PROSPECTUS                                                     Filed Pursuant to
                                                               Rule 424(b)(3)

                                VTEL CORPORATION
                             1,149,000 Common Shares
                            par value $.01 Per Share


                                   -----------


     YOU SHOULD  READ THIS  PROSPECTUS  AND ANY  SUPPLEMENT  TO THIS  PROSPECTUS
CAREFULLY BEFORE YOU INVEST, INCLUDING THE RISK FACTORS WHICH BEGIN ON PAGE 2 OF
THIS PROSPECTUS.

         o This  prospectus is part of a  registration  statement  that we filed
with the Securities and Exchange Commission.  Any statement that we make in this
prospectus will be modified or superseded by any inconsistent  statement made by
us in a  prospectus  supplement.  You should read both this  prospectus  and any
prospectus  supplement together with additional  information described under the
heading "Where You Can Find More Information."

         o Our common  stock is traded on the Nasdaq  National  Market under the
symbol  "VTEL." On April 30, 1999, the average of the high and low price for the
common stock was $5.34.

         o We issued  the common  stock  covered  by this  prospectus  to Vosaic
Company,  LLC, the selling stockholder,  as consideration for our acquisition of
substantially all of Vosaic's assets.

         o The shares of common stock offered by this  prospectus are being sold
by the selling stockholder. The selling stockholder may sell its common stock on
the Nasdaq National Market or in privately negotiated transactions,  whenever it
decides and at the price it sets.  The common stock may be sold at market price,
but the selling  stockholder has the right to sell its common stock at a premium
or discount to market price.

         o We will not receive any proceeds  from the sale of these  shares.  We
will pay all expenses of registration incurred in connection with this offering.
The selling stockholder will pay all selling and other expenses that it incurs.

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

         NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.


                  The date of this prospectus is May 14, 1999.









                                TABLE OF CONTENTS

WHERE YOU CAN FIND MORE INFORMATION............................................1
FORWARD - LOOKING STATEMENTS...................................................2
RISK FACTORS...................................................................2
ABOUT VTEL.....................................................................5
SELECTED FINANCIAL DATA........................................................5
USE OF PROCEEDS................................................................6
PLAN OF DISTRIBUTION; SELLING STOCKHOLDER......................................6
LEGAL MATTERS..................................................................7
EXPERTS  ......................................................................7


                       WHERE YOU CAN FIND MORE INFORMATION

         o Government  Filings.  We file annual,  quarterly and special reports,
proxy  statements  and  other  information  with the SEC.  Our SEC  filings  are
available   to  the  public  over  the   Internet  at  the  SEC's  web  site  at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington,  D.C. 20549, and at
the regional offices of the SEC located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation
of the SEC's public  reference  room in  Washington,  D.C. by calling the SEC at
1-800-SEC-0330.

         o  Stock Market.  Shares of  our common  stock are  traded as "National
Market  Securities" on the Nasdaq National  Market.  Material filed by us can be
inspected  at the offices of the National  Association  of  Securities  Dealers,
Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.

         o  Information   Incorporated  by  Reference.  The  SEC  allows  us  to
"incorporate by reference" the  information we file with them,  which means that
we  can  disclose  important  information  to  you by  referring  you  to  those
documents.  The  information  incorporated  by reference is an important part of
this  prospectus,  and  information  that  we  file  later  with  the  SEC  will
automatically update and supersede this information. We incorporate by reference
the  documents  listed  below and any  further  filings  made with the SEC under
Sections 13(a),  13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
this offering has been completed:

         o  Our Annual Reports  on Form 10-K  and Form 10-K/A for the year ended
July 31, 1998;

         o Our Quarterly Reports on Form 10-Q for the quarters ended October 31,
1998 and January 31, 1999; and

         o The  description of our common stock contained in our Form 8-A, dated
March 31,  1992,  including  any  amendment  or report  filed for the purpose of
updating such description.

         You may  request a copy of these  filings  at no cost,  by  writing  or
telephoning us at the following address:

                  Rodney S. Bond
                  Chief Financial Officer
                  VTEL Corporation
                  108 Wild Basin Road
                  Austin, Texas 78746
                  (512) 437-2700

         You should rely only on the  information  incorporated  by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone  else to provide  you with  different  information.  We are not making an
offer of these  securities  in any state where the offer is not  permitted.  You
should not assume that the  information  in this  prospectus  or any  prospectus
supplement  is accurate as of any date other than the date on the front of those
documents.




                                        1





                          FORWARD - LOOKING STATEMENTS

         This  prospectus  contains  certain  forward-looking  statements  which
involve substantial risks and uncertainties.  These  forward-looking  statements
can generally be identified  because the context of the statement includes words
such as may, will, except, anticipate,  intend, estimate,  continue, believe, or
other   similar   words.   Similarly,   statements   that  describe  our  future
expectations,  objectives and goals or contain projections of our future results
of operations or financial condition are also  forward-looking  statements.  Our
future results,  performance or achievements  could differ materially from those
expressed or implied in these forward-looking  statements as a result of certain
factors,  including  those  listed  under the heading  "Risk  Factors" and other
cautionary statements in this prospectus.


                                  RISK FACTORS

         An investment in the common stock  involves a high degree of risk.  You
should  carefully   consider  and  evaluate  all  of  the  information  in  this
prospectus, including the risk factors set forth below, before investing.

         We May Experience Fluctuations in Quarterly Results.

         As of January 31, 1999, our accumulated  deficit was $190,537,000.  For
the fiscal year ended July 31, 1998,  we had net income of  $2,779,000.  For the
fiscal year ended July 31, 1997,  we had a net loss of  $52,054,000.  During the
first six months of fiscal 1999, we had a net loss of $14,607,000. While we have
initiated  programs that we believe will return us to  profitability,  we cannot
assure you that we will be able to do so. Historically, a significant percentage
of our sales have occurred in the last few weeks of the quarter.  By compressing
most of our shipments into a short period of time at the end of each quarter, we
incur overtime costs,  sharply  increase our inventory levels in anticipation of
this demand and deplete or exhaust  our  backlog of customer  orders.  Our sales
cycle is  difficult  to predict and manage.  It is  possible  that  management's
estimates  of  product  demand  will be  inaccurate  and as a  result  we  could
experience a rise in inventory  levels and a decline in expected  revenue levels
in any given quarter.

         Our management  estimates  future product revenue based on its analysis
of market  conditions  and reports  from its sales  force of customer  leads and
prospective  interest. We cannot rely upon backlog of customer product orders to
forecast future revenue levels. Because of the short cycle time between customer
orders and  shipments,  unanticipated  delays  from our  vendors  could  disrupt
shipments and adversely affect the results in a given quarter. This is primarily
due to our reliance on a limited  number of highly  specialized  suppliers.  The
above factors represent  uncertainties  which can have a material adverse effect
on our financial position and results of operations if not managed properly.

         We base our expense  levels in part, on our  expectations  as to future
revenue levels.  It is difficult to predict future revenue levels due in part to
our strategy of  distributing  our products  primarily  through  resellers.  Our
recent   experience   has  been  that  revenue  levels  have  fallen  below  our
expectations.  Because our expense levels are  relatively  fixed from quarter to
quarter,  our operating  results have been materially and adversely  affected in
recent  periods.  While we have reduced  operating  expenses to attempt to align
these expenses better with our recent revenue levels,  we cannot assure you that
we have  reduced  expenses  sufficiently  to enable us to return a profit on our
sales. In addition, future quarterly operating results may fluctuate as a result
of the following factors:

          o    price reductions;
          o    delays in the introduction of new products;
          o    delays in purchase decisions due to new product  announcements by
               us or our competitors;
          o    increased competition;
          o    failure to reduce product costs or maintain product quality;
          o    cancellations or delays of orders;
          o    interruptions or delays in supplies of key components;
          o    changes in reseller base, customer base, business or product mix;
               and
          o    seasonal patterns of capital spending by customers.

         We May be Unable to Adequately  Respond to Rapid Changes in  Technology
and Customer Preferences For Videoconferencing Products.

         The market  for our  products  is  characterized  by  rapidly  changing
technology,  evolving  industry  standards and frequent  product  introductions.
Increased functionality and better picture and audio quality at lower bandwidths
and at reduced prices are characterizations of new products. The introduction of
products  embodying new technology  and the emergence of new industry  standards
may render existing products obsolete and unmarketable.  A significant factor in
our ability to grow and to remain  competitive  is our  ability to  successfully
develop and  introduce on a timely basis new and enhanced  products  that embody
new  technology,  anticipate and  incorporate  evolving  industry  standards and
achieve levels of functionality and price acceptable to the market. In the past,
we have experienced delays in introducing some of our products, primarily due to
our failure to adequately anticipate the resources necessary for our development
efforts  and, in some cases,  our  decision to devote  development  resources to
other  activities.  While we believe we have made  improvements in each of these
areas,  we may  encounter  technical  or other  difficulties  that  could  delay
introduction of new products in the future. If we are unable,  for technological
or other reasons, to develop competitive products in a timely manner in response
to  changes  in the  industry,  our  business  and  operating  results  will  be
materially and adversely affected.



                                        2





         Our Videoconferencing Business is Highly Competitive.

         Our  business  is  highly  competitive.  Our  competitors  include  the
following manufacturers:

        o         PictureTel Corporation;
        o         Polycom Corporation;
        o         Sony Corporation;
        o         Nippon Electric Corporation;
        o         Mitsubishi, Ltd.;
        o         Fujitsu, Ltd.;
        o         Panasonic, Ltd.;
        o         British Telecommunications plc; and
        o         Tandberg

         Our existing competitors and many of our potential competitors are more
established, benefit from greater market recognition and have greater financial,
technological,  production and marketing resources than we do. These factors may
materially and adversely  affect our competitive  position and  accordingly,  we
cannot assure you that we will be able to compete successfully in the future. We
cannot assure you that we will have  sufficient  resources to make continued new
investments  in product  development  and sales and marketing or that we will be
able to make technological advances necessary to remain competitive.

         Some of our  competitors  have  devoted  significant  resources  to the
development and marketing of  person-toperson  visual  communications  products,
such as desktop videoconferencing  systems and videophones,  which may result in
increased  competition.  As additional  forms of conferencing  systems,  such as
desktop  videoconferencing  systems,  emerge,  manufacturers  and  suppliers  of
desktop  computer  systems  and  software  may elect to offer  videoconferencing
products, thereby increasing competition.

         While our  Business  Plan now calls for Extending Videoconferencing for
the Internet, This Strategy is New and May Not Succeed.

         Through  our  acquisition  of the  assets of Vosaic in March  1999,  we
acquired  software  technology  that permits  streaming  of video  through a web
browser on the world wide web. We intend to incorporate this technology into our
PC-based  videoconferencing  systems.  Once incorporated into our systems,  this
technology  will permit an individual  with nothing more than a PC with Internet
access to participate in Internet-based  videoconferencing  sessions.  This is a
new strategy for us, and we cannot assure you that this feature will be welcomed
by our  customers.  Because  we  have  made a  substantial  investment  in  this
technology,  we  could  fail to  realize  on this  investment  if this  business
strategy and new product functionality is not embraced by our customers.

         Competition For Personnel in the Videoconferencing Industry is Intense,
 and We May be Unable to Attract and Retain Key Personnel for Our Business.

         Our  development  and  management  of our growth  and other  activities
depend on the efforts of key management and technical employees. Competition for
such personnel is intense. We use incentives, including competitive compensation
and stock  option  plans,  to attract and retain  well-qualified  employees.  We
cannot  assure  you,  however,  that we will  continue  to  attract  and  retain
personnel with the requisite  capabilities  and  experience.  The loss of one or
more of our key  management or technical  personnel  also could  materially  and
adversely affect us. We generally do not have employment agreements with our key
management  personnel or technical  employees.  Our future  success also depends
upon our ability to effectively attract,  retain, train, motivate and manage our
employees.  Failure to do so could  materially and adversely affect our business
and operating results.

         We  May be Unable  to Successfully Implement  Our Expansion and  Growth
Strategy.

         We acquired  Compression  Labs,  Incorporated in 1997. We also acquired
two  distributors  in Germany  and France in 1998,  and Vosaic  Company in March
1999.  These  acquisitions  have placed and may continue to place a  significant
strain on our management,  operational and financial resources.  The integration
of the  personnel and assets which were  acquired in these  acquisitions  and in
other  possible  future  acquisitions  could place  additional  strains on these
management,  operational  and financial  resources.  These strains may adversely
affect our future performance. Our future performance will depend on our ability
to broaden and develop our senior  management  and to attract and retain skilled
employees, as well as on our ability to manage our growth successfully.

         The Strategy We  Use To Distribute  Our Products  and  Our Reliance  on
Certain Types of Customers May Adversely Affect Our Business.

         We rely  substantially on third parties to distribute our products.  In
contrast,  many of our competitors sell their products primarily to end-users. A
reduction in the sales efforts by some of our current resellers or a termination
of their  relationships  with us could have a material and adverse effect on our
business and operating results. Some of these resellers also represent or may in
the future  represent  other lines of products,  some of which  compete with our
products.  We attempt  to  encourage  these  resellers  to focus on selling  our
products through marketing and support programs.  However,  there is a risk that
these  resellers  may give  higher  priority  to  products  of other  suppliers,
reducing  their efforts  devoted to selling our  products.  Ten of our resellers
accounted  for 57% and 53% of our  revenues  for the fiscal years ended July 31,
1998  and  1997.   Typically,   our  agreements   with  our  resellers   involve
non-exclusive  arrangements which may be canceled by either party at will and do
not require the  reseller to sell  minimum  amounts of our  products.  We cannot
assure you that our distribution  strategy will be successful or that we will be
able to retain our current  resellers  or identify  new  resellers in the future
that are acceptable to us.



                                        3





         We focus a substantial  portion of our sales and  marketing  efforts on
generating sales to customers in education,  government, health care and general
business. Since 1993, we have devoted significant resources to generate sales of
our  products to these types of  customers.  A  reduction  or adverse  change in
patterns of capital spending by these types of customers due to general economic
conditions, fiscal policies of government,  possible reforms in health care laws
and other factors beyond our control may  substantially and adversely affect our
revenues and operating results.

         Year 2000 Computer Problems Could Adversely  Impact  Future  Operations
and Results.

         The  widespread  use of computer  programs that rely on two-digit  date
programs  to  perform  computations  and  decision-making  functions  may  cause
videoconferencing  systems  to  malfunction  in the  year  2000  and may lead to
significant  business  delays  in the U.S.  and  internationally.  The year 2000
problem has the potential to significantly impact the videoconferencing industry
since it involves the use of computers and is dependent on third-party suppliers
for  electronic  components.  In addition to potential  problems  from  computer
systems, potential problems could arise from equipment with embedded chips, such
as vaults,  elevators and other  non-videoconferencing  systems.  Not all of our
systems are fully year 2000  compliant due to the  incorporation  of third party
software  products  that are not fully  compliant  at this  time.  If we fail to
properly  recognize  and  address  the year 2000  problem  in our  systems,  our
business, financial condition, and results of operations could be materially and
adversely affected.

         The year 2000  problem  also  affects  some of our major  suppliers  of
computers,  software,  and  other  equipment.  We have  discussed  the year 2000
problem  with some of these  suppliers,  but we  cannot  assure  you that  these
suppliers will resolve any or all year 2000  problems.  If our suppliers fail to
resolve year 2000 problems, our business could be materially disrupted.

         We expect to identify  and resolve  all year 2000  problems  that could
materially adversely affect our business  operations.  However, it is impossible
to determine with complete  certainty that all year 2000 problems  affecting us,
our suppliers or our customers have been identified or corrected.  The number of
devices  that could be affected  and the  interactions  among these  devices are
simply too numerous.  In addition,  no one can accurately  predict how many year
2000 problem-related failures will occur or the severity, duration, or financial
consequences  of these perhaps  inevitable  failures.  Moreover,  our failure to
adequately address year 2000 issues in our multi-media  conferencing systems and
PC software  applications could result in litigation,  which could be costly and
time-consuming to defend.

         We are a Defendant in Some Legal Proceedings.

         We  acquired  Compression  Labs,  Incorporated  in a  merger  that  was
completed May 23, 1997. At the time of the merger,  Compression Labs was engaged
in several legal  proceedings and disputes  relating to matters arising prior to
the merger. We cannot assure you that Compression Labs' legal proceedings can be
resolved  favorably  to  Compression  Labs or to us. If these legal  proceedings
continue for an extended  period of time, they could have an adverse effect upon
our working capital and management's ability to concentrate on its business.  An
unfavorable outcome in any one or several such legal proceedings could affect us
in a materially adverse way.

         From time to time, we have received,  and continue to receive,  letters
and  demands  from other  companies  claiming  that  aspects  of our  technology
products  may  infringe  their patent  rights.  When we received  these kinds of
letters,  we  typically  investigate  the  validity  of  the  claim  and,  where
appropriate,  may enter into  licensing  agreements  for the  disputed  patented
technology  or we may dispute the claim.  We believe  this is typical of what is
experienced in other technology  corporations.  However,  it is possible that we
could be sued. It is expensive to defend patent litigation.  It is also possible
we could  have a patent  lawsuit.  These  factors  could  adversely  affect  our
business, financial condition and results of operations.

         Our Business Would  be Disrupted if  We  Experienced  a  Disruption  in
Supply.

         Substantially  all  of  our  electronic   components,   subsystems  and
assemblies  are made by outside  vendors.  Some of our  components are currently
available   only  from  sole  sources  and  embody  such  parties'   proprietary
technology.  If our supplies are  interrupted  or if we experience a significant
increase  in  price  of one or  more of  these  components  or if a  third-party
supplier fails to remain  competitive in functionality  or price,  these factors
could  have  a  materially  adverse  effect  on  our  business  and  results  of
operations.  We cannot assure you that we will not  experience  such problems in
the future.  Similarly,  if we are  required  to incur  excessive  rework  costs
associated  with  defective  components  or  process  errors,  this  also  could
adversely  affect our business and operating  results.  We do not have contracts
with many of our suppliers  ensuring  continued  availability  of key electronic
components.

         In addition,  from time to time we enter into development  arrangements
with other third parties to develop and  incorporate  new features and functions
into our products.  As such, we depend upon these third parties to fulfill their
respective  obligations  under these  development  arrangements.  If these third
parties failed to fulfil their obligation, this also could affect our results of
operations in a materially adverse way.

         Our Stock Price has been Subject to Significant Volatility

         The market price of our common  stock has been,  and in the future will
likely be, very  volatile.  The stock price has been  affected by the  following
factors, among others:

         o         the announcement of new products or technological innovations
                   by us and by our competitors;

         o         quarter-to-quarter  variations in our  anticipated or  actual
                   results of operations; and

         o         general conditions in high technology industries.

         The stock  market  occasionally  experiences  extreme  price and volume
fluctuations,  which  affects  the  market  prices  particularly  for many  high
technology  companies  like us, and which are often  unrelated to the  operating
performance of the specific companies.


                                        4





                                   ABOUT VTEL

         We design, manufacture and market multi-media conferencing systems. Our
systems  integrate  traditional  video and audio  conferencing  with  additional
functions,   including  the  sharing  of  PC  software   applications   and  the
transmission of  high-resolution  images and facsimiles.  Through the use of our
multi-media  conferencing systems,  users are able to replicate more closely the
impact and  effectiveness of face-to-face  meetings.  Our Pen Pal GraphicsTM and
AppsViewTM user interfaces make our multi-media  conferencing systems simpler to
use.  Our  systems  are  built  upon  a  system   platform  which  is  based  on
industry-standard,  PC-compatible  open hardware and software  architecture.  By
leveraging  this open  architecture  design,  we are able to integrate  into the
videoconference  PC-compatible  hardware and software  applications  which allow
users to customize the systems to meet their unique needs.  The  PC-architecture
also provides a natural  pathway to connect our  videoconferencing  systems onto
local area networks (LANs) and wide area networks (WANs) thereby  leveraging the
rapidly  expanding  network  infrastructures  being  deployed  in  organizations
throughout  the  world.  Also   complementing  this  open  architecture  is  our
compliance with emerging  industry video  standards.  Our open  architecture and
compliance with data and  telecommunications  standards permit the incorporation
of new functions through software upgrades, thereby extending the useful life of
the user's investment.

         The cornerstone of our business strategy is to identify  customers that
can most benefit from the advanced  functionality  of  multi-media  conferencing
systems and to focus a substantial portion of our sales and marketing efforts on
these  customers,  including  end-users in the areas of  education,  government,
health care and general business.  We distribute our systems almost  exclusively
through third-party resellers which include major  telecommunications  providers
such as Ameritech Corporation, GTE Corporation, SBC Communications, Inc., Sprint
Corporation,   U.S.  West,  Inc.,  MCI  WorldCom,  Inc.  and  other  value-added
resellers.  We have  built an  extensive  marketing  and sales  organization  to
support  our  third-party   resellers.   This  organization  provides  marketing
programs;  field support personnel  including sales managers,  system engineers,
and business  development  managers;  and personnel  with industry  expertise to
implement our targeted  marketing  strategy.  Since our inception,  we have sold
over 30,000 conferencing systems and multipoint control units.

         In November 1995, we completed the  acquisition of certain assets and a
specified  work  force  of  the  Integrated   Communications  Systems  Group  of
Peirce-Phelps,  Inc. As part of Peirce-Phelps, ICS was a value-added reseller of
videoconferencing  systems,  and also  provided  integration,  installation  and
maintenance  services to certain  end-users.  The completion of the  acquisition
allows us to  significantly  enhance  our  ability  to  support  our  resellers'
abilities to offer systems integration, installation and end-user support to the
ultimate  purchaser of our  products,  thereby  allowing  the  resellers to more
effectively  provide an essential  part of the services that are integral to the
purchase of our products.

         On May 23, 1997,  we completed the  acquisition  of  Compression  Labs,
Incorporated  in exchange  for  approximately  8.4 million  shares of our common
stock.  At the time of the  acquisition,  Compression  Labs was a leader  in the
development, manufacture and marketing of digital visual communication systems.

         On March 9, 1999, we completed our  acquisition of the assets of Vosaic
Company,  LLC,  an Internet  video  software  and  technology  company.  In this
transaction,  we paid  $230,000 in cash to Vosaic,  paid costs  associated  with
relocating  certain of Vosaic's  employees to our development site in Sunnyvale,
California,  extinguished  $150,000 of debt due to us by Vosaic, agreed to issue
1,149,000  shares of our common  stock to Vosaic (a portion of which are held in
escrow pending achievement of some specified  milestones) and issued warrants to
purchase 125,000 shares of our common stock to former Vosaic employees.  We also
agreed to issue  warrants  to  purchase  225,000  shares of our common  stock to
Vosaic  following the timely  issuance of certain U.S.  patents.  The technology
that we acquired from Vosaic permits streaming of video through a web browser on
the world wide web. We intend to incorporate  this  technology into our PC-based
videoconferencing  systems  as well as offer  it on a stand  alone  basis.  Once
incorporated  into our systems,  this  technology will permit an individual with
nothing more than a PC with Internet  access to  participate  in  Internet-based
videoconferencing sessions.

         We were  organized  as a Delaware  corporation  and our common stock is
traded on the  Nasdaq  Stock  Market  under the  symbol  "VTEL."  Our  principal
executive  offices are located at 108 Wild Basin Road,  Austin,  Texas 78746 and
our telephone number is 512-437-2700.

                             SELECTED FINANCIAL DATA

         The following  table sets forth  consolidated  financial data as of the
dates and for the periods  indicated  and reflects  the merger with  Compression
Labs on May 23,  1997 which was  accounted  for as a pooling of  interests.  The
selected consolidated  financial data for the years ended and as of December 31,
1993, 1994 and 1995 and July 31, 1997 and 1998 has been derived from our audited
consolidated  financial statements.  The consolidated  financial data as of July
31, 1995 and 1996 and for the seven  months  ended July 31, 1995 and 1996 and as
of January 31, 1998 and 1999 and for the six months  ended  January 31, 1998 and
1999 has been derived from our unaudited consolidated financial statements.  The
unaudited consolidated financial statements include all adjustments,  consisting
of  normal  recurring  adjustments,  which  we  consider  necessary  for a  fair
presentation  of our  financial  position  as of such  dates and the  results of
operations  and cash flows for such  periods.  Operating  results for six months
ended January 31, 1999 are not necessarily indicative of the results that may be
expected for the entire year ended July 31, 1999.

         This consolidated financial information gives retroactive effect to our
merger with  Compression  Labs that was  consummated  in May 1997, as if the two
companies had operated as a single company for all periods  presented.  However,
the two companies operated  independently prior to the merger and the historical
changes and trends in the financial condition and results of operations of these
two companies resulted from independent activities.




                                        5





For the Years For the Seven Months For the Years For the Six Months Ended December 31, Ended July 31, Ended July 31, Ended January 31 --------------------------------------------------------------------------------------------------- 1993 1994 1995 1995 1996 1997(1) 1998 1998 1999 ------- -------- -------- ------- -------- -------- --------- -------- --------- (unaudited) (unaudited) (in thousands, except per share amounts) Statement of Operations Data: Revenues $126,547 $169,189 $191,074 $ 98,079 $ 96,962 $191,023 $179,684 $ 86,981 $ 74,570 Gross margin 39,089 66,380 66,843 39,971 35,980 74,702 84,957 40,402 32,400 Net income(loss) from continuing operations operations (21,518) (4,816) (17,301) (4,335) (18,507) (44,271) 2,779 Net income (loss) (12,817) 169 (53,843) (3,811) (18,507) (52,054) 2,779 388 (14,607) Net loss per share from continuing operations, basic and diluted $ (1.51) $ (0.27) $ (0.90) $ (0.24) $ (0.87) (2.10) 0.12 0.02 (0.63) Net income (loss) per share, basic and diluted $ (0.90) $ 0.01 $ (2.81) $ (0.21) $ (0.87) (2.45) 0.12 0.02 (0.63) Balance Sheet Data: Working capital $ 85,335 $ 85,088 $ 93,330 $ 76,023 $ 77,091 $ 39,528 $ 41,503 $ 38,770 $ 34,055 Total assets 170,469 178,086 223,061 182,082 175,092 131,135 129,289 118,374 130,254 Long-term liabilities 1,020 494 985 1,278 -- -- 3,848 -- 20,530 Stockholders' equity 117,595 124,185 139,512 126,739 122,238 76,765 81,258 78,155 65,790 - ------------------ (1) In connection with the merger with Compression Labs, we recorded merger, restructuring and other expenses of $29,397 during the year ended July 31, 1997.
USE OF PROCEEDS The selling stockholder is selling all of the common stock covered by this prospectus for its own account. Accordingly, we will not receive any proceeds from the resale of such common stock. We will bear all expenses relating to this registration except for brokerage or underwriting commissions and expenses, if any, which will be paid by the selling stockholder. PLAN OF DISTRIBUTION; SELLING STOCKHOLDER This prospectus relates to 1,149,000 shares of common stock that may be offered and sold from time to time by the selling stockholder. Set forth below is information, as of the date hereof, regarding the beneficial ownership of the shares by the selling stockholder.
Number of Shares of Common Stock Number of Beneficially Shares of Common Stock Owned Common Beneficially Owned Prior to Stock After Offering (1) Offered Offering (2) ----------------------- ----------------- ------------------------------- Selling Stockholder Number Percent - ------------------- ---------------- ------------- Vosaic Company, LLC (3)................ 1,149,000 1,149,000 --- --- - -------------------- * Indicates less than 1%. (1) Unless otherwise indicated, to our knowledge, Vosaic has sole voting and sole investment power with respect to all shares of common stock beneficially owned, subject to community property laws where applicable. This number represents those shares of common stock held by the selling stockholder, if any. (2) Assumes that all shares of common stock offered hereby by the selling stockholder are actually sold. Such presentation is based on 24,264,537 shares of VTEL common stock outstanding as of March 9, 1999. (3) The address of Vosaic Company, LLC is 2320 Grand Canal Venice, CA 90291.
The shares of common stock beneficially owned by Vosaic were acquired in the transaction pursuant to which we acquired substantially all of the assets of Vosaic effective March 9, 1999. In connection with the acquisition, we agreed to file the Registration Statement of which this prospectus forms a part. The selling stockholder has not, nor within the past three years has the selling stockholder had, any position, office or other material relationship with us or any of our predecessors or affiliates. We have been advised by the selling stockholder that it (or, subject to applicable law, its pledgees, donees, distributees, transferees or other successors in interest) intends to sell all or a portion of the shares offered by this prospectus from time to time on the Nasdaq National Market, in negotiated transactions at fixed prices which may be 6 changed, at market prices prevailing at the time of sale or at prices reasonably related thereto or at negotiated prices, or by a combination of the foregoing methods of sale through: o ordinary brokerage transactions in which the broker solicits purchases; o sales to one or more brokers or dealers as principal, and the resale by such brokers or dealers for their account pursuant to this prospectus, including resales to other brokers and dealers; o block trades in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal in order to facilitate the transaction; or o negotiated transactions with purchasers with a broker or dealer. We are not aware as of the date of this prospectus of any agreements between the selling stockholder and any broker-dealers with respect to the sale of the shares offered by this prospectus. In connection with distributions of the shares or otherwise, the selling stockholder may enter into hedging transactions with broker-dealers. In connection with such transactions: o broker-dealers may engage in short sales of the shares registered hereunder in the course of hedging the positions they assume with selling stockholder; o the selling stockholder may sell shares of our common stock short and deliver the shares to close out such short positions; o the selling stockholder may enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the shares registered hereunder, which the broker-dealer may resell pursuant to this prospectus; and o the selling stockholder may pledge the shares registered hereunder to a broker or dealer and upon a default, the broker or dealer may effect sales of the pledged shares pursuant to this prospectus. The selling stockholder and any broker, dealer or other agent executing sell orders on behalf of the selling stockholder may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended, in which event commissions received by any such broker, dealer or agent and profit on any resale of the shares of principal may be deemed to be underwriting commissions under the Securities Act. Such commissions received by a broker, dealer or agent may be in excess of customary compensation. The shares may also be sold in accordance with Section 4(1) of the Securities Act or Rule 144 and Rule 145 under the Securities Act. Information as to whether underwriters who may be selected by the selling stockholder, or any other broker-dealer, is acting as principal or agent for the selling stockholder, the compensation to be received by underwriters who may be selected by the selling stockholder, or any broker-dealer, acting as principal or agent for the selling stockholder and the compensation to be received by other broker-dealers, will, to the extent required, be set forth in a supplement to this prospectus. Any dealer or broker participating in any distribution of the shares may be required to deliver a copy of this prospectus, including the prospectus supplement, if any, to any person who purchases any of the shares from or through such dealer or broker. All expenses of registration incurred in connection with the offering will be borne by us. All selling and other expenses incurred by the selling stockholder will be borne by the selling stockholder. The selling stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including without limitation, Rule 102 under Regulation M, which provisions may limit the timing of purchases and sales of any of the common stock by the selling stockholder. Rule 102 under Regulation M provides, with certain exceptions, that it is unlawful for a selling shareholder or its affiliated purchaser to, directly or indirectly, bid for or purchase or attempt to induce any person to bid for or purchase, for an account in which the selling shareholder or affiliated purchaser has a beneficial interest in any securities that are the subject of the distribution during the applicable restricted period under Regulation M. All of the foregoing may affect the marketability of the common stock. We will require the selling stockholder, and its broker if applicable, to provide a letter that acknowledges his compliance with Regulation M under the Exchange Act before authorizing the transfer of the selling stockholder's shares. The selling stockholder may offer all of the shares for sale. Further, because it is possible that a significant number of shares could be sold at the same time hereunder, such sales, or the possibility thereof, may have a depressive effect on the market price of our common stock. LEGAL MATTERS The validity of the shares being offered hereby will be passed upon by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas. EXPERTS The financial statements of VTEL Corporation incorporated in this prospectus by reference to the annual reports on Form 10-K and Form 10-K/A for the year ended July 31, 1998 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 7 The consolidated statement of operations, stockholders' equity and cash flows of Compression Labs, Incorporated for the year ended December 31, 1995, incorporated in this prospectus by reference to the annual reports on Form 10-K and Form 10-K/A for the year ended July 31, 1998, have been so incorporated in reliance on the report of KPMG LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 8