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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10  Q

|                                             |  |                                                                                   
|-------------------------------------------- |  | ----------------------------------------------------------------------------------
|x                                            |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                             |  |                                                                                   
|For the quarterly period ended June 30, 2003
|                                             |  |                                                                                   
|or                                          
|                                             |  |                                                                                   
|o                                            |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                             |  |                                                                                   
|For the transition period from  to          

Commission file number 0-28180

SPECTRALINK CORPORATION

(Exact name of registrant as specified in charter)


|                                                                               |  |                                                
|------------------------------------------------------------------------------ |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of incorporation or organization)        |  | 84-1141188
(IRS Employer Identification Number)
|                                                                              
|5755 Central Avenue, Boulder, Colorado
(Address of principal executive office) |  | 80301-2848
(Zip code)                          

303-440-5330
(Registrants telephone number)



(Former name, former address and former fiscal year, if changed from last report)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X
No

Applicable only to corporate issuers:

As of June 30, 2003, there were 18,293,732 shares outstanding of SpectraLink
Corporations Common Stock  par value $0.01.




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TABLE OF CONTENTS



|                                |                                                                                              |  |  |  |  |  |  | 
|------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I   FINANCIAL INFORMATION
|                                | ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                | CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                                 
|                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                             
|                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                        
|                                | ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                | Item 3 Quantitative and Qualitative Disclosures about Market Risk.                          
|                                | Item 4 Controls and Procedures.                                                             
|Part II Other Information      
|                                | Item 1 Legal Proceedings                                                                    
|                                | Item 4 Submission of Matters to a Vote of Security Holders                                  
|                                | Item 6 Exhibits and Reports on Form 8-K                                                     
|                                | (a) Exhibits                                                                                
|                                | (b) Reports on Form 8-K                                                                     
|SIGNATURES                     
|EXHIBIT INDEX                  
|EX-10.16 Lease Agreement       
|EX-10.17 Lease Agreement       
|EX-10.18 Lease Agreement       
|EX-31.1 Certification by CEO   
|EX-31.2 Certification of CFO   
|EX-32.1 Certification by CEO   
|EX-32.2 Certification by CFO   



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SPECTRALINK CORPORATION AND SUBSIDIARY
INDEX

|               |  |                                                                                       |  |                                                                                                                          |     |      |    | 
|-------------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ | --- | ---- | -- | 
|               |  |                                                                                       |  |                                                                                                                          |     | Page
|Part I         |  | Financial Information                                                                 |  |                                                                                                                          |     |     
|Item 1         |  | Condensed Consolidated Financial Statements                                           |  |                                                                                                                          |     |     
|               |  |                                                                                       |  | Condensed Consolidated Balance Sheets at
June 30, 2003 and December 31, 2002 (Unaudited)                                 |     |      | 3  | 
|               |  |                                                                                       |  | Condensed Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 2003 and 2002 (Unaudited) |     |      | 4  | 
|               |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2003 and 2002 (Unaudited)              |     |      | 5  | 
|               |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                         |     |      | 6  | 
|Item 2         |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                                                          | 10  |     
|Item 3         |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                                          | 15  |     
|Item 4         |  | Controls and Procedures                                                               |  |                                                                                                                          | 22  |     
|Part II        |  | Other Information                                                                     |  |                                                                                                                          |     |     
|Item 1         |  | Legal Proceedings                                                                     |  |                                                                                                                          | 22  |     
|Item 4         |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                          | 23  |     
|Item 6         |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                          |     |     
|               |  |                                                                                       |  | (a) Exhibits                                                                                                             |     |      | 24 | 
|               |  |                                                                                       |  | (b) Form 8-K                                                                                                             |     |      | 24 | 
|Signatures     |  |                                                                                       |  |                                                                                                                          | 25  |     
|Certifications |  |                                                                                       |  |                                                                                                                          | 180 |     

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PART I   FINANCIAL INFORMATION




|       |  |                                             | 
|------ |  | ------------------------------------------- | 
|ITEM 1 |  | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SPECTRALINK CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS

|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |              |   |        |  | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------- | - | -------- | ----- | ------------ | - | ------ |  | 
|                                     |                                                                                                                                                                |  |                                            |         |   | June 30, |       | December 31,
|                                     |                                                                                                                                                                |  |                                            |         |   | 2003     |       | 2002        
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|CURRENT ASSETS:                      |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     | Cash and cash equivalents                                                                                                                                      |  | $                                          | 43,665  |   |          | $     | 44,211       |  
|                                     | Trade accounts receivable, net of allowance of $335 and $311, respectively                                                                                     |  |                                            | 12,629  |   |          |       | 11,143       |  
|                                     | Income taxes receivable                                                                                                                                        |  |                                            |        |   |          |       | 105          |  
|                                     | Inventory, net of allowance of $722 and $651, respectively                                                                                                     |  |                                            | 7,445   |   |          |       | 7,449        |  
|                                     | Other                                                                                                                                                          |  |                                            | 2,287   |   |          |       | 1,773        |  
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | Total current assets                       |         |   | 66,026   |       |              |   | 64,681 | 
|PROPERTY AND EQUIPMENT, at cost:     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     | Furniture and fixtures                                                                                                                                         |  |                                            | 2,260   |   |          |       | 1,632        |  
|                                     | Equipment                                                                                                                                                      |  |                                            | 7,870   |   |          |       | 7,240        |  
|                                     | Leasehold improvements                                                                                                                                         |  |                                            | 928     |   |          |       | 865          |  
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | 11,058                                     |         |   |          | 9,737 |             
|                                     | Less  accumulated depreciation                                                                                                                                |  |                                            | (7,751  | ) |          |       | (7,224       | )
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | Net property and equipment                 |         |   | 3,307    |       |              |   | 2,513  | 
|OTHER                                |                                                                                                                                                                |  | 479                                        |         |   |          | 397   |             
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | TOTAL ASSETS                               |         | $ | 69,812   |       |              | $ | 67,591 | 
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|LIABILITIES AND STOCKHOLDERS EQUITY
|CURRENT LIABILITIES:                 |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     | Accounts payable                                                                                                                                               |  | $                                          | 1,266   |   |          | $     | 1,023        |  
|                                     | Income taxes payable                                                                                                                                           |  |                                            | 325     |   |          |       |             |  
|                                     | Accrued payroll, commissions and employee benefits                                                                                                             |  |                                            | 2,196   |   |          |       | 2,069        |  
|                                     | Accrued sales, use and property taxes                                                                                                                          |  |                                            | 628     |   |          |       | 512          |  
|                                     | Accrued warranty expenses                                                                                                                                      |  |                                            | 404     |   |          |       | 274          |  
|                                     | Other accrued expenses and liabilities                                                                                                                         |  |                                            | 1,907   |   |          |       | 1,564        |  
|                                     | Deferred revenue                                                                                                                                               |  |                                            | 5,938   |   |          |       | 5,281        |  
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | Total current liabilities                  |         |   | 12,664   |       |              |   | 10,723 | 
|LONG-TERM LIABILITIES                |                                                                                                                                                                |  | 278                                        |         |   |          | 178   |             
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | TOTAL LIABILITIES                          |         |   | 12,942   |       |              |   | 10,901 | 
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|STOCKHOLDERS EQUITY:                |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     | Preferred stock, 5,000 shares authorized, none issued and outstanding                                                                                          |  |                                            |        |   |          |       |             |  
|                                     | Common stock, $0.01 par value, 50,000 shares authorized, 22,223 and 22,130 shares
issued, respectively, and 18,294 and 18,648 shares outstanding, respectively |  |                                            | 222     |   |          |       | 221          |  
|                                     | Additional paid-in capital                                                                                                                                     |  |                                            | 64,274  |   |          |       | 63,763       |  
|                                     | Retained earnings                                                                                                                                              |  |                                            | 21,768  |   |          |       | 18,412       |  
|                                     | Treasury stock, 3,929 shares and 3,482 shares, respectively, at cost                                                                                           |  |                                            | (29,394 | ) |          |       | (25,706      | )
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | TOTAL STOCKHOLDERS EQUITY                 |         |   | 56,870   |       |              |   | 56,690 | 
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             
|                                     |                                                                                                                                                                |  | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |         | $ | 69,812   |       |              | $ | 67,591 | 
|                                     |                                                                                                                                                                |  |                                            |         |   |          |       |             

The accompanying notes to condensed financial statements are an integral part of these condensed consolidated balance sheets.

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SPECTRALINK CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)

|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |        |     |        |        | 
|------------------------------------------- | -------------------------- | --------------------------- | --------------------------------- | ------------ | --- | ------------------ | ------ | ---------------- | --- | ------ | ------ | ------ | --- | ------ | ------ | ------ | --- | ------ | ------ | 
|                                            |                            |                             |                                   |              |     | Three Months Ended |        | Six Months Ended
|                                            |                            |                             |                                   |              |     | June 30,           |        | June 30,        
|                                            |                            |                             |                                   |              |     |                    |        |                 
|                                            |                            |                             |                                   |              |     | 2003               |        | 2002             |     | 2003   |        | 2002  
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |       
|SALES:                                      |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            | Product Sales, net         |                             | $                                 | 14,895       |     |                    | $      | 12,128           |     |        | $      | 26,172 |     |        | $      | 23,391 |    
|                                            | Service Sales              |                             |                                   | 3,740        |     |                    |        | 3,109            |     |        |        | 7,032  |     |        |        | 5,707  |    
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            |                             | Net Sales                         |              |     | 18,635             |        |                  |     | 15,237 |        |        |     | 33,204 |        |        |     | 29,098 |       
|COST OF SALES:                              |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            | Cost of Product Sales      |                             |                                   | 4,174        |     |                    |        | 3,821            |     |        |        | 7,480  |     |        |        | 7,345  |    
|                                            | Cost of Service Sales      |                             |                                   | 1,697        |     |                    |        | 1,607            |     |        |        | 3,310  |     |        |        | 2,905  |    
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            |                             | Total Cost of Sales               |              |     | 5,871              |        |                  |     | 5,428  |        |        |     | 10,790 |        |        |     | 10,250 |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            |                             |                                   | Gross Profit |     |                    | 12,764 |                  |     |        | 9,809  |        |     |        | 22,414 |        |     |        | 18,848 | 
|OPERATING EXPENSES:                         |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            | Research and Development   |                             |                                   | 2,101        |     |                    |        | 1,620            |     |        |        | 4,004  |     |        |        | 3,142  |    
|                                            | Marketing and Selling      |                             |                                   | 5,960        |     |                    |        | 5,237            |     |        |        | 11,104 |     |        |        | 10,488 |    
|                                            | General and Administrative |                             |                                   | 1,062        |     |                    |        | 1,025            |     |        |        | 2,057  |     |        |        | 1,958  |    
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            |                             | Total Operating Expenses          |              |     | 9,123              |        |                  |     | 7,882  |        |        |     | 17,165 |        |        |     | 15,588 |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|INCOME FROM OPERATIONS                      |                            |                             | 3,641                             |              |     |                    | 1,927  |                  |     |        | 5,249  |        |     |        | 3,260  |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|INVESTMENT INCOME AND OTHER:                |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            | Interest Income             |                                   |              | 116 |                    |        |                  | 169 |        |        |        | 238 |        |        |        | 341 |       
|                                            |                            | Other Income (Expense), net |                                   |              | (47 | )                  |        |                  | (17 | )      |        |        | (74 | )      |        |        | (46 | )     
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|                                            |                            |                             | Total Investment Income and Other |              |     | 69                 |        |                  |     | 152    |        |        |     | 164    |        |        |     | 295    |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|INCOME BEFORE INCOME TAXES                  |                            |                             | 3,710                             |              |     |                    | 2,079  |                  |     |        | 5,413  |        |     |        | 3,555  |       
|INCOME TAX EXPENSE                          |                            |                             | 1,410                             |              |     |                    | 790    |                  |     |        | 2,057  |        |     |        | 1,351  |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|NET INCOME                                  |                            | $                           | 2,300                             |              |     | $                  | 1,289  |                  |     | $      | 3,356  |        |     | $      | 2,204  |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|BASIC EARNINGS PER SHARE (Note 4)           |                            | $                           | 0.13                              |              |     | $                  | 0.07   |                  |     | $      | 0.18   |        |     | $      | 0.12   |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|BASIC WEIGHTED AVERAGE SHARES OUTSTANDING   |                            |                             | 18,340                            |              |     |                    | 19,060 |                  |     |        | 18,460 |        |     |        | 19,130 |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|DILUTED EARNINGS PER SHARE (Note 4)         |                            | $                           | 0.12                              |              |     | $                  | 0.07   |                  |     | $      | 0.18   |        |     | $      | 0.11   |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       
|DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |                            |                             | 18,570                            |              |     |                    | 19,460 |                  |     |        | 18,690 |        |     |        | 19,530 |       
|                                            |                            |                             |                                   |              |     |                    |        |                  |     |        |        |        |     |        |        |       

The accompanying notes to condensed financial statements are an integral part
of these condensed consolidated statements.

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SPECTRALINK CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |        |   |        |  
|----------------------------------------------------------------------- | --------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------- | ------ | ---------------- | ------ | ------ | ------ | - | ------ | -
|                                                                        |                                                                                   |   |                                                                            |        | Six Months Ended
|                                                                        |                                                                                   |   |                                                                            |        | June 30,        
|                                                                        |                                                                                   |   |                                                                            |        |                 
|                                                                        |                                                                                   |   |                                                                            |        | 2003             |        | 2002  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                   |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        | Net income                                                                        |   | $                                                                          | 3,356  |                  |        | $      | 2,204  |  
|                                                                        | Adjustments to reconcile net income to net cash provided by
operating activities: |   |                                                                            |        |                  |        |        |        |  
|                                                                        |                                                                                   |   | Depreciation and amortization                                              |        |                  | 527    |        |        |   | 556    |  
|                                                                        |                                                                                   |   | Income tax benefit from the exercise of stock options                      |        |                  | 56     |        |        |   | 160    |  
|                                                                        |                                                                                   |   | Provision for bad debts                                                    |        |                  | 36     |        |        |   | 110    |  
|                                                                        |                                                                                   |   | Provision for excess and obsolete inventory                                |        |                  | 332    |        |        |   | 157    |  
|                                                                        |                                                                                   |   | Amortization of premium on investments in marketable securities            |        |                  |       |        |        |   | 4      |  
|                                                                        | Changes in assets and liabilities -                                               |   |                                                                            |        |                  |        |        |        |  
|                                                                        |                                                                                   |   | (Increase) decrease in trade accounts receivable                           |        |                  | (1,522 | )      |        |   | 794    |  
|                                                                        |                                                                                   |   | (Increase) decrease in inventory                                           |        |                  | (328   | )      |        |   | 119    |  
|                                                                        |                                                                                   |   | (Increase) decrease in other assets and income taxes receivable            |        |                  | (491   | )      |        |   | 920    |  
|                                                                        |                                                                                   |   | Increase (decrease) in accounts payable                                    |        |                  | 243    |        |        |   | (349   | )
|                                                                        |                                                                                   |   | Increase in accrued liabilities, income taxes payable and
deferred revenue |        |                  | 1,677  |        |        |   | 516    |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        |                                                                                   |   | Net cash provided by operating activities                                  |        |                  | 3,886  |        |        |   | 5,191  |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                   |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        | Purchases of property and equipment                                               |   |                                                                            | (1,194 | )                |        |        | (205   | )
|                                                                        | Maturity of investments in marketable securities                                  |   |                                                                            |       |                  |        |        | 1,000  |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        |                                                                                   |   | Net cash (used in) provided by investing activities                        |        |                  | (1,194 | )      |        |   | 795    |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                   |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        | Principal payments under long-term obligation                                     |   |                                                                            | (6     | )                |        |        |       |  
|                                                                        | Proceeds from exercises of common stock options                                   |   |                                                                            | 159    |                  |        |        | 798    |  
|                                                                        | Proceeds from issuances of common stock                                           |   |                                                                            | 297    |                  |        |        | 311    |  
|                                                                        | Purchases of treasury stock                                                       |   |                                                                            | (3,688 | )                |        |        | (4,497 | )
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        |                                                                                   |   | Net cash used in financing activities                                      |        |                  | (3,238 | )      |        |   | (3,388 | )
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                        |                                                                                   |   | (546                                                                       | )      |                  |        | 2,598  |       
|CASH AND CASH EQUIVALENTS, beginning of period                          |                                                                                   |   | 44,211                                                                     |        |                  |        | 37,242 |       
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|CASH AND CASH EQUIVALENTS, end of period                                |                                                                                   | $ | 43,665                                                                     |        |                  | $      | 39,840 |       
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                       |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        | Cash paid for income taxes                                                        |   | $                                                                          | 1,498  |                  |        | $      | 74     |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       
|SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING
ACTIVITIES: |                                                                                   |   |                                                                            |        |                  |        |        |       
|                                                                        | Assets acquired under long-term obligation                                        |   | $                                                                          | 127    |                  |        | $      |       |  
|                                                                        |                                                                                   |   |                                                                            |        |                  |        |        |       

The accompanying notes to condensed financial statements are an integral part
of these condensed consolidated statements.

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SPECTRALINK CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)

1. Basis of Presentation

The accompanying condensed consolidated financial statements as of June
30, 2003 and December 31, 2002, and for the three and six months ended June 30,
2003 and 2002, have been prepared from the books and records of SpectraLink
Corporation and SpectraLink International Corporation (together SpectraLink
or the Company) and are unaudited. In managements opinion, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present SpectraLinks financial position,
results of operations and cash flows for the periods presented. The results of
operations for the period ended June 30, 2003, are not necessarily indicative
of the results to be expected for any subsequent quarter or for the entire
fiscal year ending December 31, 2003.

The financial statements should be read in conjunction with the audited
financial statements and notes thereto as of and for the year ended December
31, 2002, which are included in SpectraLinks Annual Report on Form 10-K. The
accounting policies utilized in the preparation of the financial statements
herein presented are the same as set forth in SpectraLinks annual financial
statements.

2. Stock-Based Compensation Plans

The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion (APB) No. 25 (APB No. 25), Accounting for
Stock Issued to Employees. Statement of Financial Accounting Standards No.
123 (SFAS 123), Accounting for Stock-Based Compensation defines a fair value
based method of accounting for stock options and similar equity instruments.
As allowed by SFAS 123, the Company has continued to apply APB No. 25 to
account for its employee stock based compensation plans and has adopted the
disclosure requirements of SFAS 123 and Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, an amendment of SFAS 123. Had the Company determined compensation
expense for its stock-based compensation plans based on fair value at the date
of grant under SFAS 123, the Companys consolidated net income, and basic and
diluted earnings per share, would have been the pro forma amounts as follows:

|                                                                                                               |                       |                                                  |       |                                          |      |                                          |       |      |      |      |       |      |        |   |       |      |        |  
|-------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------------------------------ | ----- | ---------------------------------------- | ---- | ---------------------------------------- | ----- | ---- | ---- | ---- | ----- | ---- | ------ | - | ----- | ---- | ------ | -
|                                                                                                               |                       |                                                  |       | Three months ended June 30               |      | Six months ended June 30,               
|                                                                                                               |                       |                                                  |       |                                          |      |                                         
|                                                                                                               |                       |                                                  |       | 2003                                     |      | 2002                                     |       | 2003 |      | 2002
|                                                                                                               |                       |                                                  |       |                                          |      |                                          |       |      |      |     
|                                                                                                               |                       |                                                  |       | (in
thousands, except per share amounts) |      | (in
thousands, except per share amounts)
|Net Income, as reported                                                                                        |                       | $                                                | 2,300 |                                          |      | $                                        | 1,289 |      |      | $    | 3,356 |      |        | $ | 2,204 |     
|Deduct stock based employee compensation
expense under the fair value based method,
net of related tax effect: |                       |                                                  |       |                                          |      |                                          |       |      |      |      |       |      |        |   |       |     
|                                                                                                               |                       | Compensation expense for stock options           |       |                                          | (588 | )                                        |       |      | (765 | )    |       |      | (1,169 | ) |       |      | (1,550 | )
|                                                                                                               |                       | Compensation expense for the stock
purchase plan |       |                                          | (39  | )                                        |       |      | (48  | )    |       |      | (81    | ) |       |      | (96    | )
|Net Income, pro forma                                                                                          |                       | $                                                | 1,673 |                                          |      | $                                        | 476   |      |      | $    | 2,106 |      |        | $ | 558   |     
|Earnings Per Share:                                                                                            |                       |                                                  |       |                                          |      |                                          |       |      |      |      |       |      |        |   |       |     
|                                                                                                               | Basic  as reported   |                                                  | $     | 0.13                                     |      |                                          | $     | 0.07 |      |      | $     | 0.18 |        |   | $     | 0.12 |       
|                                                                                                               | Basic  pro forma     |                                                  | $     | 0.09                                     |      |                                          | $     | 0.02 |      |      | $     | 0.11 |        |   | $     | 0.03 |       
|                                                                                                               | Diluted  as reported |                                                  | $     | 0.12                                     |      |                                          | $     | 0.07 |      |      | $     | 0.18 |        |   | $     | 0.11 |       
|                                                                                                               | Diluted  pro forma   |                                                  | $     | 0.09                                     |      |                                          | $     | 0.02 |      |      | $     | 0.11 |        |   | $     | 0.03 |       

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3. Inventory

Inventory includes the cost of raw materials, direct labor and
manufacturing overhead, and is stated at the lower of cost (first-in,
first-out) or market. Inventory as of June 30, 2003 and December 31, 2002,
consisted of the following:

|                 |  |                |       |              |  |   |       | 
|---------------- |  | -------------- | ----- | ------------ |  | - | ----- | 
|                 |  | June 30,       |       | December 31,
|                 |  | 2003           |       | 2002        
|                 |  |                |       |             
|                 |  | (In thousands)
|Raw materials    |  | $              | 2,902 |              |  | $ | 2,630 | 
|Work in progress |  |                | 28    |              |  |   |      | 
|Finished goods   |  |                | 4,515 |              |  |   | 4,819 | 
|                 |  |                |       |              |  |   |       | 
|                 |  | $              | 7,445 |              |  | $ | 7,449 | 
|                 |  |                |       |              |  |   |       | 

The reserve for inventory was $722,000 and $651,000 as of June 30, 2003 and
December 31, 2002, respectively.

4. Earnings Per Share

Basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding for the period.
Diluted earnings per share is determined by dividing the net income by the sum
of the weighted average number of common shares outstanding, and if not
anti-dilutive, the effect of outstanding stock options and/or other common
stock equivalents determined utilizing the treasury stock method. Potentially
dilutive common stock options excluded from the calculation of dilutive income
per share because they were anti-dilutive, totaled 1,803,970 and 423,984 for
the three months ended June 30, 2003 and 2002, respectively, and 1,824,627 and
419,779 for the six months ended June 30, 2003 and 2002, respectively. A
reconciliation of the numerators and denominators used in computing earnings
per share is as follows:

|                               |                           |   |                                          |   |        |  |           |     |        |   |        |       |           |   |       |   |  |  |        |     |  |   |      |   | 
|------------------------------ | ------------------------- | - | ---------------------------------------- | - | ------ |  | --------- | --- | ------ | - | ------ | ----- | --------- | - | ----- | - |  |  | ------ | --- |  | - | ---- | - | 
|                               |                           |   | Three Months Ended June 30,             
|                               |                           |   | (In thousands, except per share amounts)
|                               |                           |   | 2003                                     |   | 2002  
|                               |                           |   |                                          |   |       
|                               |                           |   | Income                                   |   | Shares |  | Per Share |     | Income |   | Shares |       | Per Share
|                               |                           |   |                                          |   |        |  |           |     |        |   |        |       |          
|Basic EPS                     |                           | $ | 2,300                                    |   |        |  | 18,340    |     |        | $ | 0.13   |       |           | $ | 1,289 |   |  |  | 19,060 |     |  | $ | 0.07 |  
|Effect of dilutive securities: |                           |   |                                          |   |        |  |           |     |        |   |        |       |           |   |       |   |  |  |        |     |  |   |      |  
|                               | Stock purchase plan       |   |                                          |  |        |  |           | 11  |        |   |        |      |           |   |       |  |  |  |        | 27  |  |   |      |  | 
|                               | Stock options outstanding |   |                                          |  |        |  |           | 219 |        |   |        | (0.01 | )         |   |       |  |  |  |        | 373 |  |   |      |  | 
|Diluted EPS                   |                           | $ | 2,300                                    |   |        |  | 18,570    |     |        | $ | 0.12   |       |           | $ | 1,289 |   |  |  | 19,460 |     |  | $ | 0.07 |  

|                               |                           |   |                                          |   |        |  |           |     |        |   |        |   |           |   |       |   |  |  |        |     |  |   |      |       |  
|------------------------------ | ------------------------- | - | ---------------------------------------- | - | ------ |  | --------- | --- | ------ | - | ------ | - | --------- | - | ----- | - |  |  | ------ | --- |  | - | ---- | ----- | -
|                               |                           |   | Six Months Ended June 30,               
|                               |                           |   | (In thousands, except per share amounts)
|                               |                           |   | 2003                                     |   | 2002  
|                               |                           |   |                                          |   |       
|                               |                           |   | Income                                   |   | Shares |  | Per Share |     | Income |   | Shares |   | Per Share
|                               |                           |   |                                          |   |        |  |           |     |        |   |        |   |          
|Basic EPS                     |                           | $ | 3,356                                    |   |        |  | 18,460    |     |        | $ | 0.18   |   |           | $ | 2,204 |   |  |  | 19,130 |     |  | $ | 0.12 |      
|Effect of dilutive securities: |                           |   |                                          |   |        |  |           |     |        |   |        |   |           |   |       |   |  |  |        |     |  |   |      |      
|                               | Stock purchase plan       |   |                                          |  |        |  |           | 24  |        |   |        |  |           |   |       |  |  |  |        | 18  |  |   |      |      |  
|                               | Stock options outstanding |   |                                          |  |        |  |           | 206 |        |   |        |  |           |   |       |  |  |  |        | 382 |  |   |      | (0.01 | )
|Diluted EPS                   |                           | $ | 3,356                                    |   |        |  | 18,690    |     |        | $ | 0.18   |   |           | $ | 2,204 |   |  |  | 19,530 |     |  | $ | 0.11 |      

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5. Product Warranties and Service

The Company provides warranties against defects in materials and
workmanship for periods for products ranging from 90 days to 15 months, but in
limited cases up to 18 months. At the time the product is shipped, the Company
establishes a provision for estimated expenses of providing service under these
warranties based on historical warranty experience. A summary of activity for
accrued product warranty and service is as follows:

|                                                    |                                                 |   |                    |      |                  |   |      |      |      |   |     |      |   |   |     |      |  
|--------------------------------------------------- | ----------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ---- | ---- | ---- | - | --- | ---- | - | - | --- | ---- | -
|                                                    |                                                 |   | Three months ended |      | Six months ended
|                                                    |                                                 |   | June 30,           |      | June 30         
|                                                    |                                                 |   |                    |      |                 
|                                                    |                                                 |   | 2003               |      | 2002             |   | 2003 |      | 2002
|                                                    |                                                 |   |                    |      |                  |   |      |      |     
|                                                    |                                                 |   | (In thousands)     |      | (In thousands)  
|Beginning
Balance Accrued Product Warranty Expenses |                                                 | $ | 282                |      |                  | $ | 248  |      |      | $ | 274 |      |   | $ | 278 |     
|                                                    | Additions to the accrual for product warranties |   |                    | 239  |                  |   |      | 215  |      |   |     | 384  |   |   |     | 443  |  
|                                                    | Payments made in cash or in kind                |   |                    | (117 | )                |   |      | (174 | )    |   |     | (254 | ) |   |     | (432 | )
|                                                    |                                                 |   |                    |      |                  |   |      |      |      |   |     |      |   |   |     |     
|Ending
Balance Accrued Product Warranty Expenses    |                                                 | $ | 404                |      |                  | $ | 289  |      |      | $ | 404 |      |   | $ | 289 |     
|                                                    |                                                 |   |                    |      |                  |   |      |      |      |   |     |      |   |   |     |     

6. Advertising Costs

The Company expenses all advertising costs as they are incurred.
Advertising expense for the three months ended June 30, 2003 and 2002, were
approximately $185,000 and $83,000, respectively, and $318,000 and $191,000 for
the six months ended June 30, 2003 and 2002, respectively.

7. Stockholders Equity

In the second quarter of 2003, SpectraLink repurchased 220,600 shares of
outstanding common stock (now classified as treasury stock) at a cost of
$1,899,000, and during the second quarter of 2002, 100,000 shares were
repurchased at a cost of $1,036,000. For the six months ended June 30, 2003,
SpectraLink repurchased 447,100 shares of outstanding common stock (now
classified as treasury stock) at a cost of $3,688,000, and during the six
months ended June 30, 2002, 461,000 shares were repurchased at a cost of
$4,497,000.

8. Legal Proceedings

On January 14, 2002, SpectraLink issued a press release announcing
preliminary financial results for the fourth quarter of 2001 and revising
downward its estimates for year 2002 results of operations. Shortly after the
press release, the Companys stock price declined and the Company and certain
of its officers and directors were named as defendants in four lawsuits served
between February 20, 2002 and March 20, 2002, three of which were filed in the
United States District Court for the District of Colorado and one of which was
filed in the Colorado District Court for the City and County of Denver. In
each of the lawsuits, plaintiffs, who purport to be purchasers or holders of
SpectraLink common stock, seek to assert claims either on behalf of a class of
persons who purchased securities in SpectraLink between July 19, 2001 and
January 11, 2002, or in the case of two of the lawsuits (one filed in the
United States District Court and one in the Colorado District Court),
derivatively on behalf of SpectraLink. Two of the lawsuits filed in the United
States District contained essentially identical claims alleging that
SpectraLink and certain of its officers and directors violated Sections 10(b)
and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as a result
of alleged public misstatements and omissions, accompanied by insider stock
sales made prior to the decline in the price of SpectraLinks stock after the
January 14, 2002 press release. In the cases brought as derivative actions,
the plaintiffs allege that the officers and directors of SpectraLink violated
fiduciary duties owed to SpectraLink and its stockholders under state laws by
allowing and/or facilitating the issuance of these same alleged public
misstatements and omissions, misappropriating nonpublic information for their
own benefit, making insider stock sales, wasting corporate assets, abusing
their positions of control, and mismanaging the corporation. The plaintiffs in
these derivative cases allege that SpectraLink has and will continue to suffer
injury as a result of these alleged violations of duty for which the officers
and directors should be liable.

The cases are designated as follows: Wilmer Kerns, Individually And On
Behalf of All Others Similarly Situated, Plaintiff, vs. SpectraLink
Corporation, Bruce Holland and Nancy K. Hamilton, Defendants (United States
District Court Civil Action Number 02-D-0263); Danilo Martin Molieri,
Individually and On Behalf of All Others Similarly Situated, Plaintiff, v.
SpectraLink Corporation, Bruce Holland and Nancy K. Hamilton, Defendants
(United States District Court Civil Action Number 02-D-0315); Evie Elennis,
derivatively on behalf of SpectraLink Corporation, Plaintiff(s), v. Bruce M.
Holland, Anthony V. Carollo, Jr., Gary L. Bliss, Michael P. Cronin, Nancy K.
Hamilton and John H. Elms, Defendant(s), and SpectraLink Corporation, Nominal
Defendant (United States District Court Civil

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Action Number 02-D-0345); and Roger Humphreys, Derivatively on Behalf of
Nominal Defendant SpectraLink Corporation, Plaintiff, v. Carl D. Carman,
Anthony V. Carollo, Jr., Bruce M. Holland, Burton J. McMurtry, Gary L. Bliss,
Michael P. Cronin, John H. Elms, and Nancy K. Hamilton, Defendants (Colorado
District Court Case. No. 02CV1687).

The Kerns and Molieri purported class actions were consolidated, and the
plaintiffs filed a Consolidated Amended Complaint. In January of 2003, the
Court denied a motion to dismiss that amended pleading, and discovery has
recently commenced. The Court has now certified a class of all purchasers of
publicly traded common stock of SpectraLink from April 19, 2001 through January
11, 2002, inclusive.

The two derivative actions were stayed pending resolution of the motion to
dismiss in the consolidated class action, and plaintiffs counsel in the
Elennis derivative action recently filed an unopposed motion for relief from
the stay and filed an amended complaint and then a corrected amended
complaint. Prior to the entry of the stays in each of the derivative cases,
the defendants had filed motions to dismiss. Defendants intend to move to
dismiss the amended and corrected Elennis complaint.

SpectraLink believes that the lawsuits are without merit and it intends to
vigorously defend itself and its officers and directors. SpectraLink does not
believe that its interests and that of the named officers and directors are
adverse to each other as of this time. However, no assurance can be given that
SpectraLink will be successful in defending the claims being asserted in these
suits, or that the interests of the various parties will remain aligned. If
SpectraLink is not successful in its defense of these suits, it could be
required to make significant payments to its stockholders and their lawyers,
which could have a material adverse effect on SpectraLinks business, financial
condition and results of operations. In addition, the litigation could result
in substantial costs, divert managements attention and resources, or
ultimately result in the interests of SpectraLink becoming adverse to those of
certain of its officers and directors. In either case, SpectraLinks business
could be adversely affected, even if the plaintiffs are not successful in their
claims against SpectraLink and/or its officers and directors.

The Company has incurred a loss related to the directors and officers
insurance deductible of which the majority of the expense was reflected in
2002. Based on current facts and circumstances, the Company is unable to
estimate future losses, if any, it may incur after considering the amounts that
will be covered by insurance.

SpectraLink is not presently a party to any other material pending legal
proceedings of which it is aware.

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##### Table of Contents






|       |  |                                                                                                                              | 
|------ |  | ---------------------------------------------------------------------------------------------------------------------------- | 
|ITEM 2 |  | MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECTRALINK CORPORATION AND SUBSIDIARY

This Form 10-Q contains forward-looking statements within the context of
Section 21E of the Securities Exchange Act of 1934, as amended. Each and every
forward-looking statement involves a number of risks and uncertainties which
are described in this report. The actual results that SpectraLink achieves may
differ materially from those described in any forward-looking statement due to
such risks and uncertainties. SpectraLink has identified by *bold face*
various sentences within this Form 10-Q which are believed to contain
forward-looking statements. Additionally, words such as believes,
anticipates, expects, intends, could, might, and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. SpectraLink undertakes no obligation to
revise any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this report.

Business Description

SpectraLink commenced operations in April 1990 to design, manufacture and
sell workplace wireless telephone systems which complement existing telephone
systems by providing mobile communications in a building or campus environment.
SpectraLink Wireless Telephone Systems increase the efficiency of employees by
enabling them to remain in telephone contact while moving throughout the
workplace. SpectraLinks primary sales efforts are currently focused on home
improvement, grocery stores and other retail store chains, hospitals, nursing
homes, distribution centers, manufacturing and service facilities, corporate
offices and education facilities. SpectraLink sells its systems in the United
States, Canada, Europe and Asia/Pacific through its direct sales force,
telecommunications equipment distributors, and certain specialty dealers.
Effective December 23, 1999, SpectraLink incorporated SpectraLink International
Corporation in Delaware, as a wholly owned subsidiary of SpectraLink.

Since inception, SpectraLink has expended considerable effort and
resources developing its wireless telephone systems, building its direct and
indirect channels of distribution, and managing the effects of rapid growth.
This rapid growth has required SpectraLink to significantly increase the scale
of its operations, including the hiring of additional personnel in all
functional areas, and has resulted in significantly higher operating expenses.
SpectraLink anticipates that its operating expenses will continue to increase.
Expansion of SpectraLinks operations may cause a significant strain on
SpectraLinks management, financial and other resources. The inability of
SpectraLink to manage additional growth, should it occur, could have a material
adverse effect on SpectraLinks business, financial condition and results of
operations.

Critical Accounting Policies and Estimates

SpectraLink has identified the most critical accounting principles upon
which its financial status depends in response to the SECs Release No.
33-8040, Cautionary Advice Regarding Disclosure About Critical Accounting
Policies. SpectraLink determined the critical accounting principles by
considering accounting policies that involve the most complex or subjective
decisions or assessments. Below is a summary of SpectraLinks most critical
accounting policies. This discussion and analysis should be read in
conjunction with SpectraLinks consolidated financial statements and related
notes included in SpectraLinks Annual Report on Form 10-K for the fiscal year
ended December 31, 2002, which was filed with the U.S. Securities and Exchange
Commission on March 28, 2003 (2002 Form 10-K).

SpectraLinks discussion and analysis of its financial condition and
results of operations are based upon SpectraLinks consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires SpectraLink to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. SpectraLink evaluates its
estimates, on an on-going basis, including those related to revenue
recognition, receivables, product warranty obligations, inventories and income
taxes. SpectraLink bases estimates on historical experience and on various
other assumptions that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.

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SpectraLink believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:



| |  |  | Most of SpectraLinks sales are generated from contractual
arrangements, which require SpectraLinks revenue recognition policy to
follow very specific and detailed guidelines in measuring revenue and
determining the periods that the related revenue should be recorded,
however, certain judgments affect the application of SpectraLinks
revenue policy, particularly in the area of collectibility. The
assessment of collectibility is particularly critical in determining
whether revenues should be recognized in the current market
environment. As part of the revenue recognition policy, SpectraLink
determines whether collectibility on its customers is reasonably
assured based on various factors, including whether there has been
deterioration in the credit quality of its customers that could result
in SpectraLink being unable to collect. SpectraLink will defer revenue
and related costs if SpectraLink is uncertain as to whether
collectibility is reasonably assured. Revenue results are difficult to
predict, and any shortfall in revenue or delay in recognizing revenue
could cause SpectraLinks operating results to vary significantly from
quarter to quarter and could result in operating losses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | SpectraLink is required to estimate the collectibility of its trade
accounts receivable. A considerable amount of judgment is required in
assessing the realization of these receivables, including current
creditworthiness of each customer and related aging of past due
balances. SpectraLink maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make
required payments. At June 30, 2003 and December 31, 2002, the
allowance for uncollectible accounts was $335,000 and $311,000,
respectively. Additional allowances may be required if the financial
condition of SpectraLinks customers were to deteriorate, resulting in
an impairment of their ability to make payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | SpectraLink provides for the estimated cost of product warranties
at the time revenue is recognized. SpectraLink engages in extensive
product quality programs and processes, including actively monitoring
and evaluating the quality of its component suppliers. At June 30, 2003
and December 31, 2002, the accrual for warranty expenses was $404,000
and $274,000, respectively. Product failure rates, material usage and
service delivery costs incurred in correcting a product failure affect
SpectraLinks warranty obligation. Revisions to the estimated warranty
liability would be required should actual product failure rates,
material usage or service delivery costs differ from SpectraLinks
estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | SpectraLink writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about
future demand and market conditions. At June 30, 2003 and December 31,
2002, the reserve for inventory was $722,000 and $651,000,
respectively. Additional inventory write-downs may be required if
actual market conditions are less favorable than those projected by
management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | SpectraLink may record a valuation allowance to reduce its deferred
tax assets to an amount that is estimated to be more likely than not
that such amounts will not be realized. As of June 30, 2003 and
December 31, 2002, there was no valuation allowance for deferred tax
assets as it was more likely than not that such amounts would be
realized. SpectraLink considers future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for
a valuation allowance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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Results of Operations

The following table sets forth unaudited results of operations for the
three-month and six-month periods ended June 30, 2003 and 2002, as a percentage
of net sales in each of these periods. This data has been derived from
unaudited consolidated financial statements.

|                                 |                            |  |      |                    |   |                  |      |       |   |      |      |       |   |  |      |       |   | 
|-------------------------------- | -------------------------- |  | ---- | ------------------ | - | ---------------- | ---- | ----- | - | ---- | ---- | ----- | - |  | ---- | ----- | - | 
|                                 |                            |  |      | Three Months Ended |   | Six Months Ended
|                                 |                            |  |      | June 30,           |   | June 30,        
|                                 |                            |  |      |                    |   |                 
|                                 |                            |  |      | 2003               |   | 2002             |      | 2003  |   | 2002
|                                 |                            |  |      |                    |   |                  |      |       |   |     
|Product Sales, net               |                            |  | 80.0 | %                  |   |                  | 79.6 | %     |   |      | 78.8 | %     |   |  | 80.4 | %    
|Service Sales                    |                            |  | 20.0 | %                  |   |                  | 20.4 | %     |   |      | 21.2 | %     |   |  | 19.6 | %    
|                                 | Net Sales                  |  |      | 100.0              | % |                  |      | 100.0 | % |      |      | 100.0 | % |  |      | 100.0 | %
|Cost of Product Sales            |                            |  | 22.4 | %                  |   |                  | 25.1 | %     |   |      | 22.5 | %     |   |  | 25.2 | %    
|Cost of Service Sales            |                            |  | 9.1  | %                  |   |                  | 10.5 | %     |   |      | 10.0 | %     |   |  | 10.0 | %    
|                                 | Total Cost of Sales        |  |      | 31.5               | % |                  |      | 35.6  | % |      |      | 32.5  | % |  |      | 35.2  | %
|Gross Profit                     |                            |  | 68.5 | %                  |   |                  | 64.4 | %     |   |      | 67.5 | %     |   |  | 64.8 | %    
|Operating Expenses:              |                            |  |      |                    |   |                  |      |       |   |      |      |       |   |  |      |      
|                                 | Research and Development   |  |      | 11.3               | % |                  |      | 10.6  | % |      |      | 12.1  | % |  |      | 10.8  | %
|                                 | Marketing and Selling      |  |      | 32.0               | % |                  |      | 34.4  | % |      |      | 33.4  | % |  |      | 36.1  | %
|                                 | General and Administrative |  |      | 5.7                | % |                  |      | 6.7   | % |      |      | 6.2   | % |  |      | 6.7   | %
|Total Operating Expenses         |                            |  | 49.0 | %                  |   |                  | 51.7 | %     |   |      | 51.7 | %     |   |  | 53.6 | %    
|Income from Operations           |                            |  | 19.5 | %                  |   |                  | 12.7 | %     |   |      | 15.8 | %     |   |  | 11.2 | %    
|Investment Income and Other, net |                            |  | 0.4  | %                  |   |                  | 1.0  | %     |   |      | 0.5  | %     |   |  | 1.0  | %    
|Income Before Income Taxes       |                            |  | 19.9 | %                  |   |                  | 13.7 | %     |   |      | 16.3 | %     |   |  | 12.2 | %    
|Income Tax Expense               |                            |  | 7.6  | %                  |   |                  | 5.2  | %     |   |      | 6.2  | %     |   |  | 4.6  | %    
|Net Income                       |                            |  | 12.3 | %                  |   |                  | 8.5  | %     |   |      | 10.1 | %     |   |  | 7.6  | %    

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SPECTRALINK CORPORATION AND SUBSIDIARY
Three and Six Months Ended June 30, 2003 and 2002

Product Sales, net.SpectraLink derives its product revenue principally from
the sale of wireless, on-premises telephone systems. Product sales for the
three months ended June 30, 2003, increased by 22.8% to $14,895,000 from
$12,128,000 for the same period last year. Product sales for the six months
ended June 30, 2003, increased by 11.9% to $26,172,000 from $23,391,000 for
the same period last year. The increase in product sales was mainly due to
SpectraLinks increased product sales through distributors and dealers, and
increased penetration in the commercial markets.

Service Sales. SpectraLink derives its service revenue principally from the
installation and service of wireless, on-premises telephone systems. Service
sales for the three months ended June 30, 2003, increased by 20.3% to
$3,740,000 from $3,109,000 for the same period last year. Service sales for
the six months ended June 30, 2003, increased by 23.2% to $7,032,000 from
$5,707,000 for the same period last year. The increase in service sales was
mainly due to increased revenue from maintenance contracts relating to
products previously sold to a larger install base of customers which continue
to use our products. Service sales also increased due to additional time and
material service repairs.

The customer mix shows a relatively equal decrease in the percentage of direct
sales compared to the increase in the percentage of indirect sales for the
three months and six months ended June 30, 2003 and 2002 for many reasons one
of which is because SpectraLink has continued to enter into agreements with
additional distributors. The
following table details the sales to different customer types as a percentage
of total net sales:

|                |  |                                |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|--------------- |  | ------------------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                |  | Customer Mix Table            
|                |  | (As a Percentage of Net Sales)
|                |  | Three Months Ended             |       | Six Months Ended
|                |  | June 30,                       |       | June 30,        
|                |  |                                |       |                 
|                |  | 2003                           |       | 2002             |  | 2003 |       | 2002
|                |  |                                |       |                  |  |      |       |     
|Customer Type:  |  |                                |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|Indirect Sales  |  |                                | 51.2  | %                |  |      | 38.4  | %    |  |  | 54.0  | % |  |  | 46.5  | %
|Direct Sales    |  |                                | 28.7  | %                |  |      | 41.2  | %    |  |  | 24.8  | % |  |  | 33.9  | %
|Service Sales   |  |                                | 20.1  | %                |  |      | 20.4  | %    |  |  | 21.2  | % |  |  | 19.6  | %
|                |  |                                |       |                  |  |      |       |      |  |  |       |   |  |  |       |  
|Total Net Sales |  |                                | 100.0 | %                |  |      | 100.0 | %    |  |  | 100.0 | % |  |  | 100.0 | %
|                |  |                                |       |                  |  |      |       |      |  |  |       |   |  |  |       |  

The following table summarizes sales to major customers:

|               |  |                                |      |                  |  |      |     |      |  |  |      |   |  |  |      |  
|-------------- |  | ------------------------------ | ---- | ---------------- |  | ---- | --- | ---- |  |  | ---- | - |  |  | ---- | -
|               |  | Sales to Major Customers      
|               |  | (As a Percentage of Net Sales)
|               |  | Three Months Ended             |      | Six Months Ended
|               |  | June 30,                       |      | June 30,        
|               |  |                                |      |                 
|               |  | 2003                           |      | 2002             |  | 2003 |     | 2002
|               |  |                                |      |                  |  |      |     |     
|Customer Name: |  |                                |      |                  |  |      |     |      |  |  |      |   |  |  |      |  
|Customer A:    |  |                                | 11.4 | %                |  |      | 9.1 | %    |  |  | 10.6 | % |  |  | 10.0 | %
|Customer B:    |  |                                | 3.1  | %                |  |      | 3.9 | %    |  |  | 3.6  | % |  |  | 10.8 | %

Gross Profit.SpectraLinks cost of sales consists primarily of direct
material, direct labor, service expenses, and manufacturing overhead. Gross
profit increased by 30.1% to $12,764,000 for the three months ended June 30,
2003, from $9,809,000 for the same period last year. Gross profit increased by
18.9% to $22,414,000 for the six months

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ended June 30, 2003, from $18,848,000 for the same period last year. For the
three months and six months ended June 30, 2003, gross profit margin (gross
profit as a percentage of net sales) increased to 68.5% from 64.4% and to 67.5%
from 64.8%, respectively. The increase in gross profit margin as a percentage
of net sales was mainly due to an increase in product sales compared to a
proportionate decrease in service sales and lower material costs.

Research and Development.Research and development expenses consist primarily
of employee costs, professional services and supplies necessary to develop,
enhance and reduce the cost of SpectraLinks systems. Research and development
expenses increased by 29.7% to $2,101,000 for the three months ended June 30,
2003, from $1,620,000 for the same period last year, representing 11.3% and
10.6%, respectively, of net sales. Research and development expenses increased
by 27.4% to $4,004,000 for the six months ended June 30, 2003, from $3,142,000
for the same period last year, representing 12.1% and 10.8%, respectively, of
net sales. SPECTRALINK EXPECTS THAT RESEARCH AND DEVELOPMENT EXPENSES WILL BE
APPROXIMATELY 10% TO 12% OF NET SALES FOR FISCAL 2003.In both periods,
SpectraLink incurred research and development expenses for new product
development, improvements to existing products, and manufacturing process
improvements. The increase in research and development expenses in dollars
spent and as a percentage of net sales was due to an increase in headcount,
which resulted from hiring additional personnel, increases in salaries and
employee benefits to retain personnel, as well as increased consulting fees,
product design fees, tooling costs and miscellaneous parts and supplies
associated with new products and enhancements to existing products.

Marketing and Selling.Marketing and selling expenses consist primarily of
salaries and other expenses for personnel, commissions, travel, advertising,
trade shows, sales meetings and market research. Sales and marketing expenses
increased by 13.8% to $5,960,000 for the three months ended June 30, 2003, from
$5,237,000 for the same period last year, representing 32.0% and 34.4%,
respectively, of net sales. Sales and marketing expenses increased by 5.9% to
$11,104,000 for the six months ended June 30, 2003, from $10,488,000 for the
same period last year, representing 33.4% and 36.1%, respectively, of net
sales. The increase in dollars spent was primarily due to an increase in
salaries and employee benefits to retain personnel, increased marketing and
promotion costs (including costs associated with launching SpectraLinks new
products) and commissions. The increase in dollars spent was partially offset
by a decrease in sales meetings and travel costs. The decrease in percent of
sales was due to economies of scale resulting from increased sales.

General and Administrative. General and administrative expenses consist
primarily of salaries and other expenses for management, finance, accounting,
contract administration, order processing, investor relations, and human
resources, as well as legal and other professional services. General and
administrative expenses increased by 3.6% to $1,062,000 for the three months
ended June 30, 2003, from $1,025,000 for the same period last year,
representing 5.7% and 6.7%, respectively, of net sales. General and
administrative expenses increased by 5.1% to $2,057,000 for the six months
ended June 30, 2003, from $1,958,000 for the same period last year,
representing 6.2% and 6.7%, respectively, of net sales. The increase in
dollars spent was primarily due to increasing SpectraLinks infrastructure to
support future growth, which resulted in increased salaries and employee
benefits to hire and retain personnel, as well as professional fees, insurance
and amounts spent on other corporate matters. The increase was partially
offset by a decrease in legal fees related to legal proceedings as SpectraLink
met its insurance deductible. The decrease as a percentage of sales was due to
economies of scale resulting from increased sales.

Investment Income and Other (Net).Investment income is the result of
SpectraLinks investments in money market, investment-grade debt securities,
government securities, and corporate bonds. Investment income and other
decreased by 54.6% to $69,000 for the three months ended June 30, 2003, from
$152,000 for the same period last year, representing 0.4% and 1.0%,
respectively, of net sales. Investment income and other decreased by 44.4% to
$164,000 for the six months ended June 30, 2003, from $295,000 for the same
period last year, representing 0.5% and 1.0%, respectively, of net sales. The
decrease in investment income and other was primarily due to a decrease in
interest rates in 2003.

Income Tax.SpectraLinks income tax expense was $1,410,000 for the three
months ended June 30, 2003, compared to $790,000 for the same period last year,
and $2,057,000 for the six months ended June 30, 2003 compared to $1,351,000
for the same period last year. The increase was primarily related to increased
sales and income from the operations of SpectraLink.

Future Operating Expenses. SpectraLink bases operating expenses in part on its
expectations of future sales, and generally determines expense levels in
advance of sales. SPECTRALINK CURRENTLY PLANS TO CONTINUE TO EXPAND AND
INCREASE ITS OPERATING EXPENSES IN AN EFFORT TO GENERATE AND SUPPORT ADDITIONAL
FUTURE REVENUE.If sales do not occur in any quarter as expected,
SpectraLinks results of operations for that quarter will be adversely
affected. Net income may be disproportionately affected by a reduction because
only a small portion of SpectraLinks operating expenses varies directly with
its revenue.

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Liquidity and Capital Resources

Since its inception, SpectraLink has funded its operations with cash
provided by operations, supplemented by equity financing and leases on capital
equipment. As of June 30, 2003, SpectraLink had $43,665,000 of cash and cash
equivalents.

For the six months ended June 30, 2003, SpectraLink generated cash from
operations of $3,886,000, consisting principally of net income of $3,356,000,
and increases in accounts payable, accrued liabilities, income taxes payable
and deferred revenue and was offset by increases in trade accounts receivable,
inventory, other assets and income tax receivable. Investing activities used
cash of $1,194,000 for purchases of property and equipment. SpectraLink used
$3,238,000 of cash in financing activities during the six months ended June 30,
2003, which was a direct result of purchases of 447,100 shares of its
outstanding common stock (now classified as treasury stock) at a cost of
$3,688,000. The use of cash to repurchase common stock was offset by proceeds
of $456,000 received from stock option exercises and issuances of common stock.

As of June 30, 2003, SpectraLink had no debt outstanding, and there were
no off-balance sheet arrangements, unconsolidated subsidiaries, commitments or
guarantees, except as disclosed in the notes to the consolidated financial
statements. Stockholders equity at June 30, 2003, was $56,870,000, which
represented 81.5% of total assets.

As of June 30, 2003, SpectraLink had working capital of $53,362,000
compared to $53,958,000 at December 31, 2002. The decrease in working capital
occurred primarily due to an increase in accounts payable, accrued liabilities,
deferred revenue and income taxes payable. As of June 30, 2003, SpectraLinks
current ratio (ratio of current assets to current liabilities) was 5.2:1,
compared with a current ratio of 6.03:1 as of December 31, 2002.

SPECTRALINK BELIEVES THAT ITS CURRENT CASH, CASH EQUIVALENTS AND
INVESTMENTS IN MARKETABLE SECURITIES, AND CASH GENERATED FROM OPERATIONS WILL
BE SUFFICIENT, BASED ON SPECTRALINKS PRESENTLY ANTICIPATED NEEDS TO FUND
NECESSARY CAPITAL EXPENDITURES, TO PROVIDE ADEQUATE WORKING CAPITAL, AND TO
FINANCE SPECTRALINKS EXPANSION FOR THE FORESEEABLE FUTURE (NEXT 12 MONTHS).
THERE CAN BE NO ASSURANCE THAT ANY ADDITIONAL FINANCING WILL BE AVAILABLE TO
SPECTRALINK ON ACCEPTABLE TERMS, OR AT ALL, WHEN REQUIRED BY SPECTRALINK. IF
EQUITY SECURITIES ARE ISSUED TO RAISE ADDITIONAL FUNDS, FURTHER DILUTION TO THE
EXISTING STOCKHOLDERS WILL RESULT.

Recently Issued Accounting Pronouncements

The EITF reached a consensus regarding Issue No. 00-21, Accounting for
Revenue Arrangements with Multiple Deliverables. This issue addresses when
and, if so, how an arrangement involving multiple deliverables should be
divided into separate units of accounting. The Issue also addresses how the
arrangement consideration should be measured and allocated to the separate
units of accounting in the arrangement. SpectraLink is required to adopt this
consensus for its quarter ending September 30, 2003. The Company has not
determined the impact this issue will have on its financial statements.




|       |  |                                                           
|------ |  | ----------------------------------------------------------
|Item 3 |  | Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact the financial
position, results of operations or cash flows of SpectraLink due to adverse
changes in financial and commodity market prices and rates. SpectraLink is
exposed to market risk in the areas of changes in United States interest rates.
These exposures are directly related to its normal operating and funding
activities. As of June 30, 2003, SpectraLink has not used derivative
instruments or engaged in hedging activities, and is not currently impacted by
fluctuations in foreign currency exchange rates.

Interest Rate Risk

As part of SpectraLinks cash management strategy, at June 30, 2003,
SpectraLink had cash and cash equivalents of $43,665,000 mainly in the form of
bank demand deposits and money markets. SpectraLink has completed a market risk
sensitivity analysis of these cash and cash equivalents based on an assumed 1%
increase in interest rates. If market interest rates had increased or
decreased 1% during the six months ended June 30, 2003, SpectraLinks interest
income would have increased or decreased by approximately $220,000. This is
only an estimate. Any actual loss due to an increase or decrease in interest
rates could differ from this estimate.

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FORWARD-LOOKING STATEMENT FACTORS

Certain statements in this Form 10-Q, as well as statements made by
SpectraLink in periodic press releases, oral statements made by SpectraLinks
officials to analysts and stockholders in the course of presentations about
SpectraLink, and conference calls following earnings releases, constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the Reform Act). Words such as believes,
anticipates, expects, intends, could, might, and similar expressions are
intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. These projections and forward-looking
statements are based on assumptions, which are believed reasonable but are, by
their nature, inherently uncertain. In all cases, results could differ
materially from those projected. Accordingly, caution should be taken not to
place undue reliance on any such forward-looking statements since such
statements speak only as of the date of the making of such statements. Some of
the important factors that could cause actual results to differ from any of
these projections or other forward-looking statements are detailed below and in
other reports filed by SpectraLink under the Securities Exchange Act of 1934.
SpectraLink undertakes no obligation to revise any forward-looking statements
in order to reflect events or circumstances that may arise after the date of
this report.

The factors discussed below are cautionary statements that identify important
factors that could cause actual results to differ materially from those
anticipated by the forward-looking statements contained in this report.



| |  |  | The certification and approval process for SpectraLinks NetLink
product for use in countries that support the 802.11b standard.
Foreign countries which support the 802.11b standard could provide
future markets for the NetLink products. However, countries
certification and approval processes for 802.11b compatible products,
such as those of SpectraLink, are typically time consuming and costly.
If SpectraLink has difficulty obtaining certification and approval by
foreign countries for its NetLink product, then SpectraLink may not be
able to gain access to the markets in these countries in a timely
fashion, if at all, which would limit international growth of
SpectraLinks business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If SpectraLink is unable to fulfill quarter end customer orders,
then SpectraLink could lose revenue and customers.The volume of
customer orders for SpectraLinks products typically increases
significantly at the end of each quarter. SpectraLink faces
significant challenges in meeting this demand. It is difficult to
ensure that SpectraLink has the resources available to meet any such
increase in order volume since it is very difficult to predict what
the level of demand will be. SpectraLink may not have the personnel
and/or systems necessary to fulfill the large order volume or the
ability to upgrade and develop its systems and infrastructure to meet
an increased order volume. If SpectraLink is unable to meet demand
from its customer for its products in a cost effective manner, then
SpectraLink might lose revenue and customers or incur increased
operating costs, either of which would harm SpectraLinks business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Many of the orders for SpectraLinks products are realized at the
end of the quarter, which makes it difficult to estimate or adjust
SpectraLinks operating activities quickly in response to an
unexpected increase or decrease in customer demand.Due to the timing
of orders from customers, SpectraLink has often recognized a
substantial portion of its revenue in the last month of a quarter. As
a result, minor fluctuations in the timing of orders and the shipment
of products may, in the future, cause operating results to vary
significantly from quarter to quarter. The demand for SpectraLinks
products depends upon many factors and is difficult to forecast.
Significant unanticipated fluctuations in demand could cause problems
in SpectraLinks operations. The lead-time required to assemble
SpectraLinks systems is often longer than the lead-time SpectraLinks
customers provide to SpectraLink for delivery of their product
requirements. Therefore, SpectraLink often must place orders in
advance of expected purchase orders from SpectraLinks customers. As
a result, SpectraLink has only a limited ability to react to
fluctuations in demand for its products, which could cause it to have
either too much or too little inventory of a particular product.
Further, the business relationship which SpectraLink has with Offshore
Group to use a Mexico facility to assemble SpectraLinks products may
not be able to provide product in a timely manner. Additionally, once
SpectraLink receives an order, it requires sufficient time to complete
the configuration of its product to the phone systems of the customer.
SpectraLinks inability to satisfy customer demand in a timely manner
would lead to lost sales and impede SpectraLinks ability to increase
its revenue. Conversely, a large portion of SpectraLinks expenses,
including rent and salaries, is fixed and difficult to reduce.
SpectraLinks expenses are based in part on expectations for its
revenue. If SpectraLinks revenue does not meet its expectations, the
adverse effect of the revenue shortfall upon SpectraLinks operating
results may be acute in light of the fixed nature of its expenses. It
is possible that due to fluctuations in revenue, SpectraLinks
operating results could be below the expectations of securities
analysts and investors. For instance, SpectraLinks stock price
declined substantially after its preliminary announcement of its
fourth quarter 2001 financial results reported in January 2002. In
such an event, or in the event that adverse

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| |   |  | market conditions prevail or are perceived to prevail either generally
or with respect to SpectraLinks business, the price of SpectraLinks
common stock would likely decline further.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The ability of SpectraLink to develop and introduce new products
and transition existing products.SpectraLinks development efforts
may not lead to the successful introduction of new or improved
products. SpectraLink may encounter delays in deploying new or
improved products. For instance, SpectraLinks new products may not
properly function with its customers existing telephone systems or
SpectraLinks new products may contain defects or bugs. These
incompatibilities, defects or bugs may not be detected until
SpectraLinks customers begin to install the products or thereafter.
SpectraLink may need to modify the design of its new or improved
products if they have incompatibilities, defects or bugs, which could
result in significant expenditures by SpectraLink as it seeks to
remedy the problems, delays in the purchase of the products or
cancelled orders. SpectraLink may also encounter delays in the
manufacturing and production of the new products. Additionally, the
new products may not be commercially successful. Demand for existing
products may decrease upon the announcement of new or improved
products. Further, since products under development are often
announced before introduction, these announcements may cause customers
to delay purchases of any products until the new or improved versions
of those products are available. If customer orders decrease or are
delayed during the product transition, SpectraLink may experience a
decline in revenue and have excess inventory on hand which could
decrease gross profit margins. SpectraLinks gross margins might
decrease if customers, who may otherwise choose to purchase existing
products, instead choose to purchase lower priced models of new
products. Delays or deficiencies in the development, manufacturing,
and delivery of, or demand for, new or improved products could have a
negative effect on SpectraLinks business, operating results or
financial condition.
|
| |  |  | The continuing economic slowdown, particularly in information
technology spending, adversely impacts SpectraLinks business.
SpectraLinks business has been adversely impacted by the general
economic slowdown in the United States and worldwide, particularly the
decline in information technology spending. Consumers of information
technology continue to defer, and in some cases cancel, their purchase
decisions. SpectraLinks operating results have been adversely
affected as a result. SpectraLink expects the economic slowdown to
continue to adversely impact its business and operating results for at
least the next few quarters and perhaps significantly longer. The
adverse impacts from the slowdown include longer sales cycles, lower
average selling prices, fewer large orders from a single customer and
reduced revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | The ability of SpectraLink and its current and new distributors
and resellers to develop and execute effective marketing and sales
strategies.SpectraLink offers its products directly and indirectly
through a variety of third-party business partners, including
distributors and resellers. Changes in the financial or business
condition of these distributors and resellers, in addition to the
ability to develop and execute effective marketing and sales
strategies, could subject SpectraLink to lost sales and affect its
ability to bring its products to market. For instance, SpectraLink
experienced a decrease in sales by distributors during the second
quarter of 2002 when those distributors downsized their businesses in
reaction to the economic slowdown and, as a result, had fewer sales
representatives marketing SpectraLink products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | SpectraLinks ability to manage potential expansion of operations
in the U.S. and internationally.SpectraLink intends to expand its
existing domestic and international operations and to enter new
markets. This expansion will require significant management attention
and financial resources. SpectraLink currently has limited experience
in marketing and distributing its products internationally and in
developing versions of products that comply with local standards.
SpectraLink may also not be able to maintain or increase international
market demand for its products. International operations are subject
to other inherent risks, including foreign government regulation of
technology or unexpected changes in regulatory and customs
requirements, difficulty and delays in accounts receivable collection,
difficulties and costs of staffing and managing foreign operations,
reduced protection for intellectual property rights, foreign currency
exchange rate fluctuations, and taxation consequences.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | The market for on-premises wireless telephone systems may fail to
grow or to grow as quickly as SpectraLink anticipates.SpectraLink
derives its revenue principally from the sale of wireless, on-premises
telephone systems and related installation and other services relating
to those systems. Therefore, SpectraLinks future operating results
depend on the demand for those types of services. If this market does
not grow or grow quickly, SpectraLinks future results of operations
would be significantly harmed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |  |  | A lower than anticipated rate of acceptance of domestic and
international markets using the 802.11b standard.SpectraLinks
NetLink Wireless Telephones are compatible with the IEEE 802.11b
standard for use on 802.11b compliant wireless LANs. Consequently,
demand for NetLink Wireless Telephones depends upon the acceptance of
markets utilizing 802.11b compliant networks. This depends in part
upon the initial adoption of the 802.11b standard in international
markets, as well as enhancements to that standard in the U.S. and
foreign markets where the standard has already been adopted.
Additionally, the acceptance of 802.11b compliant networks may move
more slowly, if at all, if competing wireless networks are established
and utilized. Additionally, the deployment of wireless voice and data
systems has been inhibited by concerns about the potential of
unauthorized access to data and communications transmitted over or
accessible through a wireless system. Potential customers may choose
not to purchase SpectraLink products until wireless systems are
developed which provide for greater security. Further, SpectraLinks
products may not be compatible with secure wireless systems that may
be developed in the future. If markets utilizing 802.11b compliant
networks do not grow as SpectraLink anticipates, SpectraLinks growth
would be impeded and it would not be able to factor the related
revenues into its growth in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The risk of business interruption arising from SpectraLinks
dependence on its manufacturing facility located in Boulder, Colorado,
and the business relationship SpectraLink has with Offshore Group to
use a facility in Empalme, Sonora, Mexico which provides assembly
services.SpectraLink is highly dependent on its Boulder, Colorado
manufacturing facility, which is home to the majority of SpectraLinks
manufacturing operations. SpectraLink is also highly dependent upon
its business relationship with Offshore Group to provide management
services and a facility located in Empalme, Sonora, Mexico which
assembles SpectraLinks products. Any event that may disrupt or
indefinitely discontinue either of the facilities capacity to
manufacture, assemble and repair SpectraLinks products could greatly
impair SpectraLinks ability to generate revenues, fulfill orders and
attain financial goals. For instance, SpectraLink may experience
delays in the receipt of assembled product from the facility in Mexico
should the border between the U.S. and Mexico close.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | SpectraLink faces increasing competition in the on-premises
wireless telephone system market.The on-premises wireless telephone
system industry is competitive and influenced by the introduction of
new products and new entrants into the industry. The competitive
factors affecting the market for SpectraLinks systems include product
functionality and features, frequency band of operation, ease-of-use,
quality of support, product quality and performance, price,
distribution channels, and the effectiveness of marketing and sales
efforts. Most of SpectraLinks competitors have significantly greater
financial, technical, research and development, and marketing
resources than SpectraLink. As a result, SpectraLinks competitors may
respond more quickly to new or emerging technologies and changes in
customer requirements, or may devote greater resources to the
development, promotion, sale and support of their products than
SpectraLink. In addition, some purchasers may prefer to buy their
wireless telephone systems from a single source provider of telephone
systems, such as Alcatel or Cisco Systems, all of which manufacture
and sell enterprise telephone systems. Other purchasers may prefer to
buy their 802.11 wireless telephone systems from a single source
provider of wireless local area networks, or LANs, such as Cisco
Systems or Symbol Technologies, all of which provide 802.11 wireless
infrastructure and wireless telephones. Because SpectraLink focuses on
wireless on-premises telephone communications, it cannot serve as the
sole source for a complete telephone or data communications system.
There is no assurance that SpectraLink will be able to compete
successfully in the future. Further, if a potential customer is
already using a competing product or system, that potential customer
may not be willing or able to make the investment necessary to replace
such a system with a SpectraLink Wireless Telephone System. In
addition, there may be potential customers who choose another
technology because of cost or their belief that their needs do not
require the full functionality provided by a SpectraLink Wireless
Telephone System.
|
| |  |  | SpectraLinks ability to respond to rapid technological changes
within the on-premises wireless telephone industry.The wireless
communications industry is characterized by rapid technological
change, short product life cycles, and evolving industry standards. To
remain competitive, SpectraLink must develop or gain access to new
technologies in order to increase product performance and
functionality, reduce product size, and maintain cost-effectiveness.
SpectraLinks success is also dependent on its ability to develop new
products for existing and emerging wireless communications markets,
and to introduce such products in a timely manner. Due to the
competitive nature of SpectraLinks business, any delay in the
commercial availability of new products could materially and adversely
affect SpectraLinks business, reputation, and operating results. In
addition, if SpectraLink is unable to develop or obtain access to
advanced wireless networking technologies as they become available, or
is unable to design, develop and introduce competitive new products on
a timely basis, SpectraLinks future operating results would be
materially and adversely affected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

18



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| |  |  | SpectraLinks reliance on sole or limited sources of supply for
many components and equipment used in its manufacturing process.
SpectraLink relies on sole or limited sources of supply for many
components and equipment used in its manufacturing process. The
delay, inability, or refusal of any of these suppliers to ship these
components or equipment could interrupt SpectraLinks manufacturing
process and ability to manufacture products in a timely manner to meet
customer demand. The limited number of sources for many of these
components may also prevent SpectraLink from decreasing its reliance
on certain suppliers and finding other sources at competitive prices.
Unforeseen price increases by any of the sole or limited source
suppliers could negatively impact product margins and the financial
performance of SpectraLink.                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | SpectraLinks ability to attract and retain personnel, including
key technical and management personnel.Much of the future success of
SpectraLink depends on the continued service and availability of
skilled personnel, including technical, marketing and staff positions.
Experienced personnel in the information technology industry are in
high demand and competition for their talents is intense. There can
be no assurance that SpectraLink will be able to successfully retain
and attract the key personnel it needs. Many of SpectraLinks key
personnel receive a total compensation package that includes stock
options and other equity awards. New regulations, volatility in the
stock market and other factors could diminish the value of
SpectraLinks equity awards, putting SpectraLink at a competitive
disadvantage or forcing SpectraLink to use more cash compensation.
|
| |  |  | The historic volatility of SpectraLinks stock price, which may
make it more difficult to resell shares at prices attractive to
sellers.The market price of SpectraLinks common stock has been
volatile and is likely to remain subject to wide fluctuations in the
future. For example, during the 12-month period ended June 30, 2003,
the closing price of SpectraLinks common stock has ranged from a high
of $11.15 per share to a low of $4.45 per share. Many factors could
cause the market price of SpectraLinks common stock to fluctuate,
including:                                                                                                                                                                                                                                                                                                                                 

| |  |  | variations in SpectraLinks actual or anticipated
quarterly or annual results;                                       
| | - |  | ---------------------------------------------------------------------------------------------------------------------
| |  |  | market conditions in SpectraLinks industry, the
industries of SpectraLinks customers and the economy as a whole;   
| |  |  | announcements of technological innovations by
SpectraLink or by its competitors;                                     
| |  |  | introduction of new products or product enhancements or
new pricing policies by SpectraLink or by its competitors;   
| |  |  | acquisitions or strategic alliances by SpectraLink or by its competitors;                                            
| |  |  | recruitment or departure of key personnel;                                                                           
| |  |  | the gain or loss of significant orders;                                                                              
| |  |  | changes in the market valuations of other telecommunications companies;                                              
| |  |  | the amount of liquid financial resources available to SpectraLink;                                                   
| |  |  | the gain or loss of significant customers; and                                                                       
| |  |  | changes in the estimates of SpectraLinks operating
performance or changes in recommendations by securities analysts.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition, the stock market in general, and the market for
technology-related stocks in particular, has experienced a decline since
2000, and could decline further, which could cause the market price of
SpectraLinks common stock to fall for reasons not necessarily related
to SpectraLinks business, results of operations or financial condition.
The market price of SpectraLinks stock also might decline in reaction
to events that affect other companies in SpectraLinks industry even if
these events do not directly affect SpectraLink. Accordingly, you may
not be able to resell your shares of common stock at or above the price
you paid. Securities class action litigation is often brought against a
company following a period of volatility in the market price of its
securities, and SpectraLink has recently been sued in several purported
securities class action lawsuits. Further, certain of SpectraLinks
management and directors have also been sued in purported shareholder
derivative actions. Although SpectraLink believes that the lawsuits
lack merit, due to inherent uncertainties in litigation, SpectraLink
cannot accurately predict the outcome of this litigation. An adverse
determination could have a significant effect upon SpectraLinks
business and materially affect the price of its stock. Moreover,
regardless of the ultimate result, it is likely that the lawsuits will
require SpectraLink to incur expenses and divert managements attention
and resources from other matters, which could also adversely affect
SpectraLinks business and the price of its stock.

19



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| |  |  | SpectraLinks reliance on a limited number of significant
customers.A portion of SpectraLinks revenue has been derived from a
limited number of customers. Sales to one customer represented
approximately 10% of SpectraLinks revenue during the three months
ended June 30, 2003. SpectraLink also has experienced
quarter-to-quarter variability in sales to each of its major customers
and expects this pattern to continue in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Changes in rules and regulations of the FCC and other wireless
regulatory agencies.The wireless communications industry, regulated
by the Federal Communications Commission (FCC) in the United States
and similar government agencies in other countries, is subject to
changing political, economic, and regulatory influences. Regulatory
changes, including changes in the allocation of available frequency
spectrum, could significantly impact SpectraLinks operations in the
United States and internationally.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | SpectraLinks ability to protect its intellectual property
rights.SpectraLinks future success depends, in part, upon its
proprietary technology. SpectraLink relies on a combination of
patent, copyright, trade secret and trademark laws, confidentiality
procedures, and nondisclosure and other contractual provisions to
protect its proprietary rights. These legal protections provide only
limited protection and may be time consuming and expensive to obtain
and enforce. There can be no assurance that SpectraLinks pending
patent applications will be allowed or that the issued or pending
patents will not be challenged or circumvented by competitors or
provide meaningful protection against competition. If challenged,
SpectraLinks patents might not be upheld or their claims could be
narrowed. If SpectraLink fails to protect its proprietary rights
adequately, SpectraLinks competitors might gain access to
SpectraLinks technology. As a result, SpectraLinks competitors might
offer similar products and SpectraLink might not be able to compete
successfully in its market. Moreover, despite SpectraLinks efforts to
protect its proprietary rights, unauthorized parties may copy aspects
of SpectraLinks products and obtain and use information that
SpectraLink regards as proprietary. Also, SpectraLinks competitors
may independently develop similar, but not infringing, technology,
duplicate SpectraLinks products, or design around SpectraLinks
patents or its other intellectual property. In addition, other parties
may breach confidentiality agreements or other protective contracts
with SpectraLink, and SpectraLink may not be able to enforce its
rights in the event of these breaches. Furthermore, SpectraLink
expects that it will increase its international operations in the
future, and the laws of many foreign countries do not protect
SpectraLinks intellectual property rights to the same extent as the
laws of the United States. SpectraLink may be required to spend
significant resources to monitor and protect its intellectual property
rights. Any litigation surrounding SpectraLinks rights could force
SpectraLink to divert important financial and other resources from its
business operations.
|
| |  |  | The assertion of intellectual property infringement claims
against SpectraLink.SpectraLinks industry is characterized by the
existence of a large number of patents and frequent claims and related
litigation regarding patent and other intellectual property rights.
SpectraLink cannot be certain that its products do not and will not
infringe upon issued patents, patents to be issued in the future, or
other intellectual property rights of others. SpectraLink may in the
future be notified that it is infringing upon certain patent and/or
other intellectual property rights of others. Although there are no
such pending lawsuits against SpectraLink or unresolved notices that
SpectraLink is infringing upon intellectual property rights of others,
there can be no assurance that infringement claims will not occur in
the future. From time to time, third parties may assert exclusive
patent, copyright, trademark and other intellectual property rights to
technologies and related methods that are important to SpectraLink.
Litigation may be necessary in the future to defend against claims of
infringement or invalidity, to determine the validity and scope of the
proprietary rights of others, to enforce SpectraLinks intellectual
property rights, or to protect SpectraLinks trade secrets.
SpectraLink may also be subject to claims from customers for
indemnification. Any resulting litigation, regardless of its
resolution, could result in substantial costs and diversion of
resources. If it were determined that SpectraLinks products infringe
upon the intellectual property rights of others, SpectraLink would
need to obtain licenses from these parties or reengineer its products
in order to avoid infringement. SpectraLink might not be able to
obtain the necessary licenses on acceptable terms or at all, or to
reengineer its products successfully. Moreover, if SpectraLink is
sued for infringement and loses the suit, it could be required to pay
substantial damages or be enjoined from licensing or using the
infringing products or technology. Any of the foregoing could cause
SpectraLink to incur significant costs and prevent it from selling its
products.                                                   
|
| |  |  | SpectraLinks reliance on its 802.11b technology partners to
continue to provide the wireless local area network for SpectraLinks
NetLink product, and to provide access points which support
SpectraLink Voice Priority.In the absences of a wireless voice
prioritization standard, SpectraLink relies on 802.11b technology
partners, such as Proxim, Symbol Technologies, and Cisco Systems to
continue to provide wireless local area network support for
SpectraLinks NetLink product and to provide access points that
support SpectraLink Voice Priority. If any of SpectraLinks
technology partners fails to provide voice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |   |  | prioritization support for SpectraLinks products, the market
opportunity for NetLink products would be reduced and SpectraLinks
future results of operations would be materially harmed until
SpectraLink finds new 802.11b technology partners or voice
prioritization standards are adopted.                                                                               
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Potential fluctuations in SpectraLinks future revenues, gross
margins and operating results.SpectraLink has experienced, and may
in the future continue to experience, significant quarterly
fluctuations in revenue, gross margins and operating results due to
numerous factors, some of which are outside SpectraLinks control.
Among other things, these factors include:
|

| |  |  | changes in customer, geographic or product mix,
including mix of configurations within each product group;                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | fluctuating market demand for, and declines in the
average selling prices of, SpectraLinks products;                                                                        
| |  |  | the timing of and delay of significant orders from customers;                                                                                                                
| |  |  | seasonality in demand within SpectraLinks various sectors;                                                                                                                  
| |  |  | increases in material or labor costs;                                                                                                                                        
| |  |  | excess inventory;                                                                                                                                                            
| |  |  | obsolescence charges;                                                                                                                                                        
| |  |  | changes in shipment volume;                                                                                                                                                  
| |  |  | loss of cost savings due to changes in component
pricing or charges incurred due to inventory holding periods if
parts ordering does not correctly anticipate product demand;
| |  |  | increases in price competition;                                                                                                                                              
| |  |  | changes in distribution channels;                                                                                                                                            
| |  |  | increases in warranty costs; and                                                                                                                                             
| |  |  | introducing of new products and costs of entering new markets.                                                                                                               



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For example, historically SpectraLink has not operated with a
significant order backlog and a substantial portion of SpectraLinks
revenue in any quarter has been derived from orders booked and shipped
in that quarter. Accordingly, SpectraLinks revenue expectations are
based almost entirely on its internal estimates of future demand and not
on firm customer orders. Planned expense levels are relatively fixed in
the short-term and are based in large part on these estimates, and if
orders and revenue do not meet expectations, SpectraLinks revenues,
gross margins and operating results could be materially adversely
affected.



| |  |  | SpectraLinks revenue and earnings are highly seasonal.
Seasonality and other factors cause significant quarterly fluctuations
in SpectraLinks revenue and net income.SpectraLinks business is
highly seasonal. This causes significant quarterly fluctuations in
SpectraLinks financial results. Revenue and operating results are
usually strongest during the second and fourth fiscal quarters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Recently enacted and proposed changes in securities laws and
regulations are likely to increase SpectraLinks costs.The
Sarbanes-Oxley Act of 2002 that became law in July 2002, as well as
new rules subsequently implemented by the SEC, requires changes in
some of SpectraLinks corporate governance, public disclosure and
compliance practices. The Act also requires the SEC to promulgate
additional new rules on a variety of subjects. In addition to final
rules and rule proposals already made by the SEC, the Nasdaq National
Market has proposed revisions to its requirements for companies, such
as SpectraLink, that are Nasdaq-listed. SpectraLink expects these
developments to increase SpectraLinks legal and financial compliance
costs, and to make some activities like SEC reporting obligations,
more difficult. In addition, SpectraLink expects these developments to
make it more difficult and more expensive for SpectraLink to obtain
director and officer liability insurance, and SpectraLink may be
required to accept reduced coverage or incur substantially higher
costs to obtain coverage. These developments could make it more
difficult for SpectraLink to attract and retain qualified members of
SpectraLinks board of directors, particularly to serve on
SpectraLinks audit committee, and qualified executive officers.
SpectraLink is presently evaluating and monitoring regulatory
developments and cannot estimate the timing or magnitude of additional
costs SpectraLink may incur as a result.
|
| |  |  | Because many of SpectraLinks current and planned products are or
will be highly complex, they may contain defects or errors that are
detectable only after deployment in complex networks and which, if
detected, could have a negative effect on SpectraLinks business,
operating results or financial condition.Many of SpectraLinks
complex products can only be fully tested when deployed in commercial
networks. As a result, end-users may discover defects or errors or
experience breakdowns in their networks after the products have been
deployed. If any of these products contains defects, or has
reliability, quality or compatibility problems, SpectraLinks
reputation might be damaged significantly and customers might be                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |   |  | reluctant to buy SpectraLink products. These defects could interrupt or
delay sales. SpectraLink may have to invest significant capital and
other resources to correct these problems. If SpectraLink fails to
provide solutions to the problems, it will also incur product recall,
repair, warranty or replacement costs. These problems might also result
in claims against SpectraLink by its customer or others. In addition,
the occurrence of any defects or errors in these products, could result
in: failure to achieve market acceptance and loss of market share;
cancellation of orders; difficulty in collecting accounts receivable;
increased service and warranty costs in excess of SpectraLinks
estimates; diversion of resources, and; increased insurance costs and
other losses to SpectraLinks business or to end-users.                                                                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If SpectraLink experiences warranty failure that indicates either
manufacturing or design deficiencies, SpectraLink may be required to
recall units in the field and/or stop producing and shipping such
products until the deficiency is identified and corrected.In the
event of such warranty failures, SpectraLinks business could be
adversely affected resulting in reduced revenue, increased costs and
decreased customer satisfaction. End-users have discovered errors in
SpectraLinks products in the past and may discover errors in
SpectraLinks products in the future. In addition, if SpectraLinks
costs of remediating problems experienced by SpectraLinks customers
exceed SpectraLinks warranty reserves, these costs may adversely
affect SpectraLinks operating results. Consequently, SpectraLinks
warranty failure could have a material adverse impact on SpectraLinks
operations and financial results.




|       |  |                        
|------ |  | -----------------------
|Item 4 |  | Controls and Procedures

The Securities and Exchange Commission defines the term disclosure
controls and procedures to mean a companys controls and other procedures that
are designed to ensure that information required to be disclosed in the reports
that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. SpectraLinks Chief
Executive Officer and Chief Financial Officer have concluded, based on the
evaluation of the effectiveness of SpectraLinks disclosure controls and
procedures by SpectraLinks management, with the participation of its Chief
Executive Officer and Chief Financial Officer, as of the end of the period
covered by this report, that SpectraLinks disclosure controls and procedures
were effective for this purpose.

During the second quarter of fiscal 2003, there have been no changes in
SpectraLinks internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, SpectraLinks internal
control over financial reporting.




|        |  |                  
|------- |  | -----------------
|Part II |  | Other Information




| |  |        |  |                  
| |  | ------ |  | -----------------
| |  | Item 1 |  | Legal Proceedings

On January 14, 2002, SpectraLink issued a press release announcing
preliminary financial results for the fourth quarter of 2001 and revising
downward its estimates for year 2002 results of operations. Shortly after the
press release, the Companys stock price declined and the Company and certain
of its officers and directors were named as defendants in four lawsuits served
between February 20, 2002 and March 20, 2002, three of which were filed in the
United States District Court for the District of Colorado and one of which was
filed in the Colorado District Court for the City and County of Denver. In
each of the lawsuits, plaintiffs, who purport to be purchasers or holders of
SpectraLink common stock, seek to assert claims either on behalf of a class of
persons who purchased securities in SpectraLink between July 19, 2001 and
January 11, 2002, or in the case of two of the lawsuits (one filed in the
United States District Court and one in the Colorado District Court),
derivatively on behalf of SpectraLink. Two of the lawsuits filed in the United
States District contained essentially identical claims alleging that
SpectraLink and certain of its officers and directors violated Sections 10(b)
and 20(a) and Rule 10b-5 under the Securities Exchange Act of 1934, as a result
of alleged public misstatements and omissions, accompanied by insider stock
sales made prior to the decline in the price of SpectraLinks stock after the
January 14, 2002 press release. In the cases brought as derivative actions,
the plaintiffs allege that the officers and directors of SpectraLink violated
fiduciary duties owed to SpectraLink and its stockholders under state laws by
allowing and/or facilitating the issuance of these same alleged public
misstatements and omissions, misappropriating nonpublic information for their
own benefit, making insider stock sales, wasting corporate assets, abusing
their positions of control, and mismanaging the corporation. The plaintiffs in
these derivative cases allege that SpectraLink has and will continue to suffer
injury as a result of these alleged violations of duty for which the officers
and directors should be liable.

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The cases are designated as follows: Wilmer Kerns, Individually And On
Behalf of All Others Similarly Situated, Plaintiff, vs. SpectraLink
Corporation, Bruce Holland and Nancy K. Hamilton, Defendants (United States
District Court Civil Action Number 02-D-0263); Danilo Martin Molieri,
Individually and On Behalf of All Others Similarly Situated, Plaintiff, v.
SpectraLink Corporation, Bruce Holland and Nancy K. Hamilton, Defendants
(United States District Court Civil Action Number 02-D-0315); Evie Elennis,
derivatively on behalf of SpectraLink Corporation, Plaintiff(s), v. Bruce M.
Holland, Anthony V. Carollo, Jr., Gary L. Bliss, Michael P. Cronin, Nancy K.
Hamilton and John H. Elms, Defendant(s), and SpectraLink Corporation, Nominal
Defendant (United States District Court Civil Action Number 02-D-0345); and
Roger Humphreys, Derivatively on Behalf of Nominal Defendant SpectraLink
Corporation, Plaintiff, v. Carl D. Carman, Anthony V. Carollo, Jr., Bruce M.
Holland, Burton J. McMurtry, Gary L. Bliss, Michael P. Cronin, John H. Elms,
and Nancy K. Hamilton, Defendants (Colorado District Court Case. No. 02CV1687).

The Kerns and Molieri purported class actions were consolidated, and the
plaintiffs filed a Consolidated Amended Complaint. In January of 2003, the
Court denied a motion to dismiss that amended pleading, and discovery has
recently commenced. The Court has now certified a class of all purchasers of
publicly traded common stock of SpectraLink from April 19, 2001 through January
11, 2002, inclusive.

The two derivative actions were stayed pending resolution of the motion to
dismiss in the consolidated class action, and plaintiffs counsel in the
Elennis derivative action recently filed an unopposed motion for relief from
the stay and filed an amended complaint and then a corrected amended
complaint. Prior to the entry of the stays in each of the derivative cases,
the defendants had filed motions to dismiss. Defendants intend to move to
dismiss the amended and corrected Elennis complaint.

SpectraLink believes that the lawsuits are without merit and it intends to
vigorously defend itself and its officers and directors. SpectraLink does not
believe that its interests and that of the named officers and directors are
adverse to each other as of this time. However, no assurance can be given that
SpectraLink will be successful in defending the claims being asserted in these
suits, or that the interests of the various parties will remain aligned. If
SpectraLink is not successful in its defense of these suits, it could be
required to make significant payments to its stockholders and their lawyers,
which could have a material adverse effect on SpectraLinks business, financial
condition and results of operations. In addition, the litigation could result
in substantial costs, divert managements attention and resources, or
ultimately result in the interests of SpectraLink becoming adverse to those of
certain of its officers and directors. In either case, SpectraLinks business
could be adversely affected, even if the plaintiffs are not successful in their
claims against SpectraLink and/or its officers and directors.

The Company has incurred a loss related to the directors and officers
insurance deductible of which the majority of the expense was reflected in
2002. Based on current facts and circumstances, the Company is unable to
estimate future losses, if any, it may incur after considering the amounts that
will be covered by insurance.

SpectraLink is not presently a party to any other material pending legal
proceedings of which it is aware.




|       |  |                                                    
|------ |  | ---------------------------------------------------
|Item 4 |  | Submission of Matters to a Vote of Security Holders



| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | At SpectraLinks Annual Meeting of Stockholders held May 22, 2003, the
following proposal was adopted by the margins indicated.



| | 1. |  | To elect a board of Directors to serve until the next Annual
Meeting of Stockholders and until their successors are elected and
qualified.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                  |            |          |  |  |           | 
|----------------------- |  | ---------------- | ---------- | -------- |  |  | --------- | 
|                        |  | Number of Shares
|                        |  |                 
|                        |  | Voted For        |            | Withheld
|                        |  |                  |            |         
|Bruce M. Holland        |  |                  | 13,620,626 |          |  |  | 3,788,560 | 
|Carl D. Carman          |  |                  | 14,964,254 |          |  |  | 2,444,932 | 
|Anthony V. Carollo, Jr. |  |                  | 16,569,962 |          |  |  | 839,224   | 
|Burton J. McMurtry      |  |                  | 14,954,054 |          |  |  | 2,455,132 | 



| | 2. |  | To ratify the selection of KPMG LLP, independent public
accountants, as auditors for SpectraLink for the fiscal year ending
December 31, 2003. Number of shares voted: For 16,507,347; Against
895,012; Abstain 6,827.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|       |  |                                 
|------ |  | --------------------------------
|Item 6 |  | Exhibits and Reports on Form 8-K




(a)  Exhibits



| |                                           
| | ------------------------------------------
| | The following exhibits are filed herewith:

|               |  |                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Title                                                                                                                               
|               |  |                                                                                                                                             
|10.16†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
Flatiron Park Company.*                                                        
|10.17†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
Flatiron Park Company.*                                                        
|10.18†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
2545 Central, LLC.*                                                            
|31.1†          |  | Certification by Bruce M. Holland pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 
|31.2†          |  | Certification by Nancy K. Hamilton pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1†*         |  | Certification by Bruce M. Holland pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 
|32.2†*         |  | Certification by Nancy K. Hamilton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



---

|† |  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|* |  | As contemplated by SEC Release No. 33-8212, these exhibits are furnished
with this quarterly report on Form 10-Q and are not deemed filed with the
Securities and Exchange Commission and are not incorporated by reference in
any filing of SpectraLink Corporation under the Securities Act of 1933 or
the Securities Exchange Act of 1934, whether made before or after the date
hereof and irrespective of any general incorporation language in any
filings.



| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibits filed with SpectraLinks 2002 Form 10-K constitute
those exhibits currently required to be on file. The reader
should refer to the 2002 Form 10-K under Part III, Item 15, for
a list of those exhibits.




(b)  Reports on Form 8-K



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SpectraLink filed a Current Report on Form 8-K on April 23,
2003. This Form 8-K reported information under Item 9
Regulation FD Disclosure, that was intended to be furnished
under Item 12. Results of Operations and Financial Condition
in accordance with SEC Release No. 33-8216. This filing included
SpectraLinks earnings press release for the three months ended
March 31, 2003, and the script used by SpectraLink executives on
the conference call explaining the quarterly results. The
information furnished under that Form 8-K was intended to be
furnished and not deemed filed with the Securities and Exchange
Commission, and is not incorporated by reference in any filing
of SpectraLink under the Securities Act of 1933 or the
Securities Exchange Act of 1934, including this quarterly
report, whether made before or after the date of that Form 8-K
and irrespective of any general incorporation language in any
filings.

24



---



##### Table of Contents






SPECTRALINK CORPORATION
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.

|                      |  |     |  |                                                                                                                   
|--------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------------------
|Date: August 11, 2003 |  | By: |  | /s/ NANCY K. HAMILTONNancy K. Hamilton,
Principal Financial and Accounting
Officer and on behalf of the Registrant

25



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##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Title                                                                                                                               
|               |  |                                                                                                                                             
|10.16†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
Flatiron Park Company.*                                                        
|10.17†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
Flatiron Park Company.*                                                        
|10.18†         |  | Lease Agreement dated April 15, 2003 between SpectraLink and
2545 Central, LLC.*                                                            
|31.1†          |  | Certification by Bruce M. Holland pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. 
|31.2†          |  | Certification by Nancy K. Hamilton pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1†*         |  | Certification by Bruce M. Holland pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 
|32.2†*         |  | Certification by Nancy K. Hamilton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



---

|† |  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|* |  | As contemplated by SEC Release No. 33-8212, these exhibits are furnished
with this quarterly report on Form 10-Q and are not deemed filed with the
Securities and Exchange Commission and are not incorporated by reference in any
filing of SpectraLink Corporation under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date hereof
and irrespective of any general incorporation language in any filings.

26