##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

Form 10-K

|   |  |                                                                                            
|-- |  | -------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934.    
|   |  | For the fiscal period ended December 31,
	2001                                             
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934.
|   |  | For the transition period
	from           to                                               

Commission file number 000-30993



---

Western Multiplex Corporation

(Exact name of registrant as specified in its
charter)


|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 52-2198231                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

1196 Borregas Avenue

Sunnyvale, California 94089


(408) 542-5200


(Address, including zip code, and telephone
number, including area code, of registrants principal
executive offices)




---

Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

Class A Common Stock, par value $.01 per
share


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 (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of the registrants knowledge, in
the definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     o

The aggregate market value of the
registrants voting stock held by non-affiliates of the
registrant was approximately $18.9 million on
February 21, 2002, based on the closing sales price of the
registrants common stock as reported on The Nasdaq Stock
Market as of such date.

The number of shares outstanding of the
registrants Class A common stock as of
February 21, 2002 was approximately 59,291,283.



---






---

TABLE OF CONTENTS



|                                           |                                                                                                                                       |  |  |  |  |  |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                    
|                                           | Item 1. Business                                                                                                                     
|                                           | Item 2. Properties                                                                                                                   
|                                           | Item 3. Legal Proceedings                                                                                                            
|                                           | Item 4. Submission of Matters to a Vote of Security Holders                                                                          
|PART II                                   
|                                           | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                                                        
|                                           | Item 6. Selected Financial Data                                                                                                      
|                                           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                                        
|RISK FACTORS                              
|                                           | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                                  
|                                           | Item 8. Financial Statements and Supplementary Data                                                                                  
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                           | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                         
|PART III                                  
|                                           | Item 10. Directors and Executive Officers of the Registrant                                                                          
|                                           | Item 11. Executive Compensation                                                                                                      
|                                           | Item 12. Security Ownership of Certain Beneficial Owners and Management                                                              
|                                           | Item 13. Certain Relationships and Related Transactions                                                                              
|PART IV                                   
|                                           | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.(a) The following documents are filed as part of this Form:
|SIGNATURES                                
|EXHIBIT INDEX                             
|EXHIBIT 10.16                             
|EXHIBIT 10.17                             
|EXHIBIT 10.18                             
|EXHIBIT 10.19                             
|EXHIBIT 10.33                             
|EXHIBIT 10.34                             
|EXHIBIT 10.35                             
|EXHIBIT 10.36                             
|EXHIBIT 10.37                             
|EXHIBIT 23                                



---



##### Table of Contents



TABLE OF CONTENTS

|           |  |                                                                                               |  |      |    | 
|---------- |  | --------------------------------------------------------------------------------------------- |  | ---- | -- | 
|           |  |                                                                                               |  | Page
|           |  |                                                                                               |  |     
|PART I     |  |                                                                                               |  |      |    | 
|ITEM 1.    |  | BUSINESS                                                                                      |  |      | 2  | 
|ITEM 2.    |  | PROPERTIES                                                                                    |  |      | 12 | 
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                             |  |      | 12 | 
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS                                   |  |      | 13 | 
|          
|PART II    |  |                                                                                               |  |      |    | 
|ITEM 5.    |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
        RELATED STOCKHOLDER MATTERS                 |  |      | 13 | 
|ITEM 6.    |  | SELECTED FINANCIAL DATA                                                                       |  |      | 14 | 
|ITEM 7.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  |      | 16 | 
|ITEM 7A.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
        MARKET RISK                            |  |      | 40 | 
|ITEM 8.    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                   |  |      | 41 | 
|ITEM 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE  |  |      | 67 | 
|          
|PART III   |  |                                                                                               |  |      |    | 
|ITEM 10.   |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                            |  |      | 67 | 
|ITEM 11.   |  | EXECUTIVE COMPENSATION                                                                        |  |      | 68 | 
|ITEM 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
        AND MANAGEMENT                        |  |      | 74 | 
|ITEM 13.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                |  |      | 76 | 
|          
|PART IV    |  |                                                                                               |  |      |    | 
|ITEM 14.   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
        REPORTS ON FORM 8-K                      |  |      | 77 | 
|SIGNATURES |  |                                                                                               |  |     

1



---



##### Table of Contents






PART I




Item
1.     Business

Except for any historical information
contained herein, the matters discussed in this Annual Report on
Form 10-K contain certain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the Companys
financial condition, results of operations, cash flows,
revenues, financing plans, business strategies and market
acceptance of its products. The words anticipate,
believe, estimate, expect,
plan, intend, and similar expressions
are intended to identify these forward-looking statements. These
forward-looking statements are found at various places
throughout this Annual Report. We caution you not to place undue
reliance on these forward-looking statements, which speak only
as of the date they were made. We do not undertake any
obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances
after the date of this Annual Report or to reflect the
occurrence of unanticipated events.

Overview

We provide broadband, or high-speed, wireless
access products both in the United States and internationally.
Our products and systems enable service providers, businesses
and other enterprises to deliver data, voice and video services.
We believe our fixed wireless systems address the growing need
of our customers and end-users to rapidly and cost effectively
deploy high-speed communication networks. During the last ten
years, we have developed technologies that have enabled us to
introduce what we believe are some of the fastest, longest range
and most reliable broadband wireless systems available,
including our Tsunami 480, which we believe is currently
the industrys fastest license-exempt wireless system.

We serve the global broadband wireless access
market by selling our systems to service providers, businesses
and other enterprises directly through our sales force and
indirectly through distributors, value-added resellers and
products integrators. In 2001, we sold our systems to
381 customers in 58 countries.

The Western Multiplex Solution

We believe that our broadband wireless systems
address the growing need for bandwidth where digital phone lines
or fiber optic cable are either too expensive to deploy in a
timely fashion or are unavailable. Our systems are used in a
variety of applications in different markets, including:



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Wireless operator infrastructure.Our systems enable cellular and
	personal communication service providers to connect their base
	stations to other base stations and to existing wire line
	networks.                                                                                                                        
|
| |  | Fiber extension.Our
	systems enable service providers to extend the reach of the
	fiber optic network that spans the United States with products
	that combine the high transmission speeds and the reliability of
	fiber optic cable with the flexibility, cost effectiveness and
	rapid deployment of wireless technologies.
|
| |  | Campus and other private networks.Our systems enable enterprises with
	multiple facilities, including those located in a campus
	environment, to connect their facilities to expand or establish
	private computer and communications networks.                                                                               
|
| |  | Last mile access.Our systems connect end-users with a
	service providers central office, providing high-speed
	last mile internet access.                                                                                                                                                                                    
|
| |  | Fiber redundancy.Our systems enable service providers
	and enterprises to back-up the wire line portions of their
	networks.                                                                                                                                                                                                  

The key benefits of our solution include:

Rapid deployment.Service providers, businesses and
other enterprises can rapidly deploy our licensed and
license-exempt systems to establish new, or expand existing,
network infrastructures. Competing technologies such as digital
phone lines and fiber optic cable generally take longer to
deploy than our broadband wireless access systems. In addition,
our license-exempt systems do not require frequency

2



---



##### Table of Contents



coordination and regulatory approval. As a
result, service providers, businesses and other enterprises can
avoid many of the time consuming processes typically required in
installing licensed wireless technologies.


Telecommunications grade availability of
service.We have developed proprietary
error correction algorithms, fault tolerant systems and
comprehensive network management software designed to enable our
Lynx and Tsunami systems to match or exceed fiber network
availability standards. These wireless systems are designed to
provide 99.999% availability, or less than five minutes of down
time per year. As a result, our systems enable service
providers, businesses and other enterprises to provide end-users
with telecommunications grade availability which is equal to or
better than that offered by most alternative broadband access
solutions.

High-speed and long distance connections.We have used our engineering expertise
and proprietary radio frequency and digital signal processing
technologies to design systems that offer an attractive
combination of high-speed transmission rates and long-range
coverage. During the past ten years, we have introduced what we
believe are some of the fastest and longest-range wireless
systems available, including our Tsunami 480, which we believe
is currently the industrys fastest license-exempt system.

Cost-effective solution.Because our technology enables our
systems to transmit over longer distances than competing product
designs, service providers, businesses and other enterprises
require fewer units to cover a specified area. As a result, they
are able to reduce both their initial and incremental capital
expenditures for network deployment.

Fully integrated end-to-end solution.We offer a broad range of systems that
enable service providers, businesses and other enterprises to
create complete broadband wireless networks that connect
end-users to the fiber optic network. Our point-to-point systems
are primarily used within the backhaul segments of networks and
also provide last mile access to large businesses. Our
point-to-multipoint systems provide last mile access to
residential users and small businesses. Our systems use similar
radio frequency technology, digital signal processing and
network management software. We believe this design commonality
offers service providers, businesses and other enterprises
higher end-to-end performance, lower equipment costs and lower
training and maintenance costs.

Our broadband wireless access systems have
various disadvantages and limitations. For example, the
broadband wireless access industry is technology intensive and
requires us to continually develop new products or product
enhancements in order for us to remain competitive. In addition,
in contrast to mobile wireless access solutions, our systems
require line-of-sight installation, which often requires the
end-user to obtain roof rights from third parties. Our systems
may also experience problems due to radio signal interference,
which may occur if multiple wireless systems are operating on
the same radio frequencies and in the same geographic areas as
our systems or, in the case of operating frequencies above
11 Ghz, if there is inclement weather. Furthermore, our
point-to-multipoint systems started shipping in late 2001 and we
may not be able to successfully penetrate the market with these
systems.

Strategy

Our objective is to be a leading global provider
of broadband wireless access systems. Our strategy to accomplish
this objective is to:

Capitalize on our technology expertise to
rapidly introduce new products.Over
the last ten years, we have developed several core technologies
that form the basis of our current product lines and which we
intend to use in our future product development. Our dedicated
team of engineers has multi-disciplinary technical capabilities,
including radio frequency technology, digital signal processing
and system software development. We believe integrating these
capabilities is highly complex, and we intend to continue to
take advantage of our technology expertise to introduce product
enhancements and new products in a rapid and cost effective
manner. For example, we are currently developing a
point-to-point broadband wireless system capable of transmitting
data at speeds in excess of 180 megabits per second and
point-to-multipoint systems which will easily integrate with our
existing point-to-point systems.

3



---



##### Table of Contents



Utilize existing customer relationships to
expand into new market segments.In
2001, we sold our systems to 381 customers in
58 countries. Our customers include AT&T Wireless
Group, Verizon Wireless, Cingular Wireless and Voicestream
Wireless Corporation. We intend to build upon our relationships
with current customers as they continue to expand their networks
and enter new market segments, such as fiber extension, campus
and other private networks and last mile access. We believe that
we will be well-positioned to provide our current customers with
broadband wireless access solutions in their new markets.

Increase our presence in international
markets.While our products are
currently sold and approved for use in 39 countries, we
intend to increase our presence in these countries and further
expand into new international markets where broadband wire line
access is currently too expensive or unavailable. In particular,
we believe there is a substantial opportunity for our licensed
products in countries where government authorities have granted
or have indicated that they intend to grant broadband wireless
licenses. Additionally, as governmental authorities make
license-exempt spectrum available, we believe our license-exempt
systems will be well-positioned for rapid deployment in these
international markets. We will continue to expand our presence
worldwide by expanding our international sales and marketing
efforts, obtaining regulatory approval for deploying our systems
in new international markets, increasing our total product
offerings in both existing and new international markets and
establishing strategic alliances and partnerships.

Aggressively market through distributors,
value-added resellers and systems integrators.We have established relationships with
key distributors, value-added resellers and systems integrators
such as Avant Telecoms Inc., Communications Services
International, Inc., Hutton Communication, Inc., Somera
Communications Inc., Tessco Technologies Incorporated and
Westcon Inc. to market and sell our systems. To further
accelerate our growth, we intend to build upon our existing
relationships and establish new relationships with distributors,
value-added resellers and systems integrators that we believe
have strong relationships with potential customers for our Lynx,
Tsunami and point-to-multipoint systems. Our marketing group
continues to develop materials and programs such as training
courses to assist our distributors, value-added resellers and
systems integrators in penetrating these markets.

Expand through strategic transactions.We intend to pursue acquisitions of
complementary businesses, technologies, products or services to
expand our presence in the broadband wireless access market. On
March 24, 2000, we acquired Ubiquity Communication, Inc., a
Petaluma, California-based company. Through the acquisition, we
acquired development stage point-to-multipoint technology that
we have integrated with our core technologies to develop our
point-to-multipoint systems. On March 22, 2001, we acquired
WirelessHome Corporation, a Long Beach, California-based
company. Through this acquisition, we acquired
point-to-multipoint technology in the Beta phase that we have
used to complete development of our first generation
point-to-multipoint systems. On January 16, 2002, we signed
a merger agreement with Proxim, Inc., a Sunnyvale,
California-based company. Proxim provides wireless local area
networking and building-to-building network products based on
radio frequency or RF technology.

Products

We have three product lines: Lynx, Tsunami and
Tsunami Multipoint, which began shipment in December 2001. We
design our systems generally to use common features, components
and software.

4



---



##### Table of Contents





| |                          
| | -------------------------
| | Lynx and Tsunami Products

Our products operate at different transmission
speeds and radio frequencies. Our product names directly
correspond to the transmission speeds at which they are capable
of operating. The table below summarizes the features of our
current products:

|                   |  |                              |                 |                   |  |                             
|------------------ |  | ---------------------------- | --------------- | ----------------- |  | ----------------------------
|                   |  | Transmission Speeds          |                 | Radio            
|                   |  | (Kilobits per second (Kbps)) |                 | Frequency        
|Product Name       |  | (Megabits per second (Mbps)) |                 | (Gigahertz (GHz))
|                   |  |                              |                 |                  
|LYNX Fractional-T1 |  |                              | 56 to 512 Kbps  |                   |  | 2.4 GHz                     
|LYNX T1/ E1        |  |                              | 1.5 Mbps/2 Mbps |                   |  | (License-exempt)            
|LYNX 2T1/2E1       |  |                              | 3 Mbps/4 Mbps   |                   |  |                             
|LYNX 4T1/4E1       |  |                              | 6 Mbps/8 Mbps   |                   |  |                             
|LYNX Fractional-T1 |  |                              | 56 to 512 Kbps  |                   |  | 5.8 GHz                     
|LYNX T1/ E1        |  |                              | 1.5 Mbps/2 Mbps |                   |  | (License-exempt)            
|LYNX 2Tl/2E1       |  |                              | 3 Mbps/4 Mbps   |                   |  |                             
|LYNX 4T1/4E        |  |                              | 6 Mbps/8 Mbps   |                   |  |                             
|LYNX 6T1/6E1       |  |                              | 16 Mbps         |                   |  |                             
|LYNX 8T1           |  |                              | 12 Mbps         |                   |  |                             
|LYNX DS-3          |  |                              | 45 Mbps         |                   |  | 6 GHz & 11 GHz (Licensed)   
|LYNX OC-3          |  |                              | 155 Mbps        |                   |  | 5.3/5.8 GHz (License-exempt)
|LYNX DS-3          |  |                              | 45 Mbps         |                   |  | 6 GHz & 11 GHz (Licensed)   
|TSUNAMI 10BaseT    |  |                              | 2 Mbps          |                   |  | 2.4 GHz & 5.8 GHz           
|                   |  |                              | 4 Mbps          |                   |  | (License-exempt)            
|                   |  |                              | 8 Mbps          |                   |  |                             
|                   |  |                              | 10 Mbps         |                   |  |                             
|TSUNAMI 100BaseT   |  |                              | 45 Mbps         |                   |  | 5.8 GHz                     
|                   |  |                              | 100 Mbps        |                   |  | (License-exempt)&           
|                   |  |                              |                 |                   |  | 23 GHz                      
|                   |  |                              |                 |                   |  | (Licensed)                  
|TSUNAMI 1000SY     |  |                              | 480 Mbps        |                   |  | 5.3/5.8 GHz                 
|                   |  |                              |                 |                   |  | (License-exempt)            
|TSUNAMI Multipoint |  |                              | 60 Mbps/sector  |                   |  | 5.8 GHz                     
|                   |  |                              |                 |                   |  | (License-exempt)            

Each of our point-to-point systems consists of
two identical pieces of equipment. Each piece of equipment is
first connected to an end-users network by a cable and a
connector and then connected by an antenna cable to an antenna,
which is usually on a rooftop or tower. The two antennae are
then aimed at one another to create a wireless connection
between the two end-user locations. By using multiple systems,
end-users can connect more than two locations to form a more
extensive network. Our point-to-multipoint system consists of a
base station connected to a wire line network which communicates
with a multitude of subscriber units that connect remote local
area computer networks to the main wire line network.

Lynx products.Our
point-to-point Lynx products are primarily used by wireless
operators to connect their base stations to other base stations
and to existing wire line networks. These connections comprise
the backhaul segments of their networks. In addition, these
products are also used to establish campus and private networks
and to provide fiber extension and last mile access. Our Lynx
products are offered in a variety of frequencies, ranging from
2.4 GHz to 11 GHz, which includes both licensed and
license-exempt spectrum, and in a variety of data transmission
speeds, ranging from 56 Kbps per second to 155 Mbps
per second. Our Lynx products can transmit and receive the
maximum data capacity in both directions simultaneously, a
feature commonly known as full duplex. Our products have a
compact, fully-integrated design and a built-in network
management system. They can be linked together within a network
and managed with simple network management protocol, or SNMP,
software. SNMP is an industry standard set of rules that governs
network

5



---



##### Table of Contents



management and monitors network devices and their
functions. Our Lynx products also include a separate control and
diagnostic channel which remotely monitors the systems
status and performance without reducing its carrying capacity.


We are currently developing additional Lynx
products, some of which should be capable of operating at speeds
exceeding 625 megabits per second. These products under
development will be additional solutions for fiber extension and
last mile access.

Tsunami products.Our point-to-point Tsunami products
primarily enable service providers, businesses and other
enterprises to expand or establish private networks by bridging
Internet traffic among multiple facilities. In addition, these
products are also used to provide fiber extension and last mile
access. Tsunami products are currently offered in a variety of
frequencies, ranging from 2.4 GHz to 23 GHz, and in a
variety of data transmission speeds, ranging from 2 Mbps
per second to 480 Mbps per second. Like our Lynx products,
our Tsunami products offer features including full duplex
transmission, fully-integrated design and a separate control and
diagnostic channel. In addition, our higher capacity Tsunami
systems include one or more additional T1 or E1 connections
without reducing the carrying capacity of the system. The
additional T1 or E1 connection is a standard
telecommunications interface that is not based on Internet
Protocol and is typically used for voice and/or video.

We are currently developing Tsunami products that
should operate at speeds exceeding 720 megabits per second.
These products under development will be additional solutions
for fiber extension, last mile access and campus and private
networks.



| |                             
| | ----------------------------
| | Point-to-Multipoint Products

In late 2001 we began shipping our
point-to-multipoint systems to enable service providers,
businesses and other enterprises to cost-effectively connect
end-users to a central hub. Businesses and other enterprises may
also use these systems to cost-effectively connect multiple
facilities within their private networks.

Our point-to-multipoint systems are deployed in a
hub and spoke configuration consisting of a single central hub
and equipment located at each end-users premises. The
central hub will wirelessly connect to the remote customer
premises equipment. It will also prioritize transmission and
allocate slots of time to each end-user based on a system called
time division duplexing. We believe our time division duplexing
technology will provide a more efficient use of capacity than
most alternative technologies to accommodate the peaks and lows
of traffic between the end-user and the central hub. The central
hub will operate in a range of frequencies, in various
geographic configurations and will be capable of supporting
hundreds of units of customer premises equipment. The hub unit
will also be able to connect to the central office of a service
provider using our point-to-point technology. The customer
premises equipment will transmit and receive data between the
end-user and the central hub at various transmission speeds and
frequencies.

Technology

Over the last ten years, we have developed a
number of core technologies that form the basis of our current
product offerings and which will also be used in our future
product development. Our primary areas of technology expertise
are radio frequency technology, digital signal processing and
system software development.

Radio frequency technology.Microwave and millimeter-wave
technology are the technologies used to wirelessly transmit
data, voice and video. Microwave technology uses radio
frequencies ranging from 1 GHz up to 20 GHz, and
millimeter-wave technology uses frequencies above 20 GHz.
We believe we are one of the few wireless equipment
manufacturers in the industry that has internally developed
fully integrated microwave circuit board designs. We believe
having these design capabilities provides us with higher
performance, lower production costs, shorter development cycles
and the ability to customize our products so that they can
easily be integrated with our existing products and with the
networks of our various customers and end-users.

Digital signal processing technology.Our products use proprietary digital
signal processing technologies and designs that we developed
specifically for use in wireless systems. We believe these
technologies have

6



---



##### Table of Contents



enabled us to introduce a number of high-speed
wireless products that we may not have been able to produce with
generic digital signal processing chip sets that are
commercially available. Because our development cycles are not
dependent on an external supplier, we believe we can develop
flexible, innovative products more quickly than our competitors
who do not have this in-house capability. We are currently using
our technological expertise in digital signal processing to
develop next generation, high-speed wireless systems designed to
operate at speeds over 720 megabits per second.


System software.Our
systems use SNMP-based software that enables remote monitoring
and control and facilitates the integration and compatibility of
our products with larger communications networks. In addition,
we have patented software for bandwidth allocation, which we
believe will allow our point-to-multipoint products to use
bandwidth more efficiently and to operate at higher speeds than
other point-to-multipoint systems.

Sales and Marketing

We sell our products worldwide to service
providers, businesses and other enterprises directly through our
sales force and indirectly through distributors and value-added
resellers. We focus our marketing efforts on supporting our
direct sales force, distributors, value-added resellers and
systems integrators. We also seek to stimulate market demand by
increasing brand awareness and educating potential customers
about the advantages of using our products.

In the United States and Canada, our sales force
focuses on key strategic accounts such as service providers,
businesses and other enterprises and also develops relationships
with end-users that purchase through distributors and
value-added resellers. Outside the United States and Canada,
sales are generally made through distributors or value-added
resellers. Our sales force, however, develops direct
relationships with end-users either independently, in which case
the sales representative then brings in the distributor or
value-added reseller to complete the sale, or together with the
distributors or value-added resellers through the relationships
they have developed with the end-users.

We have established relationships with large
national and international distributors, local and specialized
distributors and value-added resellers. The distributors sell
our products, and the value-added resellers not only sell our
products, but also assist their customers in network design,
installation and testing. In some cases, both distributors and
value-added resellers also assist their customers with
financing, maintenance and the purchase of ancillary equipment
necessary for installation of a wireless network. We are
currently exploring opportunities to begin selling directly to
original equipment manufacturers. In 2001, sales of our products
through distributors and value-added resellers represented 88.0%
of our revenue.

Our estimated backlog as of December 31,
2000 and 2001 was $15.2 million and $8.5 million,
respectively.

Customer Service

We are committed to providing our customers with
high levels of service and support. We provide training,
technical assistance and customer support on the installation,
management, use and testing of our products. We also provide a
24 month warranty for our systems and offer both
in-warranty and out-of-warranty repair services. Our repair
center is staffed with technicians who work directly with our
quality assurance team to identify potential problems and repair
equipment. In addition, we have a number of flexible hardware
and software maintenance and support programs available for our
products.

Customers

We have a globally diversified base of customers
and end-users consisting of service providers, businesses and
other enterprises. In 2001, we sold our products to
381 customers in 58 countries. For the year ended
December 31, 2001, sales to our three largest distributors,
Comstor, Somera Communications, Inc., and Tessco Technologies,
represented 29.9%, 11.4% and 10.5%, respectively, of revenue.

7



---



##### Table of Contents



Export sales, which are denominated in U.S.
dollars and consist of domestic sales to customers in foreign
countries accounted for approximately 23.1%, 33.2% and 24.3% of
net revenue in 1999, 2000, and 2001 respectively.

In 1999, 2000, and 2001, sales to all
distributors of the Companys products accounted for
approximately 23.1%, 39.5% and 69.8% of net revenues.

Research and Development

Our research and development efforts are focused
on improving the functionality and performance of our existing
products as well as developing new products to meet the changing
needs of our diverse base of customers and end-users. We are
currently pursuing the following research and development
initiatives:



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | developing our point-to-multipoint systems;                                          
|
| |  | adapting our products to additional frequencies
	and interfaces;                     
|
| |  | developing higher speed products;                                                    
|
| |  | increasing the performance of our digital signal
	processing technology; and         
|
| |  | designing our products for low-cost, outsourced
	manufacturing, assembly and testing.

We devote a substantial portion of our resources
to developing new products, enhancing existing products,
expanding and improving our core wireless technologies and
strengthening our technological expertise. Over the last ten
years, we have made and expect to continue to make significant
investments in research and development. We invested
approximately $5.9 million, $12.4 million and
$19.1 million in research and development activities in
1999, 2000, and 2001, respectively.

Manufacturing

Our ISO 9001 certified manufacturing operation,
based in our Sunnyvale, California facility, consists primarily
of pilot production, product assembly and product testing. Our
strategy is to outsource manufacturing and procurement of
component parts to manufacturers with the expertise and ability
to achieve the cost reductions associated with volume
manufacturing and to respond quickly to orders, while
maintaining our quality standards. This allows us to focus our
internal resources on developing new products. We rely on two
contract manufacturers to produce our printed circuit boards and
one contract manufacturer for limited printed circuit board
testing. We complete the final assembly and testing of our
products at our Sunnyvale facility.

We depend on single source suppliers for several
of our components. Most of these components are purchased by our
contract manufacturers. We carry additional inventory of these
components, as do our contract manufacturers, but we may have
manufacturing shortages if our sales increase more than we
expect. We have experienced in the past and may in the future
experience difficulties in obtaining various components due to
capacity constraints among suppliers in our industry which are
experiencing high levels of demand.

Competition

The market for broadband wireless access systems
is rapidly evolving, highly competitive and subject to rapid
technological change. Because we develop a variety of products
for several different markets, we have a broad range of
competitors. Competition for one or more of our systems includes
products manufactured or marketed by a number of large
communication equipment suppliers, including Alcatel, Ericsson
Business Networks AB, Lucent Technologies Inc. and Nortel
Networks Corporation, as well as by a number of smaller
companies, including Alvarion, Ltd., P-Com, Inc., Proxim, Inc.,
and Wi-LAN Inc. Many of our competitors are substantially larger
than we are and have significantly greater financial, sales,
marketing, distribution, technical, manufacturing and other
resources. In addition, our competitors may provide financing to
their customers. Companies in the communications industry which
are currently not selling broadband wireless access products, as
well as our current competitors, may make strategic acquisitions
or establish cooperative

8



---



##### Table of Contents



relationships among themselves or with third
parties to enter this market or to increase their ability to
gain market share rapidly. We expect to face increasing
competitive pressures from both current and future competitors
in the markets we serve.


We have just begun to ship our
point-to-multipoint products and have not yet developed a
competitive position in the point-to-multipoint segment of the
market. A number of other companies began commercially selling
point-to-multipoint systems before us, and these companies may
have a competitive advantage because they were the first to
market this type of product. We believe, however, that we will
be able to successfully compete by using our relationships with
our existing customers to sell our new point-to-multipoint
systems, which can be integrated with our other systems, and
because we believe our point-to-multipoint systems may have
features our competitors systems do not have.

Technological developments and consolidation
within the broadband wireless access equipment industry result
in frequent changes to our group of competitors. The principal
competitive factors in our market include:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | product features and reliability;                                                                  
|
| |  | the ability to be among the first to introduce
	new products;                                      
|
| |  | price;                                                                                             
|
| |  | brand recognition;                                                                                 
|
| |  | relationships with distributors, value-added
	resellers, systems integrators and service providers;
|
| |  | the ability to integrate various products into a
	single network; and                              
|
| |  | customer service and technical support.                                                            

Broadband wireless access solutions compete with
other high-speed solutions such as cable modem technologies,
satellite technologies, digital subscriber lines and fiber optic
cables. Many of these alternative technologies can take
advantage of existing installed infrastructure and have achieved
significantly greater market acceptance and penetration than
broadband wireless access technologies. Other factors that
influence the choice between wireless and wire line products
include reliability and security, speed and volume capacity,
cost effectiveness, availability of sufficient frequencies and
geographic suitability. We expect to face increasing competitive
pressures from both current and future technologies in the
broadband access market.

Intellectual Property

Our success depends on the preservation and
protection of our product and manufacturing process designs and
other proprietary technology. We use a variety of intellectual
property in the development and manufacturing of our products,
but do not believe that any of our intellectual property is
individually critical to our current operations. Taken as a
whole, however, we believe our intellectual property rights are
significant.

We currently have six U.S. patents, five of
which relate to our point-to-multipoint systems, and one to our
point-to-point systems under development. One of these patents
expires in 2011, two in 2012, and two in 2016. We also have one
pending U.S. patent application that pertains to our
point-to-multipoint systems. Assuming our patent applications
result in granted patents, those patents will expire in 2018. In
addition, we have four U.S. trademarks, which cover variations
of our name and logo, and several pending U.S. trademark
applications, which cover our Lynx and Tsunami product lines.
Because, to date, we have sold our products primarily in the
United States, we have not yet applied to register any of our
intellectual property in any foreign countries. However, we
intend to file foreign patent and trademark applications in the
future, in instances where we consider a particular trademark or
aspect of our technology important enough to justify the added
expense of the filings.

In addition to our registered intellectual
property, we also use proprietary technology in our business.
This technology includes internally developed proprietary error
correction algorithms, fault tolerant systems and comprehensive
network management software. A significant portion of this
technology consists of specialized

9



---



##### Table of Contents



knowledge and technical expertise that has been
developed over time by our employees. In order to maintain the
confidential nature of this technology, we have chosen to
protect it by generally limiting access to it, treating portions
of it as trade secrets and obtaining confidentiality or
non-disclosure agreements from persons who are given access to
it. All of our employees have signed our standard
confidentiality agreement, which prohibits them from disclosing
our confidential information, technology developments and
business practices, as well as any confidential information
entrusted to us by other parties. Similarly, all of the
consultants who have been given access to our confidential
information or proprietary technology have signed an agreement
prohibiting them from disclosing that information and technology
to others.


We also have an intellectual property license
agreement with Glenayre which we entered into on
November 1, 1999. Under the agreement, Glenayre granted us
a royalty-free license to use some of its intellectual property,
including patents, patent applications, copyrights, software,
technology and proprietary information. In addition, Glenayre
granted us a license to use its name. Under the agreement, we
granted Glenayre a royalty-free license to two patent
applications and to use any trademarks we own that relate to
inventory held by Glenayre on the date of the license.

Government Regulation

Our products are subject to extensive
telecommunications-based regulation by the United States and
foreign laws and international treaties. We must conform our
products to a variety of regulatory requirements and protocols
established to, among other things, avoid interference among
users of radio frequencies and to permit interconnection of
equipment. Each country has different regulations and a
different regulatory process. In order for our products to be
used in some jurisdictions, regulatory approval and, in some
cases, specific country compliance testing and re-testing may be
required. The delays inherent in this regulatory approval
process may force us to reschedule, postpone or cancel the
installation of our products by our customers, which may result
in significant reductions in our sales.

We are also subject to U.S. government export
controls. We rely on our customers to inform us when they plan
to deliver our products to other countries, and we regularly
inform our customers of the export controls with which they must
comply.

In addition, domestic and international
authorities continue to regulate the allocation and auction of
the radio frequency spectrum. These regulations have a direct
impact on us, because our licensed products can be marketed only
if permitted by suitable frequency allocations, auctions and
regulations. The implementation of these regulations may delay
our end-users in deploying their systems, which could, in turn,
lead to delays in orders of our products by our customers and
end-users.

Employees

As of December 31, 2001, we had 269
employees, including 56 in manufacturing, 91 in research and
development, 91 in sales, marketing and customer service and 31
in finance and administration. We are not a party to any
collective bargaining agreement. We believe that relations with
our employees are good.

10



---



##### Table of Contents



Executive Officers

The following information as of February 21,
2002, is provided with respect to each of our executive officers.

|                   |  |     |    |                            |  |                                                                     
|------------------ |  | --- | -- | -------------------------- |  | --------------------------------------------------------------------
|Name               |  | Age |    | Current Title and Position
|                   |  |     |    |                           
|Jonathan Zakin     |  |     | 52 |                            |  | Chief Executive Officer and Chairman of the Board
	of Directors     
|Amir Zoufonoun     |  |     | 42 |                            |  | President and Chief Operating Officer                               
|Nancy Huber        |  |     | 44 |                            |  | Executive Vice President and Chief Financial
	Officer               
|Fred Corsentino    |  |     | 48 |                            |  | Executive Vice President of Worldwide Sales                         
|Gordana Pance      |  |     | 38 |                            |  | Vice President of Engineering                                       
|Rita Khayat-Toubia |  |     | 39 |                            |  | Chief Information Officer and Vice President of
	Information Systems
|Ihab Abu-Hakima    |  |     | 45 |                            |  | Senior Vice President of International Sales                        
|Christina Rulo     |  |     | 57 |                            |  | Vice President of Human Resources                                   

Jonathan N. Zakin has served as our Chief
Executive Officer and Chairman of the Board of Directors since
November 1, 1999. Mr. Zakin is also currently
President of Leeward Technology Partners and Leeward Management
Inc., affiliates of Ripplewood Holdings, L.L.C., and he is the
Manager of Seaview Holdings, L.L.C. Prior to founding Leeward
Technology Partners in 1997, he was Executive Vice President of
Business Development and Corporate Strategy of U.S. Robotics, a
communications equipment company, from 1995 to 1997, Executive
Vice President of Sales and Marketing of U.S. Robotics from 1989
to 1995 and Vice President of Sales from 1987 to 1989.
Mr. Zakin was elected a director of U.S. Robotics in 1988.
He has also held various executive and management positions,
both domestically and internationally, with Winterhalter, Inc.,
Cosma International, Brisk and Kindle and J. Henry Schroder
Corp. Mr. Zakin received an M.B.A. degree from Harvard
Business School and a B.A. degree from New York University.

Amir Zoufonoun has served as our President and
Chief Operating Officer and a member of the Board of Directors
since November 1, 1999. He was also our General Manager
from 1998 to 1999. Since Mr. Zoufonoun joined Western
Multiplex in 1989, he served in various management positions of
increasing responsibility, including Vice President of
Engineering. From 1979 to 1989, he held various engineering and
technical management positions with Harris Corporation.
Mr. Zoufonoun received a M.S. degree in electrical
engineering from Santa Clara University and a B.S. degree in
Electrical Engineering from San Jose State University.

Nancy Huber has served as our Chief Financial
Officer, Executive Vice President and Corporate Secretary since
February 16, 2000 and on October 2, 2001 was promoted
from Vice President of Finance to Executive Vice President.
Prior to joining us, Ms. Huber served as Vice President of
Finance, Western Operations for Evans & Sutherland Computer
Corporation, a graphics developer, from 1998 to 1999. From 1994
to 1998, she was Vice President of Finance and Chief Financial
Officer for AccelGraphics, Inc. From 1991 to 1994, she served
first as MIS Manager, then Chief Financial Officer and finally
Chief Executive Officer of ATG Cygnet, Inc., a mass storage
robotic company. Ms. Huber received a Master of Management
degree from the J.L. Kellogg Graduate School of Management
and a B.S. degree in Chemical Engineering from Purdue University.

Fred Corsentino has served as our Vice President
of Sales since February 25, 2000 and was promoted to
Executive Vice President of Worldwide Sales on October 19,
2000. From 1998 to 1999, Mr. Corsentino was Vice President
of Sales for Open Port Technology, a worldwide provider of
Internet telephony solutions. From 1997 to 1998,
Mr. Corsentino was Director of North American Enterprise
Access Sales for 3Com Corporation, a communications equipment
company. From 1993 to 1997, he served as Director of East Area
Sales for U.S. Robotics where he was responsible for major
enterprise and service provider accounts. Mr. Corsentino
received an M.B.A. degree from Columbia University and a B.S.
degree in Economics from the New York Institute of Technology.

11



---



##### Table of Contents



Gordana Pance has served as our Vice President of
Engineering since November 1, 2000. Prior to that she held
various engineering management positions at Western Multiplex.
Mrs. Pance has been a key driver behind our companys
technical leadership since 1993, when she first joined Western
Multiplex to lead our RF and microwave R&D. She received her
M.S. and Ph.D. degrees from the University of Rochester, New
York, in 1990 and 1993 respectively, both in electrical
engineering.

Rita Khayat-Toubia has served as our Chief
Information Officer and Vice President, Information Systems
since March 1, 2001. Ms. Khayat-Toubia has more than
15 years of experience in information technology including
project management, application development, infrastructure
management, organizational development and process
reengineering. Prior to joining us, Ms. Khayat-Toubia
served as Director of Global Information Systems Controlling for
Hoechst Marion Roussel AG, an international pharmaceutical firm
where she managed worldwide IS activity and integrated all IS
departments. Ms. Khayat-Toubia also served as MIS Director,
Roussel Uclaf Holdings Corporation, for their U.S. headquarters
in New Jersey. Prior to her position with Hoechst Marion Roussel
AG, Ms. Khayat-Toubia served as Director of International
Information Systems for Roussel Uclaf where she instituted
operating policies and procedures for worldwide standards and
strategic planning for over 25 foreign subsidiaries.
Ms. Khayat-Toubia received a Post-M.S. degree in
Engineering, M.S. degree in Information Systems and Business
Administration from ISIM (Institut des Sciences de
lIngengieur de Montpellier), France and a B.S. degree in
Economics from Bordeaux University, France.

Ihab Abu-Hakima has served as our Senior Vice
President of International Sales since January 10, 2002. He
was our Vice President of Marketing from July 24, 2000
until March 20, 2001. From March 20, 2001 until
January 10, 2002 he was our Vice President of Business
Development. Prior to joining us, Mr. Abu-Hakima served as
Senior Vice President of Marketing and Business Development at
LiveKnowledge.com, an Internet knowledge exchange from 1999 to
2000. From 1997 to 1999, he was Vice President and General
Manager of the Internet and Business Computing Division of the
Strategic Business Analysis Division at Silicon Graphics
Computer Systems, Inc. From 1991-1996, he held various positions
at Silicon Graphics Computer Systems. Mr. Abu-Hakima
received an M.B.A. degree and a B.Eng. Electrical Engineering
degree, with honors, from McGill University.

Christina M. Rulo has served as our Vice
President of Human Resources since October 19, 2000. Prior
to joining us, Ms. Rulo served as Corporate Vice President
of Human Resources for Hyperion Solutions, where she was
responsible for leading a worldwide Human Resources merger
effort including culture integration programs and policy and
benefit redesign implementation. From 1995 through 1997,
Ms. Rulo served as Vice President of Human Resources for
VLSI Technology, Inc., a multi-national ASIC semiconductor
corporation. Ms. Rulo also served as Human Resource
Director and as a regional Human Resource Director for VLSI
prior to her appointment as Vice President. Ms. Rulo is a
Board member of Networks Advantage.




Item
2.Properties

We lease approximately 98,173 square feet of
facilities in several locations. Our headquarters is a 45,709
square foot facility in Sunnyvale, California. This facility
accommodates the following departments: sales and marketing, the
majority of our research and development, manufacturing,
administration and finance. The term of the lease for this
facility expires in June 2006. We also lease approximately 4,494
square feet in Petaluma, California, which was used for our
Ubiquity operations. As part of the closing of these operations
during the end of the first quarter of 2001, we began subleasing
this facility in November 2001. In addition, on
September 13, 2000, we entered into an agreement to lease a
37,333 square foot facility in Sunnyvale, California for our
manufacturing and customer support operations. The term of the
lease for this facility began in January 2001 and expires in
November 2010. As part of our acquisition of WirelessHome in
March 2001, we also acquired the lease for a 10,637 square foot
facility in Long Beach, California. The term of this lease
expires in July 2005.




Item 3.Legal
Proceedings

We are not currently a party to any material
legal proceedings.

12



---



##### Table of Contents








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

None.




PART II






|        |                                                                       
|------- | ----------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
	and Related Stockholder Matters

(a) Market Information

The following table shows the high and low bid
prices of the Companys common stock for the fiscal years
ended December 31, 2000 and 2001 as reported on the NASDAQ
National Market System:

|                                |  |      |       |     |  |   |       | 
|------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|                                |  | High |       | Low
|                                |  |      |       |    
|Third Quarter (ended 9/29/00)   |  | $    | 21.44 |     |  | $ | 12.00 | 
|Fourth Quarter (ended 12/31/00) |  | $    | 17.13 |     |  | $ | 4.94  | 
|First Quarter (ended 3/30/01)   |  | $    | 17.0  |     |  | $ | 6.63  | 
|Second Quarter (ended 6/29/01)  |  | $    | 8.20  |     |  | $ | 2.50  | 
|Third Quarter (ended 9/28/01)   |  | $    | 5.60  |     |  | $ | 2.82  | 
|Fourth Quarter (ended 12/31/01) |  | $    | 5.85  |     |  | $ | 3.25  | 

The closing price of the Companys common
stock on the NASDAQ National Market System on February 21,
2002 was $1.85.

(b) Holders

Western Multiplex Corporation common stock is
quoted on the NASDAQ National Market System under the symbol
WMUX. The Company has 276 stockholders of record as of
February 21, 2002.

(c) Dividends

The Company presently intends to retain its
future earnings, if any, to fund the development and growth of
its business and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.

13



---



##### Table of Contents






Item
6.Selected Financial
Data

You should read the selected consolidated
financial data set forth below in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and Western
Multiplexs consolidated financial statements and the
related notes included elsewhere in this Annual Report on
Form 10-K. The consolidated statements of operations data
for the years ended December 31, 1999, 2000 and 2001 and
the consolidated balance sheet data as of December 31, 2000
and 2001 are derived from, and are qualified by reference to,
the audited consolidated financial statements and related notes
appearing elsewhere in this Annual Report on Form 10-K. The
statement of operations data for the year ended
December 31, 1997 and 1998 and the balance sheet data as of
December 31, 1998 are derived from audited financial
statements not appearing elsewhere in this Annual Report on
Form 10-K. The balance sheet data as of December 31,
1997 is derived from unaudited financial statements not
appearing elsewhere in this Annual Report on Form 10-K.
Historical results are not necessarily indicative of results
that may be expected for any future period.

|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |        |         |  
|----------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------- | ------ | ----- | ------ | ---- | ------ | ----- | ------ | ---- | ------ | ----- | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------- | -
|                                                                  |                                                |                                                          
|                                                                  |                                                | Year Ended December 31,                                  
|                                                                  |                                                |                                                          
|                                                                  |                                                | 1997                                                      |        | 1998  |        | 1999 |        | 2000  |        | 2001
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |     
|                                                                  |                                                |                                                          
|                                                                  |                                                | (In thousands, except per share data)                    
|Revenue, net                                                      |                                                | $                                                         | 32,108 |       |        | $    | 32,903 |       |        | $    | 44,750 |       |        | $ | 105,508 |        |        | $ | 105,730 |       
|Cost of revenue                                                   |                                                |                                                           | 16,039 |       |        |      | 17,703 |       |        |      | 22,470 |       |        |   | 50,466  |        |        |   | 55,887  |       
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Gross Profit                                              |        |       | 16,069 |      |        |       | 15,200 |      |        |       | 22,280 |   |         |        | 55,042 |   |         |        | 49,843  |  
|Operating expenses:                                               |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  | Research and development                       |                                                           |        | 4,099 |        |      |        | 4,866 |        |      |        | 5,925 |        |   |         | 12,379 |        |   |         | 19,114 |        
|                                                                  | Sales and marketing                            |                                                           |        | 4,709 |        |      |        | 5,105 |        |      |        | 6,154 |        |   |         | 16,180 |        |   |         | 26,562 |        
|                                                                  | General and administrative                     |                                                           |        | 1,463 |        |      |        | 1,494 |        |      |        | 2,038 |        |   |         | 6,351  |        |   |         | 12,041 |        
|                                                                  | Amortization of goodwill and intangible assets |                                                           |        | 733   |        |      |        | 731   |        |      |        | 737   |        |   |         | 2,382  |        |   |         | 5,440  |        
|                                                                  | Amortization of deferred stock compensation    |                                                           |        |      |        |      |        |      |        |      |        |      |        |   |         | 4,161  |        |   |         | 5,196  |        
|                                                                  | Recapitalization costs                         |                                                           |        |      |        |      |        |      |        |      |        | 3,050 |        |   |         |       |        |   |         |       |        
|                                                                  | Impairment of goodwill and intangible assets   |                                                           |        |      |        |      |        |      |        |      |        |      |        |   |         |       |        |   |         | 4,331  |        
|                                                                  | Restructuring charges                          |                                                           |        |      |        |      |        |      |        |      |        |      |        |   |         |       |        |   |         | 1,816  |        
|                                                                  | In-process research and development            |                                                           |        |      |        |      |        |      |        |      |        |      |        |   |         |       |        |   |         | 6,400  |        
|                                                                  | Merger costs                                   |                                                           |        |      |        |      |        |      |        |      |        |      |        |   |         | 185    |        |   |         | 30     |        
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Total operating expenses                                  |        |       | 11,004 |      |        |       | 12,196 |      |        |       | 17,904 |   |         |        | 41,638 |   |         |        | 80,930  |  
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Income (loss) from operations                             |        |       | 5,065  |      |        |       | 3,004  |      |        |       | 4,376  |   |         |        | 13,404 |   |         |        | (31,087 | )
|Interest income (expense), net                                    |                                                |                                                           | 1,000  |       |        |      | (24    | )     |        |      | (368   | )     |        |   | 85      |        |        |   | 1,393   |       
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Income (loss) before taxes                                |        |       | 6,065  |      |        |       | 2,980  |      |        |       | 4,008  |   |         |        | 13,489 |   |         |        | (29,694 | )
|Income tax provision (benefit)                                    |                                                |                                                           | 2,577  |       |        |      | 1,145  |       |        |      | 2,831  |       |        |   | 6,800   |        |        |   | (4,096  | )     
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Income (loss) before extraordinary item                   |        |       | 3,488  |      |        |       | 1,835  |      |        |       | 1,177  |   |         |        | 6,689  |   |         |        | (25,598 | )
|Loss on early extinguishment of debt, net of tax
	benefit of $241 |                                                |                                                           |       |       |        |      |       |       |        |      |       |       |        |   | (394    | )      |        |   |        |       
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Net income (loss)                                         |        |       | 3,488  |      |        |       | 1,835  |      |        |       | 1,177  |   |         |        | 6,295  |   |         |        | (25,598 | )
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Basic earnings (loss) per share                           |        | $     | 0.04   |      |        | $     | 0.02   |      |        | $     | 0.02   |   |         | $      | 0.13   |   |         | $      | (0.44   | )
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Diluted earnings (loss) per share                         |        | $     | 0.04   |      |        | $     | 0.02   |      |        | $     | 0.02   |   |         | $      | 0.12   |   |         | $      | (0.44   | )
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Shares used to compute basic earnings
	(loss) per share   |        |       | 80,000 |      |        |       | 80,000 |      |        |       | 73,000 |   |         |        | 47,045 |   |         |        | 57,559  |  
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       
|                                                                  |                                                | Shares used to compute diluted earnings
	(loss) per share |        |       | 80,000 |      |        |       | 80,000 |      |        |       | 73,000 |   |         |        | 52,081 |   |         |        | 57,559  |  
|                                                                  |                                                |                                                           |        |       |        |      |        |       |        |      |        |       |        |   |         |        |        |   |         |       

14



---



##### Table of Contents



|                                     |  |              |        |      |  |      |        |      |  |      |        |  |  |   |         |  |  |   |         | 
|------------------------------------ |  | ------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------- |  |  | - | ------- | 
|                                     |  |             
|                                     |  | December 31,
|                                     |  |             
|                                     |  | 1997         |        | 1998 |  | 1999 |        | 2000 |  | 2001
|                                     |  |              |        |      |  |      |        |      |  |     
|                                     |  | (unaudited)  |        |      |  |      |        |      |  |     
|Balance Sheet Data:                  |  |              |        |      |  |      |        |      |  |      |        |  |  |   |         |  |  |   |         | 
|Cash and cash equivalents            |  | $            | 3,057  |      |  | $    | 1,377  |      |  | $    | 1,913  |  |  | $ | 31,094  |  |  | $ | 16,552  | 
|Short-term investments               |  |              |       |      |  |      |       |      |  |      |       |  |  |   | 20,633  |  |  |   | 6,738   | 
|Working capital                      |  |              | 10,266 |      |  |      | 9,835  |      |  |      | 4,481  |  |  |   | 84,686  |  |  |   | 65,083  | 
|Total assets                         |  |              | 34,937 |      |  |      | 35,146 |      |  |      | 43,322 |  |  |   | 140,877 |  |  |   | 134,398 | 
|Long-term debt, less current portion |  |              |       |      |  |      |       |      |  |      | 19,153 |  |  |   | 28      |  |  |   |        | 
|Total stockholders equity           |  |              | 31,845 |      |  |      | 30,719 |      |  |      | 11,006 |  |  |   | 122,024 |  |  |   | 118,252 | 
|Dividends per common share           |  | $            | 0.15   |      |  | $    |       |      |  | $    |       |  |  | $ |        |  |  | $ |        | 

15



---



##### Table of Contents






Item
7.     Managements Discussion
and Analysis of Financial Condition and Results of
Operations

Except for any historical information
contained herein, the matters discussed in this Annual Report on
Form 10-K contain certain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the Companys
financial condition, results of operations, cash flows,
revenues, financing plans, business strategies and market
acceptance of its products. The words anticipate,
believe, estimate, expect,
plan, intend, and similar expressions,
are intended to identify these forward-looking statements. These
forward-looking statements are found at various places
throughout this Annual Report. We caution you not to place undue
reliance on these forward-looking statements, which speak only
as of the date they were made. We do not undertake any
obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances
after the date of this Annual Report or to reflect the
occurrence of unanticipated events.

The following discussion should be read
together with our financial statements and the related notes
contained elsewhere in this Annual Report on
Form 10-K.

Overview

We were founded in 1979 in Sunnyvale, California
as a vendor of radio components and related services. In 1992,
we changed our strategy, became a designer and manufacturer of
broadband wireless systems and launched our Lynx broadband
wireless systems. These point-to-point systems are primarily
used by wireless operators to connect their base stations to
other base stations and to existing wire line networks. In 1999,
we introduced our Tsunami point-to-point broadband wireless
systems, which primarily enable service providers, businesses
and other enterprises to expand or establish private networks by
bridging Internet traffic among multiple facilities. Based on
our core technologies and the technology acquired through our
purchase of WirelessHome Corporation in March 2001, we are
developing point-to-multipoint systems that will enable service
providers, businesses and other enterprises to connect multiple
facilities within a geographic area to a central hub. We began
shipping our first generation of these products at the end of
the fourth quarter of 2001.

On August 4, 2000, we completed our initial
public offering of 7,500,000 shares of Class A common
stock at a public offering price of $12.00 per share. On
August 31, 2000, the underwriters exercised their option to
purchase 1,125,000 additional shares of Class A common
stock to cover over-allotments. The initial public offering and
subsequent exercise of 1,125,000 shares by the underwriters
resulted in net proceeds to us of approximately
$91.0 million after payment of the underwriters
commission and deduction of offering expenses. Simultaneously
with the closing of the initial public offering, all of our then
outstanding 38,000,000 shares of Class B common stock
and 42,000,000 shares of Class B treasury stock were
automatically converted into 38,000,000 shares of
Class A common stock and 42,000,000 shares of
Class A treasury stock, respectively.

In August 2000, we used a portion of the net
proceeds from the initial public offering to repay outstanding
indebtedness. We made the mandatory prepayment of our term notes
to Credit Suisse First Boston and also repaid all borrowings
outstanding under the revolving credit facility. The total
repayment including accrued interest was $28.9 million. In
connection with the prepayment of our term notes, we wrote off
deferred financing costs of $394,000, net of income taxes. This
transaction was accounted for as an extraordinary loss on early
extinguishment of debt.

Subsequent Event  Merger with
Proxim Inc.On January 16, 2002,
we signed a merger agreement with Proxim, Inc.
(Proxim), headquartered in Sunnyvale, California.
Proxim provides wireless local area networking and
building-to-building network products based on radio frequency
technology. Under the terms of the agreement, each outstanding
share of Proxim common stock will be converted into the right to
receive 1.8896 shares of Western Multiplex common stock.
The merger is intended to qualify as a tax-free reorganization.
Upon completion of the merger, Proxim stockholders and Western
Multiplex stockholders will each own approximately 50% of the
combined company. The transaction is subject to customary
closing conditions, including regulatory approvals and the
approval of the stockholders of both companies. The transaction
is expected to close at the end of the first calendar quarter or
early in the second calendar quarter of 2002.

16



---



##### Table of Contents



Revenue, net.We
primarily generate revenue from the sale of our Lynx and Tsunami
systems. We introduced the Tsunami product line at the end of
the fourth quarter of 1999. While our Tsunami products and Lynx
products have similar pricing for comparable models, our Lynx
product line contributes the largest part of our revenue. We
began selling our point-to-multipoint systems in the last month
of 2001 and have just begun to generate revenue from these
products. We also generate a small percentage of our revenue
from the sale of services and parts and rentals of our systems.
We sell worldwide to service providers, businesses and other
enterprises directly through our sales force and indirectly
through distributors, value added resellers and system
integrators. Sales to certain distributors are made under terms
allowing certain rights of return, protection against subsequent
price declines on our products held by our distributors and
co-op marketing programs. We recognize revenue from the sale of
our systems and parts when all the following conditions are met:
the system or part has been shipped, evidence of an arrangement
exists and we have the right to invoice the customer, the
collection of the receivable is probable, and we have no
post-delivery obligations remaining. Revenue from services, such
as preinstallation diagnostic testing and product repair
services, is recognized over the period for which the services
are performed, which is less than one month. Revenue from
product rentals is recognized over the period of the rental.

Net revenue consists of product revenues reduced
by estimated sales returns and allowances. Provisions for
estimated sales returns and allowances, which are based on
historical trends, contractual terms and other available
information, are recorded at the time of sale.

Our sales force focuses on key strategic accounts
and also develops relationships with end-users that purchase
through distributors and value-added resellers. Distributors
sell our products, and value-added resellers not only sell our
products, but also assist end-users in network design,
installation and testing. We also market our products through
strategic relationships we have with systems integrators, which
design and install networks that incorporate our systems. Any
significant decline in direct sales to end-users or in sales to
our distributors or value-added resellers, or the loss of any of
our distributors or value-added resellers, could materially
adversely affect our revenue.

In 2001, we sold our products to 381 customers in
58 countries. In 2001, international sales accounted for
approximately 24.3% of our total sales. We expect international
sales to increase as a percentage of overall sales in the
future. Currently, all of our sales are denominated in
U.S. dollars. Accordingly, we are not exposed to currency
exchange risks other than the risk that exchange rate
fluctuations may make our products more expensive for customers
outside the United States and, as a result, could decrease
international sales. In addition, we face risks inherent in
conducting global business. These risks include extended
collection time for receivables, reduced ability to enforce
obligations and reduced protection for our intellectual property.

As we have increased sales through our
distributors and value-added resellers, we have experienced a
decline in the average selling price of our products. This is
because the prices of the products that we sell indirectly
through distributors and value-added resellers are lower than
the prices of the products we sell directly through our sales
force to end-users. We have also lowered our prices for older
products as we introduce additional products that provide faster
data rates. These newer products have higher prices than our
older products. Our international sales also have lower average
selling prices when compared to our United States and Canadian
sales. This is primarily due to our reliance on distributors and
value-added resellers for international sales, and also because
our lower speed products, with significantly lower prices, are
being sold in larger quantities internationally than
domestically. As indirect sales and sales in our international
markets increase, we expect that our average selling prices will
further decrease.

Cost of revenue.Cost of revenue consists primarily of outsourced manufacturing
costs, component costs, labor and overhead costs, costs of
acquiring finished parts from original equipment manufacturers,
customer service and accrued warranty costs. We currently
outsource the majority of our manufacturing and supply chain
management to a limited number of independent contract
manufacturers, who obtain components for our products from
suppliers. Accordingly, a significant portion of our cost of
revenue consists of payments to these contract manufacturers and
component suppliers. The remainder of our cost of revenue is
related to our in-house manufacturing operations, which consist
primarily of quality control, final assembly, testing and
product integration. We expect to realize lower per unit product
costs as we continue to outsource

17



---



##### Table of Contents



more of our in-house manufacturing. However, we
cannot assure you when or if cost reductions will occur. The
failure to achieve these cost reductions could materially
adversely affect our gross margins and operating results.


Gross profit.Our
gross profit is affected by both the average selling prices of
our systems and our cost of revenue. Historically, decreases in
our average selling prices has generally been offset by
reductions in our per unit product cost. We cannot assure you,
however, that we will achieve any reductions in per unit product
cost in the future or that any reductions will offset a
reduction in our average selling prices.

Research and
development.Research and development
expenses consist primarily of salaries and related personnel
expenses, prototype development expenses, consultant fees and
allocated overhead related to the design, development, testing
and enhancement of our products and underlying technologies. We
expense all research and development expenses as incurred. We
expect to increase our research and development expenses as we
continue to develop new products and improve our core
technologies. In particular, we expect research and development
expenses to increase in connection with our continued
development of point-to-multipoint broadband wireless systems.

Sales and marketing.Sales and marketing expenses consist of salaries, commissions
and related expenses for personnel engaged in sales, product
marketing, sales support functions, advertising, trade show and
other promotional expenses and allocated overhead. We intend to
increase our sales and marketing expenditures as we add sales
and marketing personnel, increase the number of distributors and
value-added resellers that sell our products and increase
marketing programs. In particular, we expect sales and marketing
expenses to increase as we substantially expand our sales
operations to support and develop leads for our distributors and
value-added resellers.

General and
administrative.General and
administrative expenses consist primarily of salaries and
related expenses for executive, finance and administrative
personnel, professional fees, other general corporate expenses,
provision for bad debts, and allocated overhead. We do not
expect general and administrative expenses to increase in total
during 2002.

Stock option
programs.We have implemented stock
option programs for employees and members of the board of
directors to attract and retain business and technical
personnel. During the year of 2000, we recorded deferred stock
compensation for the difference between the exercise price and
the deemed fair value of our common stock on the date the stock
options were granted. This amount is included as a reduction of
stockholders equity and is being amortized by charges to
operations over the vesting period. The amortization expense
relates to options awarded to employees in their respective
operating expense categories.

Recapitalization

On November 1, 1999, Ripplewood Partners,
L.P. and affiliates acquired 94.6% of our capital stock from
Glenayre Technologies, Inc. through a wholly owned subsidiary,
WMC Holding Corp., in a transaction accounted for as a
recapitalization. Prior to the recapitalization, we were an
indirect wholly owned subsidiary of Glenayre Technologies, Inc.,
which had previously acquired us in 1995. As part of
Glenayres acquisition of us, Glenayre recognized
$22.0 million of goodwill, amortized over a 30-year useful
life. This goodwill amount, which is $17.1 million in our
balance sheet as of December 31, 2001, is reflected on our
historical financial statements.

We treated the recapitalization as an asset
acquisition for federal income tax purposes. As a result, we
recorded a deferred tax asset in the amount of $3.9 million
($3.1 million as of December 31, 2001) which will
offset future tax liabilities during the next 13 years,
assuming that we have sufficient income to realize the full
benefit of this deduction.

Acquisition of Ubiquity Communication,
Inc.

On March 24, 2000, we acquired Ubiquity
Communication, Inc., located in Petaluma, California. Through
the acquisition, we acquired technology that we planned to use
to develop our point-to-multipoint systems. At the time of the
acquisition, Ubiquity Communication had seven employees,
including six

18



---



##### Table of Contents



engineers. In connection with our acquisition of
Ubiquity Communication, we issued 692,772 shares of our
Class A common stock to the former owners of Ubiquity
Communication and reserved 137,727 shares of our Class A
common stock for issuance upon the exercise of the Ubiquity
Communication options we assumed. The value of the consideration
paid for the acquisition of Ubiquity Communication was
$6.4 million. We accounted for the transaction using the
purchase method of accounting. In March 2001, we closed the
Ubiquity operations due to the acquisition of WirelessHome
Corporation (WirelessHome).


Acquisition of WirelessHome

On March 22, 2001, we acquired WirelessHome
located in Long Beach, California in a cash and stock
transaction. WirelessHome is a development stage company that
designs and develops point-to-multipoint systems. The
acquisition was accounted for as a purchase. We acquired
WirelessHome for a total consideration of $28.2 million
composed of:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | 1,649,324 shares of Class A common stock
	valued at $12.1 million;            
|
| |  | cash for $10.5 million;                                                       
|
| |  | options and warrants assumed valued at
	$0.7 million;                         
|
| |  | a stock price protection contingent consideration
	valued at $2.5 million; and
|
| |  | transaction expenses for $2.4 million.                                        

As part of the transaction we assumed
$2.0 million of net liabilities, which consist of
$0.4 million of current assets, $0.9 million of other
assets and $3.3 million of current liabilities. In March
2001, we issued an initial consideration of $23.0 million.
As a result, we recorded the initial purchase price allocation
as follows: $24.7 million to goodwill and $0.3 million
to deferred compensation.

Goodwill related to the acquisition is being
amortized on a straight-line basis over the estimated useful
life of five years. The initial purchase price, as well as the
initial allocation, were subject to adjustments upon
WirelessHome meeting certain development milestones and other
considerations as defined in the agreement to acquire
WirelessHome.

On October 7, 2001, WirelessHome met the
development milestones in accordance with the acquisition
agreement. This resulted in additional purchase consideration of
$5.2 million. We then evaluated and recorded the final purchase
price and stock compensation expense arising from the
achievement of those milestones. The total purchase price
allocation, which consists of $28.2 million of purchase
price and $2.0 million of net liabilities assumed, was as
follows: $1.0 million to assembled workforce,
$6.4 million to in-process research and development,
$22.5 million to goodwill, and $0.3 million to
deferred compensation. In addition, we recorded
$2.2 million of stock compensation expense as a result of
releasing and issuing 558,950 shares, which were previously held
in escrow, to individuals who were directly involved in the
completion of the development milestones.

The purchase price allocation and intangible
assets valuation was based on managements estimates of the
after-tax net cash flows and gave consideration to the
following: (i) the employment of a fair market value
premise excluding any consideration specific to us which could
result in estimates of investment value for the subject assets;
(ii) comprehensive due diligence concerning all potential
intangible assets including trademarks, tradename, patents,
copyrights, non-compete agreements, assembled work force,
customer relationships and sales channel; and (iii) the
value of existing technology was specifically addressed, with a
view toward ensuring that the relative allocations to existing
technology and in-process research and development were
consistent with the relative contributions of each final product.

In making its purchase price allocation,
management considered present value calculations of income, an
analysis of project accomplishments and remaining outstanding
items, an assessment of overall contributions, as well as
project risks. The value assigned to purchased in-process
technology was determined by estimating the costs to develop the
acquired technology into commercially viable products,
estimating the resulting net cash flows from the projects, and
discounting the net cash flows to their present value. The
revenue projection

19



---



##### Table of Contents



used to value the in-process research and
development was based on estimates of relevant market sizes and
growth factors, expected trends in technology, and the nature
and expected timing of new product introductions by us and our
competitors. The resulting net cash flows from such projects are
based on managements estimates of cost of sales, operating
expenses, and income taxes from such projects.


As WirelessHome replaced Ubiquity in the
development of our point-to-multipoint systems, we closed our
Ubiquity operations during the quarter ended March 30,
2001. As a result, we recorded restructuring charges of
$1.2 million. The charge includes $1.0 million of cash
provisions, which include severance of $0.8 million for
12 employees and $0.2 million for future lease
commitments and exit costs related to the Petaluma office
facility. As of December 31, 2001, approximately
$0.8 million of these costs was incurred with the remainder
expected to be paid in 2002. The charge also includes
$0.2 million of non-cash provisions primarily related to
fixed assets and other assets that will no longer be used at the
facility.

Results of Operations

The following table provides operations data as a
percentage of revenue for the periods presented:

|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |      |      | 
|--------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ----- | ---- | ---- | ---- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                                |                                                |                         
|                                                                |                                                | Year Ended December 31, 
|                                                                |                                                |                         
|                                                                |                                                | 1999                     |       | 2000 |      | 2001
|                                                                |                                                |                          |       |      |      |     
|Revenue, net                                                    |                                                |                          | 100.0 | %    |      |      | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenue                                                 |                                                |                          | 50.2  |      |      |      | 47.8  |      |      |  | 52.9  |     
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|Gross profit                                                    |                                                |                          | 49.8  |      |      |      | 52.2  |      |      |  | 47.1  |     
|Operating expenses:                                             |                                                |                          |       |      |      |      |       |      |      |  |       |     
|                                                                | Research and development                       |                          |       | 13.2 |      |      |       | 11.7 |      |  |       | 18.1 |     
|                                                                | Sales and marketing                            |                          |       | 13.8 |      |      |       | 15.3 |      |  |       | 25.1 |     
|                                                                | General and administrative                     |                          |       | 4.6  |      |      |       | 6.0  |      |  |       | 11.4 |     
|                                                                | Amortization of goodwill and intangible assets |                          |       | 1.6  |      |      |       | 2.3  |      |  |       | 5.1  |     
|                                                                | Amortization of deferred stock compensation    |                          |       |     |      |      |       | 3.9  |      |  |       | 4.9  |     
|                                                                | Recapitalization costs                         |                          |       | 6.8  |      |      |       |     |      |  |       |     |     
|                                                                | Impairment of goodwill and intangible assets   |                          |       |     |      |      |       |     |      |  |       | 4.1  |     
|                                                                | Restructuring charges                          |                          |       |     |      |      |       |     |      |  |       | 1.7  |     
|                                                                | In-process research and development            |                          |       |     |      |      |       |     |      |  |       | 6.1  |     
|                                                                | Merger costs                                   |                          |       |     |      |      |       | 0.2  |      |  |       |     |     
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|                                                                |                                                | Total operating expenses |       |      | 40.0 |      |       |      | 39.4 |  |       |      | 76.5 | 
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|Income (loss) from operations                                   |                                                |                          | 9.8   |      |      |      | 12.8  |      |      |  | (29.4 | )   
|Interest income (expense), net                                  |                                                |                          | (0.8  | )    |      |      |      |      |      |  | 1.3   |     
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|Income (loss) before taxes                                      |                                                |                          | 9.0   |      |      |      | 12.8  |      |      |  | (28.1 | )   
|Income tax provision (benefit)                                  |                                                |                          | 6.4   |      |      |      | 6.4   |      |      |  | (3.9  | )   
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|Income (loss) before extraordinary item                         |                                                |                          | 2.6   |      |      |      | 6.4   |      |      |  | (24.2 | )   
|Loss on early extinguishment of debt net of
	income tax benefit |                                                |                          |      |      |      |      | 0.4   |      |      |  |      |     
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     
|Net income (loss)                                               |                                                |                          | 2.6   |      |      |      | 6.0   |      |      |  | (24.2 | )   
|                                                                |                                                |                          |       |      |      |      |       |      |      |  |       |     

Comparison of Years Ended December 31,
2000 and 2001

Revenue, net.Revenue was $105.5 million for the year ended
December 31, 2000 compared to $105.7 million for the
year ended December 31, 2001. For the year ended
December 31, 2001, three distributors, Comstor, Somera
Communications, Inc. and Tessco Technologies accounted for
29.4%, 11.4% and 10.5%, respectively, of total revenue. For the
year ended December 31, 2000, Somera Communications, Inc.
and Avant Telecoms, Inc., a value-added reseller, accounted for
21.4% and 11.1%, respectively, of total revenue. In 1999, 2000,
and 2001 sales to all distributors, which have certain limited
rights of return of the companys products, accounted for
approximately 23.1%, 39.5% and 69.8% of net revenue. In
addition, export

20



---



##### Table of Contents



sales, which are denominated in U.S. dollars
and consist of domestic sales to customers in foreign countries
accounted for approximately 23.1%, 33.2% and 24.3% of net
revenue in 1999, 2000 and 2001, respectively.


Cost of revenue.Cost of revenue increased 10.7% from $50.5 million for the
year ended December 31, 2000 to $55.9 million for the
year ended December 31, 2001. As a percentage of revenue,
cost of revenue increased from 47.8% for the year ended
December 31, 2000 to 52.9% for the year ended
December 31, 2001. The increase in cost of revenue and the
increase in cost of revenue as a percentage of revenue from the
year ended December 31, 2000 to the year ended
December 31, 2001 was primarily due to lower than expected
increase in revenue and production volume.

Research and
development.Research and development
expenses increased 54.4% from $12.4 million for the year
ended December 31, 2000 to $19.1 million for the year
ended December 31, 2001. The increase in research and
development expenses was primarily attributable to the cost of
increased personnel and prototype spending for the development
of new products and enhancements to existing products. As a
percentage of revenue, research and development expenses
increased from 11.7% for the year ended December 31, 2000
to 18.1% for the year ended December 31, 2001.

Sales and marketing.Sales and marketing expenses increased 64.2% from
$16.2 million for the year ended December 31, 2000 to
$26.6 million for the year ended December 31, 2001.
The increase in sales and marketing expenses is primarily
attributable to increased personnel in the international sales
organization, advertising and marketing programs, tradeshow, and
public relations expenses. As a percentage of revenue, sales and
marketing expenses increased from 15.3% for the year ended
December 31, 2000 to 25.1% for the year ended
December 31, 2001.

General and
administrative.General and
administrative expenses increased 89.6% from $6.4 million
for the year ended December 31, 2000 to $12.0 million
for the year ended December 31, 2001. The increase in
general and administrative expenses is primarily due to
increased personnel expenses, consulting costs and provision for
bad debts. As a percentage of revenue, general and
administrative expenses increased from 6.0% for the year ended
December 31, 2000 to 11.4% for the year ended
December 31, 2001.

Amortization of goodwill and other intangible
assets.Amortization of goodwill and
other intangible assets increased 128.4% from $2.4 million
for the year ended December 31, 2000 to $5.4 million
for the year ended December 31, 2001. The increase in
amortization is attributable to goodwill and other intangible
assets related to the WirelessHome acquisition in March 2001.

In July 2001, the Financial Accounting Standards
Board issued SFAS No.s 141 and 142, Business
Combinations and Goodwill and Other
Intangibles, respectively. SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS
No. 142, effective January 1, 2002, goodwill is no
longer subject to amortization over its estimated useful life.
Rather, goodwill is subject to at least an annual assessment for
impairment, applying a fair-value based test. Additionally, an
acquired intangible asset should be separately recognized if the
benefit of the intangible asset is obtained through contractual
or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented, or exchanged, regardless of the
acquirers intent to do so. As a result of our adoption of
SFAS 142, as of January 1, 2002, we will no longer
amortize goodwill. Goodwill amortization for the year ended
December 31, 2001 was approximately $5.0 million.

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 144 Accounting for
the Impairment or Disposal of Long-Lived Assets. SFAS
No. 144 addresses financial accounting and reporting for
the long-lived assets to be held and used, and disposed of. The
statement will be effective for financial statements issued for
fiscal years beginning after December 15, 2001. Although we
currently do not expect the adoption of SFAS No. 144 to
have a material impact on our financial statements, we will
continue to assess any impairment of our long lived assets.

Amortization of deferred stock
compensation.Amortization of deferred
stock compensation increased 24.9% from $4.2 million for
the year ended December 31, 2000 to $5.2 million for
the year ended December 31, 2001. Amortization of deferred
stock compensation for both periods includes the sale of stock
and issuance of options at prices deemed to be below fair market
value. Amortization of deferred stock

21



---



##### Table of Contents



compensation for the year ended December 31,
2001 also includes $2.2 million of stock compensation
expense recorded in the fourth quarter in connection with the
issuance of 558,950 shares to certain individuals upon
WirelessHome meeting certain development milestones.


Impairment of goodwill and intangible
assets.We recorded $4.3 million
of impairment of goodwill related to our former Ubiquity
operations during the first quarter of 2001. The amount of the
charge equals the unamortized amount of the goodwill as of the
date of the closure of the Ubiquity operations, as no future
benefit is anticipated since WirelessHome has replaced Ubiquity
as the developer of our point-to-multipoint systems.

Restructuring
charges.During the first and second
quarter of 2001, we recorded $1.2 million of restructuring
charges related to the closure of our former Ubiquity
operations. The charges include $1.0 million of cash
provisions, which include severance of $0.8 million for 12
employees and $0.2 million for future lease commitments and
exit costs related to the Petaluma office facility. As of
December 31, 2001, approximately $0.8 million of the
$1.0 million of cash provisions was incurred. The charge
also includes $0.2 million of non-cash provisions primarily
related to fixed assets and other assets that will no longer be
used at the facility.

In addition, during the second and third quarter
of 2001, the Company recorded $0.6 million associated with
restructuring the operations at the Companys headquarters,
primarily related to employee severances.

The following table summarizes the restructuring
activity in 2001 (in thousands):

|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ---- | ----- |  | - | --- | - |  | - | ------ | -
|                                |  | Severances |        | Facilities |  | Other |      | Total
|                                |  |            |        |            |  |       |      |      
|Balance as of December 31, 2000 |  | $          |       |            |  | $     |     |       |  | $ |    |   |  | $ |       |  
|Provision charged to operations |  |            | 1,382  |            |  |       | 208  |       |  |   | 226 |   |  |   | 1,816  |  
|Charges utilized                |  |            | (1,184 | )          |  |       | (156 | )     |  |   | (46 | ) |  |   | (1,386 | )
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|Balance as of December 31, 2001 |  | $          | 198    |            |  | $     | 52   |       |  | $ | 180 |   |  | $ | 430    |  
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  

In-process research and
development.At the time of the
WirelessHome acquisition in March 2001, the WirelessHome
technology was in an early stage of development, and the
products technical feasibility had not yet been
demonstrated. Furthermore, the marketability of the potential
future product was unproven. As a result of WirelessHome meeting
the development milestones in accordance with the acquisition
agreement, we allocated $6.4 million of the final total
purchase price to in-process research and development.

Merger costs.In the
fourth quarter of 2000, we incurred $3.2 million of merger
costs in connection with the aborted acquisition of Adaptive
Broadband Corporation. Adaptive Broadband Corporation reimbursed
us $3.0 million of those costs. The additional
$0.2 million in 2000 was recorded in operating expenses.
The additional $30,000 in the first quarter of 2001 represents
additional merger costs recorded in operating expenses.

Interest expense.Interest expense decreased from $1.5 million for the year
ended December 31, 2000 to $137,000 for the year ended
December 31, 2001. Interest expense in 2000 represents
interest incurred on term loans and a revolving credit line we
entered into in November 1999 as part of the recapitalization.
Interest expense decreased, because we repaid all borrowings
outstanding under this debt in August 2000. Interest expense in
2001 represents agency and commitment fees related to our unused
$10 million revolving credit facility.

Interest income.Interest income decreased from
$1.7 million for the year ended December 31, 2000 to
$1.5 million for the year ended December 31, 2001. The
decrease in interest income is primarily due to the decrease in
investments.

Income tax provision
(benefit).Our income tax provision
was $6.8 million for the year ended December 31, 2000
as compared to an income tax benefit of $4.1 million for
the year ended December 31, 2001. Our effective tax rates
were 50.4% for the year ended December 31, 2000 and (13.8%)
for the year ended December 31, 2001. Nondeductible
expenses in 2000 include amortization of goodwill and other

22



---



##### Table of Contents



intangible assets associated with the Ubiquity
acquisition and amortization of deferred stock compensation.
Nondeductible expenses in 2001 include amortization of goodwill
and other intangible assets associated with WirelessHome and
Ubiquity, amortization of deferred stock compensation,
impairment of the Ubiquity goodwill and in-process research and
development change associated with the WirelessHome acquisition.


The Internal Revenue Code of 1986, as amended,
contains provisions that may limit the net operating loss and
credit carryforwards available for use in any given period upon
the occurrence of certain events, including a significant change
in ownership interests, such as the merger with Proxim.

Comparison of Years Ended December 31,
1999 and 2000

Revenue, net.Revenue increased 135.8% from $44.8 million for the year
ended December 31, 1999 to $105.5 million for the year
ended December 31, 2000. Revenue increased primarily due to
a 130.8% increase in the volume of products shipped for the year
ended December 31, 2000 as compared to the year ended
December 31, 1999, combined with an increase of 2.7% in
average selling price of our products for the year ended
December 31, 2000 as compared to the year ended
December 31, 1999. For the year ended December 31,
2000, Somera Communications, Inc., a distributor, and Avant
Telecoms, Inc., a value-added reseller, accounted for 21.4% and
11.1%, respectively, of total revenue. No other customers
accounted for more than 10% of total revenues in 2000. For the
year ended December 31, 1999, Somera Communications, Inc.
accounted for 19.2% of total revenue.

Cost of revenue.Cost of revenue increased 124.6% from $22.5 million for the
year ended December 31, 1999 to $50.5 million for the
year ended December 31, 2000. As a percentage of revenue,
cost of revenue decreased from 50.2% for the year ended
December 31, 1999 to 47.8% for the year ended
December 31, 2000. The increase in cost of revenue was
primarily attributable to increased sales. The decrease in cost
of revenue as a percentage of revenue from the year ended
December 31, 1999 to the year ended December 31, 2000
was primarily due to lower costs of components and the sale of
newly released products in 2000 with higher gross margins.

Research and
development.Research and development
expenses increased 108.9% from $5.9 million for the year
ended December 31, 1999 to $12.4 million for the year
ended December 31, 2000. The increase in research and
development expenses was primarily attributable to the cost of
increased personnel and prototype spending for the development
of new products and enhancements to existing products. As a
percentage of revenue, research and development expenses
decreased from 13.2% for the year ended December 31, 1999
to 11.7% for the year ended December 31, 2000.

Sales and marketing.Sales and marketing expenses increased 162.9% from
$6.2 million for the year ended December 31, 1999 to
$16.2 million for the year ended December 31, 2000.
The increase in sales and marketing expenses is primarily
attributable to increased sales and marketing personnel,
advertising, tradeshow, and public relations expenses. As a
percentage of revenue, sales and marketing expenses increased
from 13.8% for the year ended December 31, 1999 to 15.3%
for the year ended December 31, 2000.

General and
administrative.General and
administrative expenses increased 228.6% from $2.0 million
for the year ended December 31, 1999 to $6.7 million
for the year ended December 31, 2000. The increase in
general and administrative expenses is primarily due to
increased personnel and consulting expenses. As a percentage of
revenue, general and administrative expenses increased from 4.6%
for the year ended December 31, 1999 to 6.4% for the year
ended December 31, 2000.

Amortization of
goodwill.Amortization of goodwill
increased 325% from $737,000 for the year ended
December 31, 1999 to $2.4 million for the year ended
December 31, 2000. The increase in amortization of goodwill
is attributable to goodwill and other intangible assets related
to the Ubiquity acquisition in March 2000.

Amortization of deferred stock
compensation.Amortization of deferred
stock compensation was $4.2 million for the year ended
December 31, 2000 as a result of the sale of stock and
issuance of options at prices deemed to be below fair market
value.

23



---



##### Table of Contents



Merger costs.In the
fourth quarter of 2000, we incurred $3.2 million of merger
costs in connection with the aborted acquisition of Adaptive
Broadband Corporation. Adaptive Broadband Corporation reimbursed
to us $3.0 million of those costs. The remaining
$0.2 million was recorded in operating expenses.

Interest expense.Interest expense increased from $368,000 for the year ended
December 31, 1999 to $1.6 million for the year ended
December 31, 2000. Interest expense for both fiscal years
primarily relates to term loans and a revolving credit line we
entered into in November 1999 as part of the recapitalization.
In August 2000, we repaid all borrowings outstanding under this
debt. Therefore, the increase in interest expense is primarily
due to the fact that our borrowings outstanding were for a
shorter period in 1999 than in 2000, and we had additional
borrowings in 2000 against the revolving line of credit prior to
repaying the debt.

Interest income.Interest income increased from $0 for
the year ended December 31, 1999 to $1.7 million for
the year ended December 31, 2000. The increase in interest
income is primarily due to the purchase of investments for the
year ended December 31, 2000 resulting from net proceeds
from our initial public offering in August 2000.

Income tax
provision.The income tax provision
increased from $2.8 million for the year ended
December 31, 1999 to $6.8 million for the year ended
December 31, 2000. Our effective tax rate decreased from
70.6% for the year ended December 31, 1999 to 50.4% for the
year ended December 31, 2000. The decrease in the effective
tax rate is primarily due to recapitalization costs incurred
during the year ended December 31, 1999 that were not tax
deductible offset by increases in non-deductible expenses during
the year ended December 31, 2000 arising from the
amortization of deferred stock compensation and goodwill.

Early extinguishment of debt.In August 2000, we used a portion of
the net proceeds from the initial public offering to repay
outstanding indebtedness. In connection with the prepayment of
our term notes, we wrote off deferred financing costs of
$394,000, net of income tax. This transaction was accounted for
as an extraordinary loss.

Liquidity and Capital Resources

Our principal source of funding has been from the
net proceeds of approximately $91.0 million from our
initial public offering in August 2000. Prior to our initial
public offering, we had financed our operations and working
capital requirements primarily through cash generated by our
business and bank financing. We used $28.9 million of the
net proceeds to repay outstanding indebtedness under our term
notes and outstanding borrowings under our revolving credit
facility. We also used approximately $7.0 million to invest
in short-term and long-term interest-bearing, investment-grade
securities, approximately $7.0 million for the purchase of
equipment and leasehold improvements, approximately
$3.0 million to pay a security deposit in connection with a
new noncancellable operating lease, approximately
$13.0 million in connection with the WirelessHome
acquisition, approximately $2.0 million to repay debt
assumed from WirelessHome, approximately $4.0 million in
payments for income taxes, and approximately $12.0 million
to finance our operations and working capital requirements. We
estimate approximately $14.0 million of the net proceeds
has not yet been used.

As of the date of this Annual Report on
Form 10-K, we have not allocated the remaining net proceeds
of the offering for specific uses. We expect to use the
remainder of the net proceeds of the offering primarily for
general corporate purposes, including working capital, expansion
of our engineering organization, product development programs,
sales and marketing capabilities, and general administrative
functions and capital expenditures. We may also use a portion of
the net proceeds to acquire complementary businesses, products
and technologies or to establish joint ventures that we believe
will complement our current or future business.

We have not identified the specific use of the
remainder of the net proceeds due to the flexible nature of our
planning process. The amounts that we actually expend for
general corporate and other purposes will vary significantly
depending on a number of factors, including future sales growth
and the amount of cash we generate from operations, if any.
Pending the use of the proceeds described above, we will
continue to invest the remainder of the net proceeds in
short-term, interest-bearing, investment-grade securities.

Cash and cash equivalents increased by
$29.2 million from $1.9 million at December 31,
1999 to $31.1 million at December 31, 2000 and
decreased by $14.5 million from $31.1 million at
December 31, 2000

24



---



##### Table of Contents



to $16.6 million at December 31, 2001.
Operating activities generated $6.4 million in cash in 1999
and consumed $13.1 million in 2001 and $11.9 million
in 2001.


Net cash provided by operating activities for
1999 was $6.4 million primarily due to net income of
$1.2 million, recapitalization costs of $3.1 million,
depreciation and amortization of $1.3 million, provision
for bad debts of $239,000, and increased changes in inventory of
$646,000, deferred taxes of $152,000, accounts payable and
accrued liabilities of $2.9 million, and payable to parent
company of $1.3 million, offset by increased changes in
accounts receivable of $4.1 million and other long-term
obligations of $286,000. Net cash used in operating activities
for 2000 was $13.1 million primarily due to net income of
$6.3 million, depreciation and amortization of
$7.6 million, deferred financing costs amortization of
$748,000, provision for bad debts of $105,000, provision for
sales returns and allowances of $513,000, and increased changes
in accounts payable and accrued liabilities of
$11.6 million, offset by increased changes in accounts
receivable of $26.1 million, inventory of
$5.4 million, prepaid expenses and other of
$4.6 million, deferred taxes of $199,000, other long-term
assets of $2.3 million and payable to parent company of
$1.4 million. Net cash used in operating activities for
2001 was $11.9 million primarily due to the net loss of
$25.6 million, depreciation and amortization of
$12.7 million, impairment of goodwill of $4.3 million,
in-process research and development of $6.4 million,
provision for bad debts of $1.0 million, provision for
sales returns and allowances of $6.3 million, and increased
changes in prepaid expenses and other of $2.5 million,
offset by increased changes in accounts receivable of $435,000,
inventory of $9.0 million, deferred taxes of
$6.2 million, and accounts payable and accrued liabilities
of $3.9 million.

Net cash used in investing activities increased
from $1.2 million in 1999 to $27.4 million in 2000.
Net cash used in investing activities decreased from
$27.4 million in 2000 to $2.6 million in 2001. Net
cash used in investing activities in 1999 represents
$1.2 million in purchases of equipment and leasehold
improvements. Net cash used in investing activities in 2000
consists of $3.8 million in purchases of equipment and
leasehold improvements, $23.6 million in purchases of
investment securities, and $1.5 million in restricted cash,
offset by $1.5 million in proceeds from sale of investment
securities. Net cash used in investing activities in 2001
consists of $4.8 million in purchases of equipment and
leasehold improvements, $10.8 million in purchases of
investment securities, and $12.7 in payments in connection with
the acquisition of WirelessHome, offset by $25.7 million in
proceeds from the sale of investment securities.

Net cash provided by (used in) financing
activities increased from $(4.6) million in 1999 to
$69.7 million in 2000. Net cash provided by financing
activities decreased from $69.7 million in 2000 to $29,000
in 2001. Net cash used in financing activities in 1999 consists
of $3.8 million in net cash transfers to Glenayre,
$21.0 million in payment for purchase of treasury stock and
$3.1 million in recapitalization costs, offset by
$21.2 million in net proceeds from (repayment of) long-term
debt and $2.0 million in net borrowings on (repayment of)
line of credit. Net cash provided by financing activities in
2000 consists of $95.2 million in net proceeds from
issuance of shares, offset by $22.0 million in net proceeds
from (repayment of) long-term debt, $2.5 million in net
borrowings on (repayment of) line of credit, and
$1.1 million in issuances of stock subscription loans to
employees. Net cash provided by financing activities in 2001
consists of $2.0 million in issuance of shares, and
payments received of $144,000 on employee stock subscription
loans, offset by $1.7 million in net proceeds from
(repayment of) long-term debt and $400,000 in payment for
purchase of treasury stock.

We believe that our existing cash and cash
equivalents and our available borrowings under our
$10 million revolving credit facility with Credit Suisse
First Boston will be sufficient to finance our working capital
and capital expenditure requirements for at least the next
12 months. We intend to invest any cash in excess of
current operating requirements in short-term, interest-bearing
investment-grade securities. Our future capital requirements
will depend upon many factors, including management of working
capital, the success of marketing, sales and distribution
efforts, the timing of research and product development efforts
and expansion of our marketing efforts.

25



---



##### Table of Contents



Quarterly Results Of Operations

The following table presents our operating
results for each of the eight quarters in the period ending
December 31, 2001. The information for each of these
quarters is unaudited and has been prepared on the same basis as
our audited financial statements appearing elsewhere in this
Annual Report on Form 10-K. In the opinion of management,
all necessary adjustments, consisting only of normal recurring
adjustments, have been included to present fairly the unaudited
quarterly results when read in conjunction with our audited
financial statements and related notes. We have experienced and
expect to continue to experience fluctuations in operating
results from quarter to quarter. Historical operating results
are not necessarily indicative of the results that may be
expected for any future period.

|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |       |        | 
|------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ------ | ----- | ----- | ---- | ------ | -------------- | ----- | ---- | ------ | ----- | ------ | ---- | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------- | ----- | ------ | 
|                                                                          |                                                | 2000                     |        | 2000  |       | 2000 |        | 2000           |       | 2001 |        | 2001  |        | 2001 |        | 2001 
|                                                                          |                                                | Q1                       |        | Q2    |       | Q3   |        | Q4             |       | Q1   |        | Q2    |        | Q3   |        | Q4   
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |     
|                                                                          |                                                |                          |        |       |       |      |        | (Unaudited)    |       |      |        |       |        |     
|                                                                          |                                                |                          |        |       |       |      |        | (In thousands) |       |      |        |       |        |     
|Income Statement                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Revenue, net                                                              |                                                | $                        | 17,020 |       |       | $    | 20,944 |                |       | $    | 29,909 |       |        | $    | 37,635 |       |        | $ | 37,585 |       |        | $ | 22,295 |       |        | $ | 21,675 |       |        | $ | 24,175  |      
|Cost of revenue                                                           |                                                |                          | 7,725  |       |       |      | 9,340  |                |       |      | 14,775 |       |        |      | 18,626 |       |        |   | 18,899 |       |        |   | 12,085 |       |        |   | 12,829 |       |        |   | 12,074  |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Gross profit                                                              |                                                |                          | 9,295  |       |       |      | 11,604 |                |       |      | 15,134 |       |        |      | 19,009 |       |        |   | 18,686 |       |        |   | 10,210 |       |        |   | 8,846  |       |        |   | 12,101  |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Operating expenses:                                                       |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|                                                                          | Research and development                       |                          |        | 1,941 |       |      |        | 2,828          |       |      |        | 3,298 |        |      |        | 4,312 |        |   |        | 4,077 |        |   |        | 5,054 |        |   |        | 5,151 |        |   |         | 4,832 |       
|                                                                          | Sales and marketing                            |                          |        | 2,549 |       |      |        | 3,202          |       |      |        | 4,767 |        |      |        | 5,662 |        |   |        | 7,079 |        |   |        | 6,038 |        |   |        | 7,324 |        |   |         | 6,121 |       
|                                                                          | General and administrative                     |                          |        | 1,089 |       |      |        | 1,463          |       |      |        | 1,545 |        |      |        | 2,426 |        |   |        | 2,910 |        |   |        | 3,450 |        |   |        | 3,103 |        |   |         | 2,578 |       
|                                                                          | Amortization of goodwill and intangible assets |                          |        | 187   |       |      |        | 751            |       |      |        | 722   |        |      |        | 722   |        |   |        | 822   |        |   |        | 1,414 |        |   |        | 1,491 |        |   |         | 1,713 |       
|                                                                          | Amortization of deferred stock compensation    |                          |        | 886   |       |      |        | 1,082          |       |      |        | 946   |        |      |        | 1,075 |        |   |        | 1,941 |        |   |        | 315   |        |   |        | 303   |        |   |         | 2,637 |       
|                                                                          | Recapitalization costs                         |                          |        |      |       |      |        |               |       |      |        |      |        |      |        |      |        |   |        |      |        |   |        |      |        |   |        |      |        |   |         |      |       
|                                                                          | Impairment of goodwill and intangible assets   |                          |        |      |       |      |        |               |       |      |        |      |        |      |        |      |        |   |        | 4,331 |        |   |        |      |        |   |        |      |        |   |         |      |       
|                                                                          | Restructuring charges                          |                          |        |      |       |      |        |               |       |      |        |      |        |      |        |      |        |   |        | 1,108 |        |   |        | 312   |        |   |        | 396   |        |   |         |      |       
|                                                                          | In-process research and development            |                          |        |      |       |      |        |               |       |      |        |      |        |      |        |      |        |   |        |      |        |   |        |      |        |   |        |      |        |   |         | 6,400 |       
|                                                                          | Merger costs                                   |                          |        |      |       |      |        |               |       |      |        |      |        |      |        | 185   |        |   |        | 30    |        |   |        |      |        |   |        |      |        |   |         |      |       
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|                                                                          |                                                | Total operating expenses |        |       | 6,652 |      |        |                | 9,326 |      |        |       | 11,278 |      |        |       | 14,382 |   |        |       | 22,298 |   |        |       | 16,583 |   |        |       | 17,768 |   |         |       | 24,281 | 
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Income (loss) from operations                                             |                                                |                          | 2,643  |       |       |      | 2,278  |                |       |      | 3,856  |       |        |      | 4,627  |       |        |   | (3,612 | )     |        |   | (6,373 | )     |        |   | (8,922 | )     |        |   | (12,180 | )    
|Interest income (expense), net                                            |                                                |                          | (597   | )     |       |      | (627   | )              |       |      | 258    |       |        |      | 1,051  |       |        |   | 472    |       |        |   | 444    |       |        |   | 304    |       |        |   | 173     |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Income (loss) before taxes                                                |                                                |                          | 2,046  |       |       |      | 1,651  |                |       |      | 4,114  |       |        |      | 5,678  |       |        |   | (3,140 | )     |        |   | (5,929 | )     |        |   | (8,618 | )     |        |   | (12,007 | )    
|Income tax provision (benefit)                                            |                                                |                          | 1,283  |       |       |      | 1,100  |                |       |      | 2,030  |       |        |      | 2,387  |       |        |   | 1,346  |       |        |   | (1,797 | )     |        |   | (2,905 | )     |        |   | (740    | )    
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Income (loss) before extraordinary item                                   |                                                |                          | 763    |       |       |      | 551    |                |       |      | 2,084  |       |        |      | 3,291  |       |        |   | (4,486 | )     |        |   | (4,132 | )     |        |   | (5,713 | )     |        |   | (11,267 | )    
|Loss on early extinguishment of debt, net of
	income tax benefit of $241. |                                                |                          |       |       |       |      |       |                |       |      | 394    |       |        |      |       |       |        |   |       |       |        |   |       |       |        |   |       |       |        |   |        |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Net income (loss)                                                         |                                                | $                        | 763    |       |       | $    | 551    |                |       | $    | 1,690  |       |        | $    | 3,291  |       |        | $ | (4,486 | )     |        | $ | (4,132 | )     |        | $ | (5,713 | )     |        | $ | (11,267 | )    
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Basic and diluted earnings (loss) per share                               |                                                | $                        | 0.02   |       |       | $    | 0.01   |                |       | $    | 0.03   |       |        | $    | 0.06   |       |        | $ | (0.08  | )     |        | $ | (0.07  | )     |        | $ | (0.10  | )     |        | $ | (0.19   | )    
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Shares used to compute basic earnings (loss)                              |                                                |                          | 39,134 |       |       |      | 42,709 |                |       |      | 49,707 |       |        |      | 55,533 |       |        |   | 55,999 |       |        |   | 57,509 |       |        |   | 57,747 |       |        |   | 58,912  |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      
|Shares used to compute diluted earnings
	(loss) per share                 |                                                |                          | 46,209 |       |       |      | 50,798 |                |       |      | 54,947 |       |        |      | 58,161 |       |        |   | 55,999 |       |        |   | 57,509 |       |        |   | 57,747 |       |        |   | 58,912  |      
|                                                                          |                                                |                          |        |       |       |      |        |                |       |      |        |       |        |      |        |       |        |   |        |       |        |   |        |       |        |   |        |       |        |   |         |      

Our quarterly revenue and income from operations
results have varied and are likely to continue to fluctuate
significantly from quarter to quarter.

Our quarterly results may fluctuate for many
reasons, including the following:



| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | seasonal factors that may affect capital spending
	by customers;                
|
| |  | the timing of sales of our products;                                            
|
| |  | the mix of products sold because our products
	generate different gross margins;

26



---



##### Table of Contents





| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to develop, introduce, ship and
	support new products and product enhancements and to manage
	product transitions;                                                   
|
| |  | our ability to obtain sufficient supplies of
	components for our products for which our contract manufacturers
	have a sole supply source or require a long lead time to produce;
|
| |  | cost pressures from shortages of skilled
	technical, sales and marketing employees, increased product
	development and other factors;                                            
|
| |  | a failure to achieve cost reductions;                                                                                                                                            
|
| |  | a decrease in the average selling prices of our
	products;                                                                                                                       
|
| |  | delays in deliveries to distributors, value-added
	resellers and other customers; and                                                                                            
|
| |  | manufacturing capacity constraints, which affect
	our ability to fulfill orders.                                                                                                 

We have experienced disruptions in our operations
from some of the factors listed above and may experience them
again. In addition, we are dependent on decisions by service
providers, businesses and other enterprises to build wireless
networks. These decisions are in turn dependent upon the success
and expected demand for the services offered by those service
providers, businesses and other enterprises.

We plan to increase significantly our operating
expenses to fund greater levels of research and development,
expand our sales and marketing operations, broaden our customer
support capabilities and develop new relationships with
distributors and value-added resellers. Our operating expenses
are largely based on anticipated revenue trends, and a high
percentage of our expenses are and will continue to be fixed in
the short term. As a result, any delay in generating or
recognizing revenue could cause significant variations in our
operating results from quarter to quarter and could result in
substantial operating losses.

Due to the above factors, we believe that
quarter-to-quarter comparisons of our operating results are not
a good indication of our future performance. It is likely that
in some future quarters, our operating results may be below the
expectations of public market analysts and investors. In this
event, the price of our common stock may fall.

Critical Accounting Policies

Our critical accounting policies are as follows:



| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimating sales returns and allowances;                                                                                                           
|
| |  | estimating other allowances, specifically, the
	allowance for doubtful accounts, the reserve for excess and
	obsolete inventory and warranty costs;
|
| |  | accounting for income taxes; and                                                                                                                   
|
| |  | valuation of goodwill and other intangible assets.                                                                                                 

Estimating sales returns and
allowances.We sell worldwide to
service providers, businesses and other enterprises directly
through our sales force and indirectly through distributors,
value added resellers and system integrators. Sales to certain
distributors are made under terms allowing certain rights of
return, protection against subsequent price declines on our
products held by our distributors. In 1999, 2000 and 2001, sales
to distributors of our products accounted for approximately
23.1%, 39.5% and 69.8% of net revenue.

Net revenue consists of product revenue reduced
by estimated sales returns and allowances. Provisions for
estimated sales returns and allowances, which are based on
historical trends, contractual terms and other available
information, are recorded at the time of sale. As part of our
revenue recognition policy, management must make estimates of
potential future product returns related to product revenue in
the current period. Management analyzes historical returns,
current economic trends, and changes in customer demand and
acceptance of our products when evaluating the adequacy of the
sales returns and other allowances. To

27



---



##### Table of Contents



estimate potential product returns from
distributors, management analyzes historical returns, the
distributor inventory levels, the sales out of the distributors,
and the specific contractual return rights of each distributor.
Significant management judgments and estimates must be made and
used in connection with establishing sales returns and other
allowances in any accounting period. Material differences may
result in the amount and timing of our revenue for any period if
management made different judgments or utilized different
estimates. Other sales related estimates include our allowance
for sales discounts and rebates which we identify and reserve
for specifically at the time such discounts and rebates are
given. Our allowances for sales returns and other sales related
reserve were $4.0 million as of December 31, 2001.


Estimating other
allowances.The preparation of our
financial statements requires our management to make estimates
and assumptions that affect the reported amount of assets and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reported period.

Management must make estimates of the
uncollectability of our accounts receivables. Management
specifically analyzes accounts receivable and analyzes
historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends, and changes in our
customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts. Material differences may result
in the amount and timing of expenses for any period if
management made different judgments or utilized different
estimates. Our allowance for doubtful accounts amounted to
$1.4 million, as of December 31, 2001.

Management must make estimates of potential
future excess and obsolete inventory and product warranty costs.
Management specifically identifies obsolete products and
analyzes historical usage, forecasted production based on demand
forecasts, current economic trends, and historical write-offs
when evaluating the adequacy of the reserve for excess and
obsolete inventory. When evaluating the reserve for warranty
costs, management takes into consideration the term of the
warranty coverage, historical return rates, historical costs of
repair, knowledge of new products introduced and current
economic trends. Material differences in estimates of excess and
obsolete inventory and product warranty costs may result in the
amount and timing of cost of sales for any period if management
made different judgments or utilized different estimates. Our
reserve for excess and obsolete inventory and product warranty
costs were $3.0 million and $869,000, respectively, as of
December 31, 2001.

Accounting for income
taxes.As part of the process of
preparing our consolidated financial statements, we are required
to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves us estimating our
current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax
and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood
that our deferred tax assets will be recovered from future
taxable income, and, to the extent we believe that recovery is
not likely, we must establish a valuation allowance. To the
extent we establish a valuation allowance or increase this
allowance in a period, we must include an expense within the tax
provision in the statement of operations.

Significant management judgment is required in
determining our provision for income taxes, deferred tax assets
and liabilities and any valuation allowance recorded against our
net deferred tax assets. We recorded a net deferred tax asset of
approximately $11.4 million at December 31, 2001, of
which approximately $5.1 million related to net operating
losses generated during the current year which expire on
December 31, 2021, as well as approximately
$0.9 million in tax credits which expire at various dates
beginning in 2009. Although realization is not assured,
management believes that it is more likely than not that the
deferred tax assets will be realized through refunds from the
carryback of the current year net operating loss and the
generation of future taxable income. Although the deferred tax
asset is considered realizable, actual amounts could be reduced
if sufficient future taxable income is not achieved.

28



---



##### Table of Contents



Valuation of goodwill and other intangible
assets.We assess the impairment of
goodwill and identifiable intangible assets whenever events or
changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important which could
trigger an impairment review include the following:



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | significant underperformance relative to expected
	historical or projected future operating results;          
|
| |  | significant changes in the manner of our use of
	the acquired assets or the strategy for our overall business;
|
| |  | significant negative industry or economic trends;                                                             
|
| |  | significant decline in our stock price for a
	sustained period; and                                           
|
| |  | our market capitalization relative to net book
	value.                                                        

When we determine that the carrying value of
goodwill and other intangible assets may not be recoverable
based upon the existence of one or more of the above indicators
of impairment, we measure any impairment based on a projected
discounted cash flow method using a discount rate determined by
our management to be commensurate with the risk inherent in our
current business model. Net goodwill and other intangible assets
amounted to $36.6 million as of December 31, 2001.

In 2002, Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets became effective and as a result,
we will cease to amortize approximately $35.9 million of
goodwill. We had recorded approximately $5.0 million of
amortization on these amounts during 2001 and would have
recorded approximately $5.2 million of amortization during
2002. In lieu of amortization, we are required to perform an
initial impairment review of our goodwill in 2002 and an annual
impairment review thereafter. We currently do not expect to
record an impairment charge upon completion of the initial
impairment review. However, there can be no assurance that at
the time the review is completed a material impairment charge
will not be recorded.

Seasonality

Historically, our revenues have been higher in
the last two quarters of the fiscal year. In addition our
revenues have historically been significantly higher in the last
month of each quarter. This shift may primarily be attributed to
the budgetary constraints of the customers in our industry and
weather conditions that make an outdoor installation more
difficult during the winter. However, going forward, we believe
the impact of seasonal fluctuations on our business will
decrease because demand for our products is increasing at a rate
that outpaces any budget restrictions our customers may have.
Moreover, our expansion into international markets may minimize
the impact that weather conditions may have on our overall sales.




RISK FACTORS

This Annual Report on Form 10-K also
contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us
described below and elsewhere in this Form 10-K.

You should carefully consider the risks described
below before making an investment decision with respect to our
common stock. The risks and uncertainties described below are
not the only ones facing us. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial
may also impair our business operations.

If any of the following risks actually occur, our
business, financial condition or results of operations could be
materially adversely affected. In such case, the trading price
of our common stock could decline and you could lose all or part
of your investment.

29



---



##### Table of Contents



Sales of our products could decline if
customer relationships are disrupted by the proposed merger with
Proxim.

The merger may have the effect of disrupting
customer relationships. Our customers may not continue their
current buying patterns during the pendency of, and following,
the merger. Customers may defer purchasing decisions as they
evaluate the likelihood of our successful integration or may
instead purchase products of competitors. Any significant delay
or reduction in orders for our products could cause sales of our
products to decline.

We are not profitable and may not be
profitable in the future.

We had a net loss from operations of
approximately $25.6 million for the year ended December 31,
2001. We cannot assure you that revenue will increase or
continue at current levels or growth rates or that we will
achieve profitability or generate cash from operations in future
periods. In view of the rapidly evolving nature of our business
and our limited history of producing many of our current
products, period-to-period comparisons of operating results are
not necessarily meaningful and you should not rely on them as
indicating what our future performance will be.

We expect that we will continue to incur
significant sales, marketing, product development and
administrative expenses. As a result, we will need to generate
significant revenue to achieve profitability and we cannot
assure you that we will achieve profitability in the future. Any
failure to significantly increase our revenue as we implement
our product and distribution strategies will harm our business,
operating results and financial condition.

We may experience fluctuations in operating
results and may not be able to adjust spending in time to
compensate for any unexpected revenue shortfall which may cause
operating results to fall below expectations of securities
analysts and investors.

Our operating results may fluctuate significantly
in the future as a result of a variety of factors, many of which
will be outside our control. We may not be able to adjust
spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in
revenues in relation to planned expenditures could materially
harm our operating results and financial condition, and may
cause operating results to fall below the expectations of
securities analysts and investors. If this happens, the trading
price of our common stock could decline significantly.

Factors that may harm operating results include:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the effectiveness of our distribution channels,
	and our success in maintaining current distribution channels and
	developing new distribution channels;
|
| |  | our ability to effectively manage the development
	of new business segments and markets;                                                                
|
| |  | our ability to successfully manage the
	integration of operations;                                                                                      
|
| |  | market demand for our point-to-point Lynx and
	Tsunami systems;                                                                                         
|
| |  | market demand for our point-to-multipoint systems;                                                                                                      
|
| |  | technical difficulties, system downtime or other
	similar failures;                                                                                     
|
| |  | our ability to upgrade and develop our systems
	and infrastructure;                                                                                     
|
| |  | difficulties in expanding and conducting
	international operations; and                                                                                 
|
| |  | general economic conditions and economic
	conditions specific to the wireless communications industry.                                                  

Historically, we have not operated with a
significant order backlog and a substantial portion of our
revenues in any quarter has been derived from orders booked and
shipped in that quarter. Accordingly, a significant component of
revenue expectations will be based almost entirely on internal
estimates of future

30



---



##### Table of Contents



demand and not on firm customer orders. Planned
operating expense levels are relatively fixed in the short term
and are based in large part on these estimates. If orders and
revenue do not meet expectations, our operating results could be
materially adversely affected.


Shares eligible for future sale, including
shares owned by our principal stockholders, may cause the market
price of our common stock to drop significantly, even if our
business is doing well.

The potential for sales of substantial amounts of
our common stock into the public market may adversely affect the
market price of our common stock. Approximately
32.1 million shares are held by affiliates of Ripplewood
Holdings L.L.C. and an aggregate of approximately
8.5 million shares are held by Jonathan Zakin, who is our
Chairman and Chief Executive Officer, and Michael Seedman, who
is currently a member of our board of directors, and their
respective affiliates. In the event that the affiliates of
Ripplewood Holdings L.L.C. distribute shares that they hold to
their members and partners that are not our affiliates, those
distributed shares could be immediately sold without regard to
any volume limitations.

Competition within the wireless networking
industry is intense and is expected to increase significantly.
Our failure to compete successfully could materially harm our
prospects and financial results.

The market for broadband wireless systems and
building-to-building markets is extremely competitive and we
expect that competition will intensify in the future. Increased
competition could adversely affect our business and operating
results through pricing pressures, the loss of market share and
other factors. The principal competitive factors affecting
broadband fixed wireless markets include the following:



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | data throughput;                                                                                                
|
| |  | interference immunity;                                                                                          
|
| |  | network security;                                                                                               
|
| |  | price;                                                                                                          
|
| |  | integration with voice technology;                                                                              
|
| |  | power consumption;                                                                                              
|
| |  | product reliability;                                                                                            
|
| |  | ease of use;                                                                                                    
|
| |  | product costs;                                                                                                  
|
| |  | product features and applications;                                                                              
|
| |  | product time to market;                                                                                         
|
| |  | product certifications;                                                                                         
|
| |  | changes to government regulations with respect to
	each country served and related to the use of radio spectrum;
|
| |  | brand recognition;                                                                                              
|
| |  | OEM partnerships;                                                                                               
|
| |  | marketing alliances;                                                                                            
|
| |  | manufacturing capabilities and experience;                                                                      
|
| |  | effective distribution channels; and                                                                            
|
| |  | company reputation.                                                                                             

We could be at a disadvantage to competitors,
particularly Agere Systems, Alvarion Cisco Systems (which
acquired Aironet Wireless Communications), Netro, Nokia, P-Com,
Proxim, Symbol Technologies,

31



---



##### Table of Contents



Wi-LAN Inc. and 3COM that have broader
distribution channels, brand recognition, extensive patent
portfolios and more diversified product lines.


Many of our present and potential competitors
have substantially greater financial, marketing, technical and
other resources with which to pursue engineering, manufacturing,
marketing, and distribution of their products. These competitors
may succeed in establishing technology standards or strategic
alliances in the broadband fixed wireless market, obtain more
rapid market acceptance for their products, or otherwise gain a
competitive advantage. We can offer no assurance we will succeed
in developing products or technologies that are more effective
than those developed by our competitors. Furthermore, we compete
with companies that have high volume manufacturing and extensive
marketing and distribution capabilities, areas in which we have
only limited experience. We can offer no assurance that we will
be able to compete successfully against existing and new
competitors as wireless markets evolve and the level of
competition increases.

We recently began shipping our first
generation point-to-multipoint systems. These products have not
been in the market long enough to determine if they work
effectively or if they will be a commercial success.

We believe our future prospects are dependent on
our ability to successfully enter the point-to-multipoint
market. If we are unable to successfully distribute our
point-to-multipoint systems, it will be difficult for us to
compete successfully in the broadband wireless access market.
Historically, our operations have focused on the point-to-point
segment of the broadband wireless access market. In an effort to
remain competitive and grow our business, we have recently
decided to enter the point-to-multipoint segment of the market.
Through our acquisition of WirelessHome Corporation, we acquired
point-to-multipoint technology and recently began to ship
products employing this technology. If our point-to-multipoint
products are not commercially successful, our future prospects
and competitive position will be materially harmed. Furthermore,
some of our competitors are selling point-to-multipoint
broadband wireless access systems already, and there is often an
advantage to companies that are among the first to introduce new
products. If our point-to-multipoint systems are not
competitive, it may be difficult for us to attract new customers.

To remain competitive, we will need to expand
our operations. Failure to effectively manage growth could
result in our inability to support and maintain our
operations.

We anticipate that we will need to expand our
operations in order to address new market opportunities for our
products. This expansion could place a significant strain on our
management, operational and financial resources. We cannot
assure you that:



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | our personnel, systems, procedures and controls
	will be adequate to support our future operations;           
|
| |  | our management will be able to identify, hire,
	train, motivate or manage required personnel; or              
|
| |  | our management will be able to successfully
	identify and exploit existing and potential market opportunities.

In response to the recent decline in demand for
wireless networks generally, we reduced the size of our work
force. Those reductions may hinder our ability to expand our
operations in response to new market opportunities or a sudden
growth in demand for our products. In addition, we could
experience lower earnings as a result of expenses associated
with growing our operations, whether through internal
development or through acquisitions.

We depend on international sales and our
ability to sustain or expand international sales is subject to
many risks, which could adversely affect our operating
results.

Revenue from our shipments to customers outside
of the United States, principally to a limited number of
distributors, represented 24%, 33% and 23% of total revenue
during the calendar years 2001, 2000 and 1999, respectively. We
expect that revenue from shipments to international customers
will vary as a percentage of total revenue.

32



---



##### Table of Contents



There are certain risks inherent in doing
business in international markets, including the following:



| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| |  | uncertainty of product acceptance by customers in
	foreign countries;          
|
| |  | export license and documentation requirements;                                 
|
| |  | unforeseen changes in regulatory requirements;                                 
|
| |  | difficulties in staffing and managing
	multinational operations;               
|
| |  | governmental restrictions on the repatriation of
	funds into the United States;
|
| |  | foreign currency fluctuations;                                                 
|
| |  | longer payment cycles for international
	distributors;                         
|
| |  | difficulty in collecting accounts receivable;                                  
|
| |  | tariffs, duties, taxes and other trade barriers;                               
|
| |  | difficulties in finding foreign licensees or
	joint venture partners; and      
|
| |  | potential political and economic instability.                                  

There is a risk that such factors will harm our
ability to continue to successfully operate internationally and
our efforts to expand our international operations.

There can be no assurance that foreign markets
will continue to develop or that we will receive additional
orders to supply our products to foreign customers. Our business
and operating results could be materially adversely affected if
foreign markets do not continue to develop or if we do not
receive additional orders to supply our products for use by
foreign customers.

There is a risk that our business may start to
grow and that we will not have enough employees to meet the
increased demand for our products. To successfully expand
international sales, we will need to recruit additional
international sales and support personnel and expand our
relationships with international distributors and value-added
resellers. This expansion will require significant management
attention and financial resources. We may incur these additional
costs and add these management burdens without successfully
expanding sales. This failure would cause profitability to
decline or losses to increase.

Our revenue may decline and our profitability
may be threatened if the demand for wireless services in general
and broadband wireless access systems in particular does not
continue to grow.

Our success is dependent on continued growth in
demand for wireless telecommunications and data communications
services. If the rate of growth slows and service providers
reduce their capital investments in wireless infrastructure or
fail to expand into new geographic markets, our revenue will
decline. Unlike some competitors such as Cisco and Nortel, among
others, our principal product offerings rely on wireless
technologies. Accordingly, we would experience a greater impact
from a decline in the demand for wireless services than some of
our most important competitors. In addition, wireless access
solutions are unproven in the marketplace and some of the
wireless technologies, such as our Tsunami point-to-multipoint
technology in which we are currently investing substantial
capital, have only been commercially introduced in the last few
years. If wireless access technology turns out to be unsuitable
for widespread commercial deployment, it is unlikely we could
generate enough sales to sustain profitability. We have listed
below the factors that we believe are key to the success or
failure of broadband wireless access technology:



| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | its reliability and security and the perception
	by end-users of its reliability and security;                                 
|
| |  | its capacity to handle growing demands for faster
	transmission of increasing amounts of data, voice and video;                
|
| |  | the availability of sufficient frequencies for
	network service providers to deploy products at commercially
	reasonable rates;

33



---



##### Table of Contents





| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | its cost-effectiveness and performance compared
	to other forms of broadband access, whose prices and performance
	continue to improve;
|
| |  | its suitability for a sufficient number of
	geographic regions; and                                                                    
|
| |  | the availability of sufficient site locations for
	network service providers to install products at commercially
	reasonable rates.    

We have experienced the effects of many of the
factors listed above in interactions with customers selecting
wireless versus wire line technology. For example, because of
the frequency with which individuals using cellular phones
experience fading or a loss of signal, customers often hold the
perception that all broadband wireless technologies will have
the same reliability constraints even though the wireless
technology we use does not have the same problems as cellular
phones. In some geographic areas, because of adverse weather
conditions that affect wireless transmissions, but not wire line
technologies, we are not able to sell products as successfully
as competitors with wire line technology. In addition, future
legislation, legal decisions and regulation relating to the
wireless telecommunications industry may slow or delay the
deployment of wireless networks. We may also lose customers to
different types of wireless technologies. For example, we have
only a limited offering of products that operate in licensed
radio spectrums. Some customers, however, may want to operate in
licensed radio spectrums because such spectrums sometimes offer
less interference than license free radio spectrums or have
other advantages.

Our business will depend on rapidly evolving
telecommunications and Internet industries.

Our future success is dependent upon the
continued growth of the data communications and wireless
industries, particularly with regard to Internet usage. The
global data communications and Internet industries are evolving
rapidly and it is difficult to predict potential growth rates or
future trends in technology development. We cannot assure you
that the deregulation, privatization and economic globalization
of the worldwide telecommunications market that has resulted in
increased competition and escalating demand for new technologies
and services will continue in a manner favorable to us or our
business strategies. In addition, there can be no assurance that
the growth in demand for wireless and Internet services, and the
resulting need for high speed or enhanced data communications
products and wireless systems, will continue at its current rate
or at all.

We currently derive a substantial portion of
our revenue from a limited number of distributors. Therefore, a
decrease or loss in business from any of them may cause a
significant delay or decline in our revenue and could harm our
reputation.

We currently generate a significant amount of
revenue from a limited number of distributors. The loss of
business from any of these distributors or the delay of
significant orders from any of them, even if only temporary,
could significantly reduce our revenue, delay recognition of
revenue, harm our reputation or reduce our ability to accurately
predict cash flow. For the year ended December 31, 2000,
approximately 21% of our revenue was derived from one
distributor. For the year ended December 31, 2001,
approximately 30%, 11% and 11%, respectively, of our revenue was
derived from three distributors. We do not have long-term
contracts with any of these distributors. Our future success
will depend significantly on the timing and size of future
purchase orders, if any, from a limited number of distributors.

We depend on limited suppliers for key
components that are difficult to manufacture, and because we do
not have long-term arrangements with these suppliers, we could
experience disruptions in supply that could decrease or delay
the recognition of revenues.

We depend on single or limited source suppliers
for several key components used in our products. Any disruptions
in the supply of these components could delay or decrease our
revenues. In addition, even for components with multiple
sources, there have been, and may continue to be, shortages due
to capacity constraints caused by high demand. We do not have
any long-term arrangements with our suppliers. If, for any
reason, a supplier fails to meet its quantity or quality
requirements, or stops selling components to its contract
manufacturers at commercially reasonable prices, we could
experience significant production delays and cost

34



---



##### Table of Contents



increases, as well as higher warranty expenses
and product reputation problems. Because the key components and
assemblies of our products are complex, difficult to manufacture
and require long lead times, we may have difficulty finding
alternative suppliers to produce our components and assemblies
on a timely basis. We have experienced shortages of some of
these components in the past, which delayed related revenue, and
we may experience shortages in the future. In addition, because
the majority of our products have a short sales cycle of between
30 and 90 days, we may have difficulty in making accurate and
reliable forecasts of product needs. As a result, we could
experience shortages in supply, which could delay or decrease
revenue because our customers may cancel their orders or choose
a competitor for their future needs.


We have limited manufacturing capability and
depend on contract manufacturers for our manufacturing
requirements.

We currently have limited manufacturing
capability and no experience in large scale or foreign
manufacturing. If our customers were to concurrently place
orders for unexpectedly large product quantities, our present
manufacturing capacity might be inadequate to meet the demand.
There can be no assurance that we will be able to develop or
contract for additional manufacturing capacity on acceptable
terms on a timely basis. In addition, in order to compete
successfully, we will need to achieve significant product cost
reductions. Although we intend to achieve cost reductions
through engineering improvements, production economies, and
manufacturing at lower cost locations including outside the
United States, there can be no assurance that we will be able to
do so. In order to remain competitive, we must continue to
introduce new products and processes into our manufacturing
environment, and there can be no assurance that any such new
products will not create obsolete inventories related to older
products.

We have in the past experienced higher than
expected demand for our products. This resulted in delays in the
delivery of certain products due to temporary shortages of
certain components, particularly components with long lead
times, and insufficient manufacturing capacity. Due to the
complex nature of products and manufacturing processes, the
worldwide demand for some wireless technology components and
other factors, there can be no assurance that delays in the
delivery of products will not occur in the future.

The average selling prices of our products
have been declining, and we may be unable to achieve the
manufacturing cost reductions and improvements required in order
to remain profitable.

The average selling price of our products has
been declining in recent years. If we do not reduce production
costs and other expenses, we may not be able to offset this
continuing decline and achieve or maintain profitability. We
must also develop and introduce on a timely basis new systems
that can be sold at higher average selling prices. Failure to
develop these new products would cause our revenue to decline or
to increase more slowly.

We expect that average selling prices of our
products will continue to decrease because one of our strategies
will be to increase the percentage of domestic and international
sales being made through distributors and value-added resellers,
and to OEM customers, which involve lower prices than our direct
sales. This risk from declining average selling prices may also
intensify because we expect that market conditions, particularly
falling prices for competing broadband solutions, will force us
to reduce prices over time. Under some circumstances, we may be
forced to reduce prices even if it causes us to decrease gross
profit or to take a loss on our products. We may also be unable
to reduce sufficiently the cost of our products to enable us to
compete with other broadband access technologies with lower
product costs. In order to remain competitive, we will need to
design our products so that they can be manufactured with
low-cost, automated manufacturing, assembly and testing
techniques. We cannot assure you that we will be successful in
designing our products to allow contract manufacturers to use
lower-cost, automated techniques. In addition, any redesign may
fail to result in sufficient cost reductions to allow us to
significantly reduce the price of our products or prevent our
gross profit from declining as prices decline.

35



---



##### Table of Contents



Because many of our current and planned
products are or will be highly complex, they may contain defects
or errors that are detected only after deployment in complex
networks and which, if detected, could harm our reputation and
result in a decrease in revenue or in difficulty collecting
accounts receivable.

Many of our 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. 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;                                 
|
| |  | diversion of resources, legal actions by
	customers and end-users; and
|
| |  | increased insurance costs and other losses to us
	or to end-users.    

End-users have discovered errors in our products
in the past and may discover errors in these products in the
future. Because customers often delay deployment of a full
system until the products have been tested by them and any
defects have been corrected, these revisions caused delays in
orders by our customers for our systems. Because our strategy is
to introduce more complex products in the future, this risk will
intensify over time.

To compete effectively, we will need to
establish and expand new distribution channels for our
point-to-multipoint products.

We intend to add new distributors and value-added
resellers for our Tsunami point-to-multipoint products. Our
point-to-multipoint products are sold through our current
domestic and international distributors. In general,
distributors and value-added resellers offer products of several
different companies, including products that may compete with
our products. Accordingly, they may give higher priority to
products of other suppliers, thus reducing their efforts to sell
our products. In addition, they often focus on specific markets
and we will need to add new distributors and value-added
resellers as we expand our sales to new markets. Agreements with
distributors are generally terminable at their option. Any
reduction in sales efforts or termination of a relationship may
materially and adversely affect our business and operating
results. Use of distributors also entails the risk that they
will build up inventories in anticipation of substantial growth
in sales. If such growth does not occur as anticipated, they may
substantially decrease the amount of products ordered in
subsequent quarters. Such fluctuations could contribute to
significant variations in our future operating results.

Broadband wireless access solutions have some
disadvantages and limitations as compared to other alternative
broadband access solutions that may prevent widespread adoption,
which could hurt our profitability and prospects.

Broadband wireless access solutions, including
point-to-point and point-to-multipoint systems, compete with
other high-speed access solutions such as digital subscriber
lines, cable modem technology, fiber optic cable and other
high-speed wire line and satellite technologies. If the market
for our point-to-point and point-to-multipoint solutions fails
to develop or develops more slowly than we expect due to this
competition, our sales opportunities and profitability will be
harmed. Many of these alternative technologies can take
advantage of existing installed infrastructure and are generally
perceived to be reliable and secure. As a result, they have
already achieved significantly greater market acceptance and
penetration than point-to-point and point-to-multipoint
broadband wireless access technologies. Moreover, current
point-to-point and point-to-multipoint broadband wireless access
technologies have inherent technical limitations that may
inhibit their widespread adoption in many areas, including the
need for line-of-sight installation and, in the case of
operating frequencies above 11 GHz, reduced communication
distance in bad weather.

36



---



##### Table of Contents



We expect point-to-point and point-to-multipoint
broadband wireless access technologies to face increasing
competitive pressures from both current and future alternative
technologies. In light of these factors, many service providers
may be reluctant to invest heavily in broadband wireless access
solutions.

Broadband wireless access products require a
direct line-of-sight, which may limit the ability of service
providers to deploy them in a cost-effective manner and could
harm our sales.

Because of line-of-sight limitations, service
providers often install broadband wireless access equipment on
the rooftops of buildings and on other tall structures. Before
undertaking these installations, service providers must
generally secure roof rights from the owners of each building or
other structure on which the equipment is to be installed. The
inability to easily and cost-effectively obtain roof rights may
deter customers from choosing to install broadband wireless
access equipment, which could have an adverse effect on our
sales.

If we fail to attract, hire and retain
qualified personnel, we may not be able to develop, market or
sell our products or successfully manage our business.

Competition for personnel in our industry and in
Northern California where we are located is intense, and we may
not be successful in attracting and retaining qualified
personnel. We depend on the continued services of our executive
officers and other key personnel. The loss of the services of
any key personnel or our inability to hire new personnel with
the requisite skills could restrict our ability to develop new
products or enhance existing products in a timely manner, sell
products to our customers or manage our business effectively.
There are only a limited number of people in the job market with
the requisite skills, particularly people with radio frequency
technology expertise. We may not be able to hire or retain
qualified personnel if we are unable to offer competitive
salaries and benefits in the Northern California labor market.
In addition, as a public company, we may find it more difficult
to attract personnel and we may have to increase compensation.
We are also dependent on the continued contributions of our
principal sales, engineering and management personnel, many of
whom would be difficult to replace.

We may have difficulties with our acquisitions
and investments, which could adversely affect our growth and
financial condition.

From time to time, we may consider new business
opportunities and ventures, including acquisitions, in a broad
range of areas. Any decision by us to pursue a significant
business expansion or new business opportunity would be
accompanied by risks, including, among others:



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requiring us to invest a substantial amount of
	capital, which could materially harm our financial condition and
	our ability to implement our existing business strategy;
|
| |  | requiring us to issue additional equity
	interests, which would be dilutive to our stockholders;                                                                          
|
| |  | placing additional and substantial burdens on our
	management personnel and our financial and operational systems;                                                        
|
| |  | the difficulty of assimilating the operations,
	technology and personnel of the acquired companies;                                                                       
|
| |  | the potential disruption of our ongoing business;                                                                                                                         
|
| |  | the possible inability to retain key technical
	and managerial personnel;                                                                                                 
|
| |  | potential additional expenses associated with
	amortization of purchased intangible assets or the impairment of
	goodwill;                                                
|
| |  | additional expenses associated with the
	activities and expansion of the acquired businesses; and                                                                         
|
| |  | the possible impairment of relationships with
	existing employees, customers, suppliers and investors.                                                                    

In addition, we cannot assure you that we will be
successful in overcoming these risks or any other problems
encountered in connection with any acquisitions or other
investments that we may make in the future.

37



---



##### Table of Contents



If we fail to protect our intellectual
property rights or if such rights are not adequately protected
under current law, competitors may be able to use our technology
or trademarks and this could weaken our competitive position,
reduce our revenue and increase costs.

We will rely on intellectual property laws to
protect the products that we own, develop and license. We will
also rely on confidentiality agreements with some of our
licensees and other third parties and confidentiality agreements
and policies covering our employees. We cannot assure you that
such laws and measures will provide sufficient protection, that
other companies will not develop technologies that are similar
or superior or that third parties will not copy or otherwise
obtain and use our technologies without authorization.

Possible third-party claims of infringement of
proprietary rights against us could have a material adverse
effect on our business, results of operation and financial
condition.

The communications industry is characterized by a
relatively high level of litigation based on allegations of
infringement of proprietary rights. There can be no assurance
that third parties will not assert infringement claims against
us, that any such assertion of infringement will not result in
litigation or that we would prevail in such litigation.
Furthermore, any such claims, with or without merit, could
result in substantial cost to us and diversion of our personnel,
require us to develop new technology or require us to enter into
royalty or licensing arrangements. Such royalty or licensing
agreements, if required, may not be available on terms
acceptable to us, or at all. In the event of a successful claim
of infringement or misappropriation against us, and our failure
or inability to develop non-infringing technology or to license
the infringed, misappropriated or similar technology at a
reasonable cost, our business, results of operations and
financial condition would be materially adversely affected. In
addition, we may be obligated to indemnify our customers against
claimed infringement of patents, trademarks, copyrights and
other proprietary rights of third parties. Any requirement for
us to indemnify our customers could have a material adverse
effect on our business, results of operations and financial
condition.

Compliance with governmental regulations in
multiple jurisdictions where we sell our products is difficult
and costly.

Our products are also subject to regulatory
requirements in domestic and international markets and,
therefore, we must monitor the development of spread spectrum
and other radio frequency regulations domestically and in
certain countries that represent potential markets for our
products. Regulatory changes by the FCC or by regulatory
agencies outside the United States, including changes in the
allocation of available frequency spectrum, could significantly
affect our operations by restricting our development efforts,
rendering current products obsolete or increasing the
opportunity for additional competition. Several changes by the
FCC were approved within the last eight years including changes
in the allocation and use of available frequency spectrum, as
well as the granting of an interim waiver. These approved
changes could create opportunities for other wireless networking
products and services. There can be no assurance that new
regulations will not be promulgated that could materially and
adversely affect our business and operating results. Changes in,
or the failure by us to comply with, applicable domestic and
international regulations could materially adversely affect our
business and operating results. In addition, with respect to
those countries that do not follow FCC regulations, we may need
to modify our products to meet local rules and regulations.

It is possible that the United States and other
jurisdictions will adopt new laws and regulations affecting the
pricing, characteristics and quality of broadband wireless
systems and products. Increased government regulations could:



| |   |                                                         
| | - | --------------------------------------------------------
| |  | decrease the growth of the broadband wireless
	industry;
|
| |  | hinder our ability to conduct business
	internationally;
|
| |  | reduce our revenues;                                    
|
| |  | increase the costs of our products;                     

38



---



##### Table of Contents





| |   |                                      
| | - | -------------------------------------
| |  | increase our operating expenses; and 
|
| |  | expose us to significant liabilities.

The price of our common stock may be subject
to wide fluctuation, and you may lose all or part of your
investment in our common stock.

The trading price of our common stock has been
subject to wide fluctuations, which are likely to continue
following our proposed merger with Proxim. The trading price of
our common stock may fluctuate in response to a number of events
and factors, including:



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | quarterly variations in revenues and operating
	results;                               
|
| |  | announcements of innovations and new products;                                         
|
| |  | strategic developments or business combinations
	by us or our competitors;             
|
| |  | changes in our expected operating expense levels;                                      
|
| |  | changes in financial estimates and
	recommendations of financial and industry analysts;
|
| |  | the operating and securities price performance of
	comparable companies; and           
|
| |  | news reports relating to trends in the wireless
	communications industry.              

In addition, the stock market in general, and the
market prices for wireless-related companies in particular, have
experienced extreme volatility that often has been unrelated to
the operating performance of these companies. These broad market
and industry fluctuations may influence the trading price of our
common stock. These trading price fluctuations may make it more
difficult to use our common stock as currency to make
acquisitions that might otherwise be advantageous, or to use
stock options as a means to attract and retain employees. In
addition, you may lose all or part of your investment in our
common stock.

Provisions of our certificate of
incorporation, bylaws and Delaware law could deter takeover
attempts.

Some provisions in our certificate of
incorporation and bylaws could delay, prevent or make more
difficult a merger, tender offer, proxy contest or change of
control of us. Our stockholders might view any transaction of
this type as being in their best interest since the transaction
could result in a higher stock price than the then-market price
of our common stock. Among other things, our certificate of
incorporation and bylaws:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | authorize our board of directors to issue
	preferred stock with the terms of each series to be fixed by the
	board of directors;              
|
| |  | divide our board of directors into three classes
	so that only approximately one-third of the total number of
	directors is elected each year;
|
| |  | permit directors to be removed only for cause; and                                                                                            
|
| |  | specify advance notice requirements for
	stockholder proposals and director nominations.                                                      

In addition, with some exceptions, the Delaware
General Corporation Law will restrict or delay mergers and other
business combinations between us and any stockholder that
acquires 15% or more of our voting stock.

Affiliates of Ripplewood Holdings L.L.C.
beneficially own a significant percentage of our common stock,
which will allow them to significantly influence matters
requiring shareholder approval and could discourage potential
acquisitions of us.

Affiliates of Ripplewood Holdings L.L.C. together
control approximately 63% of our outstanding common stock. These
stockholders will be able to exert significant influence over
actions requiring the approval of our stockholders, including
many types of change of control transactions and any amendments
to our certificate of incorporation. The interests of the
affiliates of Ripplewood Holdings L.L.C. may be different

39



---



##### Table of Contents



from our other stockholders. In addition, the
significant ownership percentage of affiliates of Ripplewood
Holdings L.L.C. could have the effect of delaying or preventing
a change of control of us or otherwise discourage a potential
acquiror from obtaining control of us.





Item
7A.     Quantitative and Qualitative
Disclosures About Market Risk

Our exposure to market risk for changes in
interest rates relates primarily to our investment portfolio. We
place our investments with high credit quality issuers and, by
policy, limit the amount of the credit exposure to any one
issuer. Our general policy is to limit the risk of principal
loss and ensure the safety of invested funds by limiting market
and credit risk. We do not believe our exposure to market and
credit risk to be material.

Currently, all sales to international customers
are denominated in U.S. dollars and, accordingly, we are not
currently exposed to foreign currency exchange rate risks other
than the risk that conversion to U.S. dollars at a high
cost may cause some customers to search for a lower priced
competitive product.

40



---



##### Table of Contents






Item
8.     Financial Statements and
Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                 |  |      |    | 
|------------------------------------------------ |  | ---- | -- | 
|                                                 |  | Page
|                                                 |  |     
|Report of Independent Public Accountants         |  |      | 42 | 
|Consolidated Balance Sheets                      |  |      | 43 | 
|Consolidated Statements of Operations            |  |      | 44 | 
|Consolidated Statements of Stockholders
	Equity |  |      | 45 | 
|Consolidated Statements of Cash Flows            |  |      | 47 | 
|Notes to Consolidated Financial Statements       |  |      | 48 | 

41



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To Western Multiplex Corporation:

We have audited the accompanying consolidated
balance sheets of Western Multiplex Corporation (a Delaware
corporation, formerly known as Glenayre Western Multiplex) and
subsidiaries as of December 31, 2000 and 2001, and the
related consolidated statements of operations,
stockholders equity and cash flows for each of the three
years in the period ended December 31, 2001. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Western Multiplex Corporation and subsidiaries as of
December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America.

Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole.
The schedule listed under Item 14(a) is presented for the
purposes of complying with the Securities and Exchange
Commissions rules and is not a part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



| |                        
| | -----------------------
| | /s/ ARTHUR ANDERSEN LLP

San Jose, California

January 28, 2002


42



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

CONSOLIDATED BALANCE SHEETS

As of December 31, 2000 and
2001


|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |         |         | 
|--------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                          |                                                                                                                                                               |                                           
|                                                                                                          |                                                                                                                                                               | December 31,                              
|                                                                                                          |                                                                                                                                                               |                                           
|                                                                                                          |                                                                                                                                                               | 2000                                       |         | 2001   
|                                                                                                          |                                                                                                                                                               |                                            |         |        
|                                                                                                          |                                                                                                                                                               |                                           
|                                                                                                          |                                                                                                                                                               | (Dollars in thousands,                    
|                                                                                                          |                                                                                                                                                               | except per share                          
|                                                                                                          |                                                                                                                                                               | amounts)                                  
|ASSETS                                                                                                   
|Current assets:                                                                                           |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          | Cash and cash equivalents                                                                                                                                     |                                            | $       | 31,094  |         |   | $       | 16,552  |        
|                                                                                                          | Short-term investments                                                                                                                                        |                                            |         | 20,633  |         |   |         | 6,738   |        
|                                                                                                          | Accounts receivable, net of allowances of $957
	and $5,406, respectively                                                                                      |                                            |         | 34,292  |         |   |         | 27,396  |        
|                                                                                                          | Inventory, net                                                                                                                                                |                                            |         | 10,949  |         |   |         | 19,906  |        
|                                                                                                          | Prepaid expenses and other                                                                                                                                    |                                            |         | 4,970   |         |   |         | 2,413   |        
|                                                                                                          | Deferred tax assets                                                                                                                                           |                                            |         | 1,573   |         |   |         | 8,224   |        
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          | Total current assets                                                                                                                                          |                                            |         | 103,511 |         |   |         | 81,229  |        
|Equipment and leasehold improvements, net                                                                 |                                                                                                                                                               |                                            | 5,381   |         |         |   | 8,776   |        
|Goodwill and other intangible assets, net of
	accumulated amortization of $5,820 and $9,117, respectively |                                                                                                                                                               |                                            | 22,906  |         |         |   | 36,613  |        
|Deferred tax assets, net of current portion                                                               |                                                                                                                                                               |                                            | 3,565   |         |         |   | 3,125   |        
|Restricted cash and long-term investments                                                                 |                                                                                                                                                               |                                            | 3,014   |         |         |   | 2,084   |        
|Other long-term assets                                                                                    |                                                                                                                                                               |                                            | 2,500   |         |         |   | 2,571   |        
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|Total assets                                                                                              |                                                                                                                                                               | $                                          | 140,877 |         |         | $ | 134,398 |        
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                                                    
|Current liabilities:                                                                                      |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          | Accounts payable                                                                                                                                              |                                            | $       | 10,208  |         |   | $       | 7,549   |        
|                                                                                                          | Accrued liabilities                                                                                                                                           |                                            |         | 8,582   |         |   |         | 8,597   |        
|                                                                                                          | Payable to parent company                                                                                                                                     |                                            |         | 35      |         |   |         |        |        
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          |                                                                                                                                                               | Total current liabilities                  |         |         | 18,825  |   |         |         | 16,146  | 
|Long-term debt                                                                                            |                                                                                                                                                               |                                            | 28      |         |         |   |        |        
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          |                                                                                                                                                               | Total liabilities                          |         |         | 18,853  |   |         |         | 16,146  | 
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|Commitments and contingencies (Note 6)                                                                    |                                                                                                                                                               |                                            |         |         |         |   |         |        
|Stockholders equity:                                                                                     |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          | Common stock, Class A, par value $.01;
	authorized 100,000,000: 55,564,419 and 59,218,105 issued and
	outstanding at December 31, 2000 and 2001, respectively |                                            |         | 975     |         |   |         | 1,013   |        
|                                                                                                          | Common stock, Class B, par value $.01;
	authorized 100,000,000: none issued and outstanding at
	December 31, 2000 and 2001, respectively                      |                                            |         |        |         |   |         |        |        
|                                                                                                          | Additional paid-in capital                                                                                                                                    |                                            |         | 141,341 |         |   |         | 159,626 |        
|                                                                                                          | Treasury stock                                                                                                                                                |                                            |         | (21,000 | )       |   |         | (21,400 | )      
|                                                                                                          | Deferred stock compensation                                                                                                                                   |                                            |         | (4,310  | )       |   |         | (614    | )      
|                                                                                                          | Unrealized gain on investments                                                                                                                                |                                            |         | 12      |         |   |         | 75      |        
|                                                                                                          | Retained earnings (deficit)                                                                                                                                   |                                            |         | 6,068   |         |   |         | (19,530 | )      
|                                                                                                          | Less: Stock subscription receivable from employees                                                                                                            |                                            |         | (1,062  | )       |   |         | (918    | )      
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          |                                                                                                                                                               | Total stockholders equity                 |         |         | 122,024 |   |         |         | 118,252 | 
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        
|                                                                                                          |                                                                                                                                                               | Total liabilities and stockholders equity |         | $       | 140,877 |   |         | $       | 134,398 | 
|                                                                                                          |                                                                                                                                                               |                                            |         |         |         |   |         |        

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

43



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

CONSOLIDATED STATEMENTS OF
OPERATIONS

For the Years Ended December 31, 1999,
2000 and 2001


|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |        |         |  
|-------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------ | ---------- | ----- | ------ | ---- | ---------- | ------ | ------ | - | ---------- | ------ | ------- | -
|                                                                                       |                                                |                                                 
|                                                                                       |                                                | Year Ended December 31,                         
|                                                                                       |                                                |                                                 
|                                                                                       |                                                | 1999                                             |            | 2000  |        | 2001
|                                                                                       |                                                |                                                  |            |       |        |     
|                                                                                       |                                                |                                                 
|                                                                                       |                                                | (Dollars in thousands, except per share amounts)
|Revenue, net                                                                           |                                                | $                                                | 44,750     |       |        | $    | 105,508    |        |        | $ | 105,730    |       
|Cost of revenue                                                                        |                                                |                                                  | 22,470     |       |        |      | 50,466     |        |        |   | 55,887     |       
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Gross profit                                     |            | $     | 22,280 |      |            | $      | 55,042 |   |            | $      | 49,843  |  
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|Operating expenses:                                                                    |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       | Research and development                       |                                                  |            | 5,925 |        |      |            | 12,379 |        |   |            | 19,114 |        
|                                                                                       | Sales and marketing                            |                                                  |            | 6,154 |        |      |            | 16,180 |        |   |            | 26,562 |        
|                                                                                       | General and administrative                     |                                                  |            | 2,038 |        |      |            | 6,351  |        |   |            | 12,041 |        
|                                                                                       | Amortization of goodwill and intangible assets |                                                  |            | 737   |        |      |            | 2,382  |        |   |            | 5,440  |        
|                                                                                       | Amortization of deferred stock compensation(*) |                                                  |            |      |        |      |            | 4,161  |        |   |            | 5,196  |        
|                                                                                       | Recapitalization costs                         |                                                  |            | 3,050 |        |      |            |       |        |   |            |       |        
|                                                                                       | Impairment of goodwill and intangible assets   |                                                  |            |      |        |      |            |       |        |   |            | 4,331  |        
|                                                                                       | Restructuring charges                          |                                                  |            |      |        |      |            |       |        |   |            | 1,816  |        
|                                                                                       | In-process research and development            |                                                  |            |      |        |      |            |       |        |   |            | 6,400  |        
|                                                                                       | Merger costs                                   |                                                  |            |      |        |      |            | 185    |        |   |            | 30     |        
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Total operating expenses                         |            |       | 17,904 |      |            |        | 41,638 |   |            |        | 80,930  |  
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Income (loss) from operations                    |            |       | 4,376  |      |            |        | 13,404 |   |            |        | (31,087 | )
|Interest expense                                                                       |                                                |                                                  | (368       | )     |        |      | (1,584     | )      |        |   | (137       | )     
|Interest income                                                                        |                                                |                                                  |           |       |        |      | 1,669      |        |        |   | 1,530      |       
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Income (loss) before taxes                       |            |       | 4,008  |      |            |        | 13,489 |   |            |        | (29,694 | )
|Income tax provision (benefit)                                                         |                                                |                                                  | 2,831      |       |        |      | 6,800      |        |        |   | (4,096     | )     
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Income (loss) before extraordinary item          |            |       | 1,177  |      |            |        | 6,689  |   |            |        | (25,598 | )
|Loss on early extinguishment of debt, net of
	income tax benefit of $241               |                                                |                                                  |           |       |        |      | (394       | )      |        |   |           |       
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Net income (loss)                                |            | $     | 1,177  |      |            | $      | 6,295  |   |            | $      | (25,598 | )
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|Basic earnings (loss) per share                                                        |                                                | $                                                | 0.02       |       |        | $    | 0.13       |        |        | $ | (0.44      | )     
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|Diluted earnings (loss) per share                                                      |                                                | $                                                | 0.02       |       |        | $    | 0.12       |        |        | $ | (0.44      | )     
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|Shares used to compute basic earnings (loss) per
	share                                |                                                |                                                  | 73,000,000 |       |        |      | 47,044,568 |        |        |   | 57,559,434 |       
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|Shares used to compute diluted earnings
	(loss) per share                              |                                                |                                                  | 73,000,000 |       |        |      | 52,080,734 |        |        |   | 57,559,434 |       
|                                                                                       |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|(*) Amortization of deferred stock
	compensation excluded from the following expenses: |                                                |                                                  |            |       |        |      |            |        |        |   |            |       
|                                                                                       |                                                | Cost of revenue                                  |            |       |        |      |            |        | 67     |   |            |        | 23      |  
|                                                                                       |                                                | Research and development                         |            |       |        |      |            |        | 2,000  |   |            |        | 4,237   |  
|                                                                                       |                                                | Sales and marketing                              |            |       |        |      |            |        | 981    |   |            |        | 343     |  
|                                                                                       |                                                | General administrative                           |            |       |        |      |            |        | 1,113  |   |            |        | 593     |  

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

44



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

For the Years Ended December 31, 1999,
2000 and 2001


|                                |                                                                                                                     |                                                  |   |                |  |         |   |        |  |         |            |             |   |         |     |        |   |  |   |             |   |   |   |         |   |  |             |             |   |   |         |         |  
|------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | - | -------------- |  | ------- | - | ------ |  | ------- | ---------- | ----------- | - | ------- | --- | ------ | - |  | - | ----------- | - | - | - | ------- | - |  | ----------- | ----------- | - | - | ------- | ------- | -
|                                |                                                                                                                     |                                                  |   |               
|                                |                                                                                                                     | Common Stock                                     |   | Treasury Stock
|                                |                                                                                                                     |                                                  |   |               
|                                |                                                                                                                     | Class A                                          |   |                |  | Class B |   |        |  | Class A |            |             |   | Class B |     |       
|                                |                                                                                                                     | Shares                                           |   | Amount         |  | Shares  |   | Amount |  | Shares  |            | Amount      |   | Shares  |     | Amount
|                                |                                                                                                                     |                                                  |   |                |  |         |   |        |  |         |            |             |   |         |     |       
|                                |                                                                                                                     |                                                 
|                                |                                                                                                                     | (Dollars in thousands, except per share amounts)
|Balance as of December 31, 1998 |                                                                                                                     |                                                  |  |                |  | $       |  |        |  |         | 80,000,000 |             |   | $       | 800 |        |   |  |  |             |   | $ |  |         |   |  |            |             |   | $ |        |        
|                                | Net income                                                                                                          |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Net cash transfer to Glenayre                                                                                       |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Forgiveness of receivable from Glenayre                                                                             |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Common stock redemption related to
	recapitalization                                                                |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             | (42,000,000 | ) |   |         | (21,000 | )
|                                | Deferred tax asset recognized upon
	recapitalization and related tax election                                       |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                |                                                                                                                     |                                                  |   |                |  |         |   |        |  |         |            |             |   |         |     |        |   |  |   |             |   |   |   |         |   |  |             |             |   |   |         |        
|Balance as of December 31, 1999 |                                                                                                                     |                                                  |  |                |  | $       |  |        |  |         | 80,000,000 |             |   | $       | 800 |        |   |  |  |             |   | $ |  |         |   |  | (42,000,000 | )           |   | $ | (21,000 | )      
|                                | Net income                                                                                                          |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Issuance of Class A common stock pursuant to
	purchase plan                                                         |                                                  |   | 3,830,351      |  |         |   | 38     |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Conversion of Class B common stock into
	Class A common stock immediately prior to the initial
	public offering     |                                                  |   | 80,000,000     |  |         |   | 800    |  |         |            | (80,000,000 | ) |         |     | (800   | ) |  |   | (42,000,000 | ) |   |   | (21,000 | ) |  |             | 42,000,000  |   |   |         | 21,000  |  
|                                | Issuance of Class A common stock in
	connection with the Ubiquity acquisition                                       |                                                  |   | 692,772        |  |         |   | 7      |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Stock options assumed in connection with the
	Ubiquity acquisition                                                  |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Issuance of Class A common stock in
	connections with the initial public offering net of issuance
	costs of $12,460 |                                                  |   | 8,625,000      |  |         |   | 86     |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Exercise of stock options                                                                                           |                                                  |   | 16,000         |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Exercise of warrants in connection with the
	recapitalization of the Company                                        |                                                  |   | 4,370,000      |  |         |   | 44     |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Deferred stock compensation                                                                                         |                                                  |   | 35,296         |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Unrealized gain on investments                                                                                      |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                | Stock subscription receivable from employees                                                                        |                                                  |   |               |  |         |   |       |  |         |            |            |   |         |     |       |   |  |   |            |   |   |   |        |   |  |             |            |   |   |         |        |  
|                                |                                                                                                                     |                                                  |   |                |  |         |   |        |  |         |            |             |   |         |     |        |   |  |   |             |   |   |   |         |   |  |             |             |   |   |         |        

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                |                                                                                                                     |                                                  |        |          |   |             |   |           |   |              |   |              |  |       |        |       |  |   |        |        |   |   |   |        |   |   |        |         |  
|------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | -------- | - | ----------- | - | --------- | - | ------------ | - | ------------ |  | ----- | ------ | ----- |  | - | ------ | ------ | - | - | - | ------ | - | - | ------ | ------- | -
|                                |                                                                                                                     |                                                  |        |          |   |             |   |           |   | Net          |   | Stock        |  |      
|                                |                                                                                                                     |                                                  |        | Deferred |   |             |   |           |   | Payable      |   | Subscription |  |      
|                                |                                                                                                                     | Additional                                       |        | Stock    |   | Unrealized  |   | Retained  |   | (Receivable) |   | Receivable   |  |      
|                                |                                                                                                                     | Paid-in                                          |        | Compen-  |   | Gain on     |   | Earnings  |   | from         |   | from         |  |      
|                                |                                                                                                                     | Capital                                          |        | sation   |   | Investments |   | (Deficit) |   | Glenayre     |   | Employees    |  | Total
|                                |                                                                                                                     |                                                  |        |          |   |             |   |           |   |              |   |              |  |      
|                                |                                                                                                                     |                                                 
|                                |                                                                                                                     | (Dollars in thousands, except per share amounts)
|Balance as of December 31, 1998 |                                                                                                                     | $                                                | 32,443 |          |   | $           |  |           |   | $            |  |              |  | $     | (1,404 | )     |  | $ | (1,120 | )      |   | $ |  |        |   | $ | 30,719 |        
|                                | Net income                                                                                                          |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        | 1,177 |  |   |        |       |   |   |   |       |   |   |        | 1,177   |  
|                                | Net cash transfer to Glenayre                                                                                       |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        | (3,790 | ) |   |   |       |   |   |        | (3,790  | )
|                                | Forgiveness of receivable from Glenayre                                                                             |                                                  |        | (4,910   | ) |             |   |          |   |              |   |             |  |       |        |      |  |   |        | 4,910  |   |   |   |       |   |   |        |        |  
|                                | Common stock redemption related to
	recapitalization                                                                |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | (21,000 | )
|                                | Deferred tax asset recognized upon
	recapitalization and related tax election                                       |                                                  |        | 3,900    |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 3,900   |  
|                                |                                                                                                                     |                                                  |        |          |   |             |   |           |   |              |   |              |  |       |        |       |  |   |        |        |   |   |   |        |   |   |        |        
|Balance as of December 31, 1999 |                                                                                                                     | $                                                | 31,433 |          |   | $           |  |           |   | $            |  |              |  | $     | (227   | )     |  | $ |       |        |   | $ |  |        |   | $ | 11,006 |        
|                                | Net income                                                                                                          |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        | 6,295 |  |   |        |       |   |   |   |       |   |   |        | 6,295   |  
|                                | Issuance of Class A common stock pursuant to
	purchase plan                                                         |                                                  |        | 1,879    |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 1,917   |  
|                                | Conversion of Class B common stock into
	Class A common stock immediately prior to the initial
	public offering     |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        |        |  
|                                | Issuance of Class A common stock in
	connection with the Ubiquity acquisition                                       |                                                  |        | 5,535    |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 5,542   |  
|                                | Stock options assumed in connection with the
	Ubiquity acquisition                                                  |                                                  |        | 834      |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 834     |  
|                                | Issuance of Class A common stock in
	connections with the initial public offering net of issuance
	costs of $12,460 |                                                  |        | 91,040   |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 91,126  |  
|                                | Exercise of stock options                                                                                           |                                                  |        | 8        |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 8       |  
|                                | Exercise of warrants in connection with the
	recapitalization of the Company                                        |                                                  |        | 2,141    |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 2,185   |  
|                                | Deferred stock compensation                                                                                         |                                                  |        | 8,471    |   |             |   | (4,310    | ) |              |   |             |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 4,161   |  
|                                | Unrealized gain on investments                                                                                      |                                                  |        |         |   |             |   |          |   |              |   | 12           |  |       |        |      |  |   |        |       |   |   |   |       |   |   |        | 12      |  
|                                | Stock subscription receivable from employees                                                                        |                                                  |        |         |   |             |   |          |   |              |   |             |  |       |        |      |  |   |        |       |   |   |   | (1,062 | ) |   |        | (1,062  | )
|                                |                                                                                                                     |                                                  |        |          |   |             |   |           |   |              |   |              |  |       |        |       |  |   |        |        |   |   |   |        |   |   |        |        

45



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY  (Continued)

For the Years Ended December 31, 1999,
2000 and 2001


|                                      |                                                                                             |                                                  |             |                |  |         |       |        |  |         |   |        |  |         |   |        |  |  |             |          |   |   |         |      |   |  |   |   |  |   |   |   | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------- | -------------- |  | ------- | ----- | ------ |  | ------- | - | ------ |  | ------- | - | ------ |  |  | ----------- | -------- | - | - | ------- | ---- | - |  | - | - |  | - | - | - | 
|                                      |                                                                                             |                                                  |             |               
|                                      |                                                                                             | Common Stock                                     |             | Treasury Stock
|                                      |                                                                                             |                                                  |             |               
|                                      |                                                                                             | Class A                                          |             |                |  | Class B |       |        |  | Class A |   |        |  | Class B |   |       
|                                      |                                                                                             | Shares                                           |             | Amount         |  | Shares  |       | Amount |  | Shares  |   | Amount |  | Shares  |   | Amount
|                                      |                                                                                             |                                                  |             |                |  |         |       |        |  |         |   |        |  |         |   |       
|                                      |                                                                                             |                                                 
|                                      |                                                                                             | (Dollars in thousands, except per share amounts)
|Balance sheet as of December 31, 2000 |                                                                                             |                                                  | 97,569,419  |                |  | $       | 975   |        |  |         |  |        |  | $       |  |        |  |  | (42,000,000 | )        |   | $ | (21,000 | )    |   |  |  |   |  | $ |  |  
|                                      | Net loss                                                                                    |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Issuance of Class A common stock pursuant to
	Employee Stock Purchase Plan                  |                                                  |             | 130,266        |  |         |       | 1      |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Issuance of Class A common stock in
	connection with the WirelessHome acquisition           |                                                  |             | 1,649,324      |  |         |       | 11     |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Stock options and warrants assumed in connection
	with the WirelessHome acquisition         |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Common stock redemption related to the
	WirelessHome acquisition                            |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             | (107,396 | ) |   |         | (400 | ) |  |   |  |  |   |   |  | 
|                                      | Stock price protection contingent consideration
	related to the WirelessHome acquisition    |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Deferred stock compensation related to
	WirelessHome                                        |                                                  |             | 558,950        |  |         |       | 6      |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Compensation expense in connection with
	employees stock forward sale agreements           |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Exercise of stock options                                                                   |                                                  |             | 1,328,782      |  |         |       | 14     |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Other deferred stock compensation                                                           |                                                  |             | 88,760         |  |         |       | 1      |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Reversal of deferred compensation in connection
	with the termination of Ubiquity employees |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Amortization of deferred stock compensation                                                 |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Unrealized gain on investments                                                              |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      | Stock subscription receivable from employees                                                |                                                  |             |               |  |         |       |       |  |         |   |       |  |         |   |       |  |  |             |         |   |   |         |     |   |  |   |  |  |   |   |  | 
|                                      |                                                                                             |                                                  |             |                |  |         |       |        |  |         |   |        |  |         |   |        |  |  |             |          |   |   |         |      |   |  |   |   |  |   |   |  
|Balance as of December 31, 2001       |                                                                                             |                                                  | 101,325,501 |                |  | $       | 1,013 |        |  |         |  |        |  | $       |  |        |  |  | (42,107,396 | )        |   | $ | (21,400 | )    |   |  |  |   |  | $ |  |  
|                                      |                                                                                             |                                                  |             |                |  |         |       |        |  |         |   |        |  |         |   |        |  |  |             |          |   |   |         |      |   |  |   |   |  |   |   |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                      |                                                                                             |                                                  |         |          |   |             |        |           |   |              |    |              |  |       |         |         |   |   |   |   |  |   |        |     |  |   |         |         |  
|------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------- | -------- | - | ----------- | ------ | --------- | - | ------------ | -- | ------------ |  | ----- | ------- | ------- | - | - | - | - |  | - | ------ | --- |  | - | ------- | ------- | -
|                                      |                                                                                             |                                                  |         |          |   |             |        |           |   | Net          |    | Stock        |  |      
|                                      |                                                                                             |                                                  |         | Deferred |   |             |        |           |   | Payable      |    | Subscription |  |      
|                                      |                                                                                             | Additional                                       |         | Stock    |   | Unrealized  |        | Retained  |   | (Receivable) |    | Receivable   |  |      
|                                      |                                                                                             | Paid-in                                          |         | Compen-  |   | Gain on     |        | Earnings  |   | from         |    | from         |  |      
|                                      |                                                                                             | Capital                                          |         | sation   |   | Investments |        | (Deficit) |   | Glenayre     |    | Employees    |  | Total
|                                      |                                                                                             |                                                  |         |          |   |             |        |           |   |              |    |              |  |      
|                                      |                                                                                             |                                                 
|                                      |                                                                                             | (Dollars in thousands, except per share amounts)
|Balance sheet as of December 31, 2000 |                                                                                             | $                                                | 141,341 |          |   | $           | (4,310 | )         |   | $            | 12 |              |  | $     | 6,068   |         |   | $ |  |   |  | $ | (1,062 | )   |  | $ | 122,024 |        
|                                      | Net loss                                                                                    |                                                  |         |         |   |             |        |          |   |              |    |             |  |       |         | (25,598 | ) |   |   |  |  |   |        |    |  |   |         | (25,598 | )
|                                      | Issuance of Class A common stock pursuant to
	Employee Stock Purchase Plan                  |                                                  |         | 1,284    |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 1,285   |  
|                                      | Issuance of Class A common stock in
	connection with the WirelessHome acquisition           |                                                  |         | 12,089   |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 12,105  |  
|                                      | Stock options and warrants assumed in connection
	with the WirelessHome acquisition         |                                                  |         | 665      |   |             |        | (323      | ) |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 342     |  
|                                      | Common stock redemption related to the
	WirelessHome acquisition                            |                                                  |         |         |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | (400    | )
|                                      | Stock price protection contingent consideration
	related to the WirelessHome acquisition    |                                                  |         | 2,519    |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 2,519   |  
|                                      | Deferred stock compensation related to
	WirelessHome                                        |                                                  |         | 2,198    |   |             |        | (2,204    | ) |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         |        |  
|                                      | Compensation expense in connection with
	employees stock forward sale agreements           |                                                  |         | 191      |   |             |        | (191      | ) |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         |        |  
|                                      | Exercise of stock options                                                                   |                                                  |         | 726      |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 740     |  
|                                      | Other deferred stock compensation                                                           |                                                  |         | 363      |   |             |        | (532      | ) |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | (168    | )
|                                      | Reversal of deferred compensation in connection
	with the termination of Ubiquity employees |                                                  |         | (1,750   | ) |             |        | 1,750     |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         |        |  
|                                      | Amortization of deferred stock compensation                                                 |                                                  |         |         |   |             |        | 5,196     |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 5,196   |  
|                                      | Unrealized gain on investments                                                              |                                                  |         |         |   |             |        |          |   |              |    | 63           |  |       |         |        |   |   |   |  |  |   |        |    |  |   |         | 63      |  
|                                      | Stock subscription receivable from employees                                                |                                                  |         |         |   |             |        |          |   |              |    |             |  |       |         |        |   |   |   |  |  |   |        | 144 |  |   |         | 144     |  
|                                      |                                                                                             |                                                  |         |          |   |             |        |           |   |              |    |              |  |       |         |         |   |   |   |   |  |   |        |     |  |   |         |        
|Balance as of December 31, 2001       |                                                                                             | $                                                | 159,626 |          |   | $           | (614   | )         |   | $            | 75 |              |  | $     | (19,530 | )       |   | $ |  |   |  | $ | (918   | )   |  | $ | 118,252 |        
|                                      |                                                                                             |                                                  |         |          |   |             |        |           |   |              |    |              |  |       |         |         |   |   |   |   |  |   |        |     |  |   |         |        

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

46



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended December 31, 1999,
2000 and 2001


|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |         |        |        |         |  
|----------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------- | ---------------------------------------------------- | ----- | ------ | ------ | ------- | ----- | ------- | ------- | ------- | ------ | ------ | ------- | -
|                                                      |                                                                                                     |                                                   
|                                                      |                                                                                                     | Year Ended December 31,                           
|                                                      |                                                                                                     |                                                   
|                                                      |                                                                                                     | 1999                                               |                                          | 2000                                                 |       | 2001  
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |       
|                                                      |                                                                                                     |                                                   
|                                                      |                                                                                                     | (Dollars in thousands)                            
|Cash flows from operating activities:                 |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Net income (loss)                                                                                   |                                                    | $                                        | 1,177                                                |       |        | $      | 6,295   |       |         | $       | (25,598 | )     
|                                                      | Adjustments to reconcile net income (loss) to net
	cash provided by (used in) operating activities: |                                                    |                                          |                                                      |       |        |        |         |       |         |         |         |       
|                                                      |                                                                                                     | Recapitalization costs                             |                                          |                                                      | 3,050 |        |        |         |      |         |         |         |       |       
|                                                      |                                                                                                     | Depreciation and amortization                      |                                          |                                                      | 1,292 |        |        |         | 7,597 |         |         |         | 12,692 |       
|                                                      |                                                                                                     | Deferred financing costs amortization              |                                          |                                                      | 32    |        |        |         | 748   |         |         |         |       |       
|                                                      |                                                                                                     | Impairment of goodwill and other intangible assets |                                          |                                                      |      |        |        |         |      |         |         |         | 4,331  |       
|                                                      |                                                                                                     | In-process research and development                |                                          |                                                      |      |        |        |         |      |         |         |         | 6,400  |       
|                                                      |                                                                                                     | Provision for bad debts                            |                                          |                                                      | 239   |        |        |         | 105   |         |         |         | 1,012  |       
|                                                      |                                                                                                     | Provision for sales returns and allowances         |                                          |                                                      |      |        |        |         | 513   |         |         |         | 6,319  |       
|                                                      |                                                                                                     | Assets and liabilities, net of acquisitions:       |                                          |                                                      |       |        |        |         |       |         |         |         |        |       
|                                                      |                                                                                                     |                                                    | Accounts receivable                      |                                                      |       | (4,133 | )      |         |       | (26,080 | )       |         |        | (435   | )      
|                                                      |                                                                                                     |                                                    | Inventory                                |                                                      |       | 646    |        |         |       | (5,406  | )       |         |        | (8,957 | )      
|                                                      |                                                                                                     |                                                    | Prepaid expenses and other               |                                                      |       | 30     |        |         |       | (4,587  | )       |         |        | 2,454  |        
|                                                      |                                                                                                     |                                                    | Deferred taxes                           |                                                      |       | 152    |        |         |       | (199    | )       |         |        | (6,211 | )      
|                                                      |                                                                                                     |                                                    | Other long-term assets                   |                                                      |       |       |        |         |       | (2,334  | )       |         |        | (21    | )      
|                                                      |                                                                                                     |                                                    | Accounts payable and accrued liabilities |                                                      |       | 2,909  |        |         |       | 11,616  |         |         |        | (3,932 | )      
|                                                      |                                                                                                     |                                                    | Payable to parent company                |                                                      |       | 1,266  |        |         |       | (1,374  | )       |         |        | (35    | )      
|                                                      |                                                                                                     |                                                    | Other long-term obligations              |                                                      |       | (286   | )      |         |       |        |         |         |        |       |        
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      |                                                                                                     |                                                    |                                          | Net cash provided by (used in) operating
	activities |       |        | 6,374  |         |       |         | (13,106 | )       |        |        | (11,981 | )
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Cash flows from investing activities:                 |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Purchases of equipment and leasehold improvements                                                   |                                                    |                                          | (1,218                                               | )     |        |        | (3,804  | )     |         |         | (4,812  | )     
|                                                      | Purchases of investment securities                                                                  |                                                    |                                          |                                                     |       |        |        | (23,632 | )     |         |         | (10,771 | )     
|                                                      | Proceeds from sale of investment securities                                                         |                                                    |                                          |                                                     |       |        |        | 1,497   |       |         |         | 25,659  |       
|                                                      | Restricted cash                                                                                     |                                                    |                                          |                                                     |       |        |        | (1,500  | )     |         |         |        |       
|                                                      | Net cash used to acquired WirelessHome                                                              |                                                    |                                          |                                                     |       |        |        |        |       |         |         | (12,666 | )     
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      |                                                                                                     |                                                    |                                          | Net cash used in investing activities                |       |        | (1,218 | )       |       |         | (27,439 | )       |        |        | (2,590  | )
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Cash flows from financing activities:                 |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Net proceeds from issuance of shares                                                                |                                                    |                                          |                                                     |       |        |        | 95,236  |       |         |         | 1,988   |       
|                                                      | Net proceeds from (repayment of) long-term debt                                                     |                                                    |                                          | 21,220                                               |       |        |        | (21,972 | )     |         |         | (1,703  | )     
|                                                      | Net borrowings on (repayment of) line of credit                                                     |                                                    |                                          | 2,000                                                |       |        |        | (2,476  | )     |         |         |        |       
|                                                      | Net cash transfers to Glenayre                                                                      |                                                    |                                          | (3,790                                               | )     |        |        |        |       |         |         |        |       
|                                                      | Employee subscription receivable                                                                    |                                                    |                                          |                                                     |       |        |        | (1,062  | )     |         |         | 144     |       
|                                                      | Payment for purchase of treasury stock                                                              |                                                    |                                          | (21,000                                              | )     |        |        |        |       |         |         | (400    | )     
|                                                      | Recapitalization costs                                                                              |                                                    |                                          | (3,050                                               | )     |        |        |        |       |         |         |        |       
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      |                                                                                                     |                                                    |                                          | Net cash provided by (used in) financing
	activities |       |        | (4,620 | )       |       |         | 69,726  |         |        |        | 29      |  
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Net increase (decrease) in cash and cash
	equivalents |                                                                                                     |                                                    | 536                                      |                                                      |       |        | 29,181 |         |       |         | (14,542 | )      
|Cash and cash equivalents, beginning of period        |                                                                                                     |                                                    | 1,377                                    |                                                      |       |        | 1,913  |         |       |         | 31,094  |        
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Cash and cash equivalents, end of period              |                                                                                                     | $                                                  | 1,913                                    |                                                      |       | $      | 31,094 |         |       | $       | 16,552  |        
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Supplemental Disclosures:                             |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Cash paid during the year for:                                                                      |                                                    |                                          |                                                      |       |        |        |         |       |         |         |         |       
|                                                      |                                                                                                     |                                                    | Interest                                 |                                                      | $     | 190    |        |         | $     | 1,585   |         |         | $      | 138    |        
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      |                                                                                                     |                                                    | Income taxes                             |                                                      | $     | 39     |        |         | $     | 7,740   |         |         | $      | 2,100  |        
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|Non-cash Transactions:                                |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Issuance of shares and stock options assumed in
	connection with the Ubiquity acquisition           |                                                    | $                                        |                                                     |       |        | $      | 6,376   |       |         | $       |        |       
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        
|                                                      | Issuance of shares and stock options assumed in
	connection with the WirelessHome acquisition       |                                                    | $                                        |                                                     |       |        | $      |        |       |         | $       | 12,760  |       
|                                                      |                                                                                                     |                                                    |                                          |                                                      |       |        |        |         |       |         |         |        

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

47



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION






NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


1.     Organization
and Operations of the Company

Western Multiplex (the Company) was
founded in 1979 in Sunnyvale, California. In 1992, the Company
launched the Lynx broadband wireless access systems, which are
primarily used by wireless operators to connect their base
stations to other base stations and to existing wire line
networks. In 1999, the Company introduced the Tsunami broadband
wireless access systems, which are primarily used by service
providers, businesses and other enterprises to expand or
establish private networks carrying Internet traffic among
multiple facilities.

The Company was acquired by GTI Acquisition
Corporation (GTI) in 1995, a wholly owned subsidiary
of Glenayre Technologies Inc. (Glenayre).

Effective November 1, 1999, a
recapitalization of the Company was executed that included the
following transactions, in accordance with the terms of the
Amended and Restated Acquisition Agreement by and among GTI
Acquisition Corp., Glenayre Technologies, Inc., the Company and
WMC Holding Corp. dated December 31, 1999 (the
Agreement):



| |   |                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company borrowed $22.0 million under two
	term loan arrangements and drew down $2.0 million on a
	$10.0 million revolving credit facility with Credit Suisse
	First Boston.                                                                              
|
| |  | The Company redeemed 42 million shares of
	Class B common stock from GTI for $21.0 million of the
	80 million then outstanding shares.                                                                                                                       
|
| |  | WMC Holding Corp. (Purchaser)
	acquired approximately 36 million shares of Class B common
	stock from GTI, or approximately 94.6% of the remaining
	outstanding shares of the Company, for approximately
	$16.5 million.                                   
|
| |  | The Company incurred approximately
	$0.8 million in financing costs that were capitalized and
	$3.1 million in transaction costs related to the equity
	transactions that were classified as recapitalization costs in
	the statement of operations for 1999.

On March 24, 2000, the Company acquired
Ubiquity Communication, Inc. (Ubiquity), located in
Petaluma, California. Ubiquity was a development stage company,
which designed and developed point-to-multipoint broadband
wireless systems. The Company issued 692,772 shares of
Class A common stock in the acquisition and reserved
137,727 shares for issuance upon the exercise of the Ubiquity
options assumed. The acquisition was accounted for as a purchase
transaction. The total purchase price was valued at
$6.4 million. Purchased intangibles and goodwill related to
the acquisition totaled approximately $6.8 million and will
be amortized on a straight-line basis over the estimated useful
life of three years. The Company subsequently granted to certain
Ubiquity employees an additional 350,000 options at an exercise
price of $.50 under the Western Multiplex 1999 Stock Incentive
Plan. Additionally, certain Ubiquity employees purchased 300,000
shares of WMC Holding Corp. In March 2001, the Company closed
the Ubiquity operations due to the acquisition of WirelessHome
Corporation.

On August 4, 2000, the Company completed its
initial public offering of 7,500,000 shares of Class A
common stock at a public offering price of $12.00 per share. On
August 31, 2000, the underwriters exercised their option to
purchase 1,125,000 additional shares of Class A common
stock to cover over-allotments. The initial public offering and
subsequent exercise of 1,125,000 shares by the underwriters
resulted in net proceeds to the Company of approximately
$91.0 million after payment of the underwriters
commission and deduction of offering expenses. Simultaneously
with the closing of the initial public offering, all of the
Companys then outstanding 38,000,000 shares of
Class B common stock and 42,000,000 shares of Class B
treasury stock were automatically converted into 38,000,000
shares of Class A common stock and 42,000,000 shares of
Class A treasury stock, respectively.

48



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In August 2000, the Company used a portion of the
net proceeds from the initial public offering to repay
outstanding indebtedness. The Company made the mandatory
prepayment of its term notes to Credit Suisse First Boston and
also repaid all borrowings outstanding under the revolving
credit facility. The total repayment including accrued interest
was $28.9 million. In connection with the prepayment of its
term notes, the Company wrote off deferred financing costs of
$394,000, net of income taxes and recorded an extraordinary loss
on early extinguishment of debt.

In November 2000, the Company entered into an
Agreement and Plan of Merger with Adaptive Broadband Corporation
(Adaptive). This proposed merger was subject to the
approval of both the Companys and Adaptives
stockholders in special meetings of the stockholders of each
company. In January 2001, prior to the special
stockholders meetings taking place, both companies
mutually agreed to terminate the merger agreement. As a result
of the terminated merger, Adaptive reimbursed the Company
$3.0 million of the $3.2 million of related merger
costs.

On March 22, 2001, the Company acquired
WirelessHome located in Long Beach, California in a cash and
stock transaction. WirelessHome is a development stage company
that designs and develops point-to-multipoint systems. The
acquisition was accounted for as a purchase. The Company
acquired WirelessHome for a total consideration of
$28.2 million composed of:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | 1,649,324 shares of Class A common stock
	valued at $12.1 million;            
|
| |  | cash for $10.5 million;                                                       
|
| |  | options and warrants assumed valued at
	$0.7 million;                         
|
| |  | a stock price protection contingent consideration
	valued at $2.5 million; and
|
| |  | transaction expenses for $2.4 million.                                        

As part of the transaction the Company assumed
$2.0 million of net liabilities, which consist of
$0.4 million of current assets, $0.9 million of other
assets and $3.3 million of current liabilities. In March
2001, the Company issued an initial consideration of
$23.0 million. As a result, the Company recorded the
initial purchase price allocation as follows: $24.7 million
to goodwill and $0.3 million to deferred compensation. The
stock price protection contingent consideration recorded in
stockholders equity at the date of the acquisition will be
effectively issued should the ten-day average closing price of
the Companys stock not equal or be greater than $12.40
within a year from the acquisition date. The Company may issue
this consideration in cash or in stock at its election. If the
Company decides to pay this consideration cash, the
stockholders equity will be reduced by the same amount.

Unaudited proforma operating results of the
Company for the periods indicated assume the WirelessHome
acquisition occurred as of January 1, 2000 (in thousands
except per share amounts):

|                       |  |              |         |              |  |   |         |  
|---------------------- |  | ------------ | ------- | ------------ |  | - | ------- | -
|                       |  | Year Ended   |         | Year Ended  
|                       |  | December 31, |         | December 31,
|                       |  | 2000         |         | 2001        
|                       |  |              |         |             
|Revenue                |  | $            | 105,508 |              |  | $ | 105,730 |  
|Net loss               |  | $            | (7,615  | )            |  | $ | (28,106 | )
|Diluted loss per share |  | $            | (0.16   | )            |  | $ | (0.49   | )

Goodwill related to the acquisition is being
amortized on a straight-line basis over the estimated useful
life of five years. The initial purchase price, as well as the
initial allocation, were subject to adjustments upon
WirelessHome meeting certain development milestones and other
considerations as defined in the agreement to acquire
WirelessHome.

49



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

On October 7, 2001, WirelessHome met the
development milestones in accordance with the acquisition
agreement. This resulted in additional purchase consideration of
$5.2 million. We then evaluated and recorded the final purchase
price and stock compensation expense arising from the
achievement of those milestones. The total purchase price
allocation, which consists of $28.2 million of purchase
price and $2.0 million of net liabilities assumed, was as
follows: $1.0 million to assembled workforce,
$6.4 million to in-process research and development,
$22.5 million to goodwill, and $0.3 million to
deferred compensation. In addition, we recorded
$2.2 million of stock compensation expense as a result of
releasing and issuing 558,950 shares, which were previously held
in escrow, to individuals who were directly involved in the
completion of the development milestones.

The purchase price allocation and intangible
assets valuation was based on managements estimates of the
after-tax net cash flows and gave consideration to the
following: (i) the employment of a fair market value
premise excluding any consideration specific to the Company
which could result in estimates of investment value for the
subject assets; (ii) comprehensive due diligence concerning
all potential intangible assets including trademarks, tradename,
patents, copyrights, non-compete agreements, assembled work
force, customer relationships and sales channel; and
(iii) the value of existing technology was specifically
addressed, with a view toward ensuring that the relative
allocations to existing technology and in-process research and
development were consistent with the relative contributions of
each final product.

In making its purchase price allocation,
management considered present value calculations of income, an
analysis of project accomplishments and remaining outstanding
items, an assessment of overall contributions, as well as
project risks. The value assigned to purchased in-process
technology was determined by estimating the costs to develop the
acquired technology into commercially viable products,
estimating the resulting net cash flows from the projects, and
discounting the net cash flows to their present value. The
revenue projection used to value the in-process research and
development was based on estimates of relevant market sizes and
growth factors, expected trends in technology, and the nature
and expected timing of new product introductions by the Company
and its competitors. The resulting net cash flows from such
projects are based on managements estimates of cost of
sales, operating expenses, and income taxes from such projects.

As WirelessHome replaced Ubiquity in the
development of the Companys point-to-multipoint systems,
the Company closed its Ubiquity operations during the quarter
ended March 30, 2001. As a result, the Company recorded
restructuring charges of $1.2 million. The charge includes
$1.0 million of cash provisions, which include severance of
$0.8 million for 12 employees and $0.2 million for
future lease commitments and exit costs related to the Petaluma
office facility. As of December 31, 2001, approximately
$0.8 million of these costs was incurred with the remainder
expected to be paid in 2002. The charge also includes
$0.2 million of non-cash provisions primarily related to
fixed assets and other assets that will no longer be used at the
facility.

In addition, the Company recorded
$0.6 million associated with restructuring the operations
at the Companys headquarters, primarily related to
employee severances.

On January 16, 2002, the Company signed a
merger agreement with Proxim, Inc. (Proxim),
headquartered in Sunnyvale, California. Proxim provides wireless
local area networking and building-to-building network products
based on radio frequency or RF technology. Under the terms of
the agreement, each outstanding share of Proxim common stock
will be converted into 1.8896 shares of Western Multiplex
common stock. The merger is intended to qualify as a tax-free
reorganization. Upon completion of the merger, Proxim
stockholders and Western Multiplex stockholders will each own
approximately 50% of the combined company. The transaction is
subject to customary closing conditions, including regulatory
approvals and the approval of the stockholders of both
companies. The transaction is expected to close during the first
quarter of 2002.

The Company is subject to a number of risks
including, among others, the successful completion and
integration of the proposed merger with Proxim; fluctuation of
operating results; new products and rapid

50



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

technological change; continued expansion into
international markets; customer concentration; impact on product
demand for wireless and broadband products; dependence on key
manufacturers; competition; volatility of stock price;
dependence on key personnel; regulatory actions and control by
existing stockholders.

2.     Summary of
Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries
Ubiquity and WirelessHome. All intercompany accounts and
transactions have been eliminated.



| |                                                         
| | --------------------------------------------------------
| | Use of Estimates in Preparation of
	Financial Statements

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



| |                  
| | -----------------
| | Reclassifications

Prior years amounts have been reclassified
where necessary to conform with the fiscal 2001 financial
statement presentation.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents consist of cash in bank
deposit accounts and short-term, highly liquid investments with
original maturities of less than three months.



| |            
| | -----------
| | Investments

The Company classifies its investments in debt
securities with original maturities greater than three months
and remaining maturities less than one year as short-term
investments and debt securities with remaining maturities
greater than one year as long-term investments. The
Companys policy is to protect the value of its fixed
income investment portfolio and to minimize principal risk by
earning returns based on current interest rates. At
December 31, 2001, the Companys investments in debt
securities based on its maturities were as follows (in
thousands):

|                       |  |              |        |      |  |   |       | 
|---------------------- |  | ------------ | ------ | ---- |  | - | ----- | 
|                       |  |             
|                       |  | December 31,
|                       |  |             
|                       |  | 2000         |        | 2001
|                       |  |              |        |     
|Cash equivalents       |  | $            | 26,985 |      |  | $ |      | 
|Short-term investments |  |              | 20,633 |      |  |   | 6,738 | 
|Long-term investments  |  |              | 1,514  |      |  |   | 584   | 
|                       |  |              |        |      |  |   |       | 
|                       |  | $            | 49,132 |      |  | $ | 7,322 | 
|                       |  |              |        |      |  |   |       | 

The Company classifies all of its investments in
debt securities as available-for-sale in accordance with
Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Investments in
Debt and Equity Securities. Accordingly, the Company
reports its investments at fair value, with unrealized gains and
losses, net of tax, recorded in stockholders equity. The
cost of securities sold is based on the specific identification
method. Realized gains or losses and declines in value, if any,
judged to be other than temporary

51



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

on available-for-sale securities are reported in
other income or expense. The Companys investments in debt
securities by major security types were as follows (in
thousands):

|                          |  |      |        |                  |  |                |    |  |  |   |        | 
|------------------------- |  | ---- | ------ | ---------------- |  | -------------- | -- |  |  | - | ------ | 
|                          |  |      |        | Gross Unrealized |  | Estimated Fair
|                          |  | Cost |        | Gains            |  | Value         
|December 31, 2000:        |  |      |        |                  |  |               
|Auction rate securities   |  | $    | 12,200 |                  |  | $              |   |  |  | $ | 12,200 | 
|Commercial paper          |  |      | 19,962 |                  |  |                | 4  |  |  |   | 19,966 | 
|Federal agency securities |  |      | 3,724  |                  |  |                | 2  |  |  |   | 3,726  | 
|Corporate bonds           |  |      | 13,234 |                  |  |                | 6  |  |  |   | 13,240 | 
|                          |  |      |        |                  |  |                |    |  |  |   |        | 
|                          |  | $    | 49,120 |                  |  | $              | 12 |  |  | $ | 49,132 | 
|                          |  |      |        |                  |  |                |    |  |  |   |        | 

|                        |  |      |       |                  |  |                |    |  |  |   |       | 
|----------------------- |  | ---- | ----- | ---------------- |  | -------------- | -- |  |  | - | ----- | 
|                        |  |      |       | Gross Unrealized |  | Estimated Fair
|                        |  | Cost |       | Gains            |  | Value         
|December 31, 2001:      |  |      |       |                  |  |               
|Auction rate securities |  | $    | 630   |                  |  | $              |   |  |  | $ | 630   | 
|Corporate bonds         |  |      | 6,617 |                  |  |                | 75 |  |  |   | 6,692 | 
|                        |  |      |       |                  |  |                |    |  |  |   |       | 
|                        |  | $    | 7,247 |                  |  | $              | 75 |  |  | $ | 7,322 | 
|                        |  |      |       |                  |  |                |    |  |  |   |       | 

In addition to its investments in debt
securities, the Company has restricted cash of $1.5 million
related to a noncancellable operating lease (see Note 6)
for a standby letter of credit as a security deposit for the
lease.

The following summarizes the Companys cash,
cash equivalents and investments (in thousands):

|                       |                                           |              |        |        |  |   |        |        | 
|---------------------- | ----------------------------------------- | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                       |                                           |             
|                       |                                           | December 31,
|                       |                                           |             
|                       |                                           | 2000         |        | 2001  
|                       |                                           |              |        |       
|Cash                   |                                           | $            | 4,109  |        |  | $ | 16,552 |       
|Cash equivalents       |                                           |              | 26,985 |        |  |   |       |       
|                       |                                           |              |        |        |  |   |        |       
|                       | Cash and cash equivalents                 |              |        | 31,094 |  |   |        | 16,552 | 
|Short-term investments |                                           |              | 20,633 |        |  |   | 6,738  |       
|Restricted cash        |                                           |              | 1,500  |        |  |   | 1,500  |       
|Long-term investments  |                                           |              | 1,514  |        |  |   | 584    |       
|                       |                                           |              |        |        |  |   |        |       
|                       | Restricted cash and long-term investments |              |        | 3,014  |  |   |        | 2,084  | 
|                       |                                           |              |        |        |  |   |        |       
|                       |                                           | $            | 54,741 |        |  | $ | 25,374 |       
|                       |                                           |              |        |        |  |   |        |       



| |                    
| | -------------------
| | Revenue Recognition

The Companys revenue is derived from the
sale of systems and, to a lesser extent, from the sale of
services and parts as well as fees received from the rental of
its systems. The Company sells worldwide to service providers,
businesses and other enterprises directly through its sales
force and indirectly through distributors and value added
resellers and system integrators. Sales to certain distributors
are made under terms allowing certain rights of return,
protection against subsequent price declines on the
Companys products held by its distributors and co-op
marketing programs. In 1999, 2000 and 2001, sales to all
distributors of the companys products accounted for
approximately 23.1%, 39.5% and 69.8% of net revenue.

Revenue from product and part sales is recognized
when all of the following conditions are met: the product has
been shipped and title has passed to the customer, the selling
price is fixed and determinable, the collection of the
receivable is probable and there are no post-delivery
obligations remaining.

52



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Revenue from services, such as preinstallation
diagnostic testing and product repair services, is recognized
over the period for which the services are performed, which is
generally less than one month. Revenue from product rentals is
recognized over the period of the rental arrangement.

Net revenue consists of product revenues reduced
by estimated sales returns and allowances. Provisions for
estimated sales returns and allowances, estimated reserves for
warranty costs and co-op marketing programs, which are based on
historical trends, contractual terms and other available
information, are recorded at the time of sale.



| |                  
| | -----------------
| | Segment Reporting

SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information
establishes standards for disclosures about operating segments,
products and services, geographic areas and major customers. The
Company is organized and operates as one operating segment:
providing wireless access products. Revenues by geographic area
are attributed to the country from which the sale is made. To
date, all of the Companys transactions have originated in
one geographic location, the United States, even though many of
the Companys customers may operate in foreign as well as
domestic markets.



| |                
| | ---------------
| | Major Customers

One customer, Somera Communications, Inc.
(Somera), a distributor, accounted for 19% of total
revenue for the year ended December 31, 1999. For the year
ended December 31, 2000, Somera and Avant Telecoms, Inc., a
value-added reseller, accounted for 21.4% and 11.1% of revenue,
respectively. For the year ended December 31, 2001, the
following distributors, Comstor, Somera and Tessco Technologies,
accounted for 29.9%, 11.4% and 10.5% of revenue, respectively.

Export sales which are denominated in U.S.
dollars and consist of domestic sales to customers in foreign
countries accounted for approximately 23.1%, 33.2% and 24.3% of
net revenue in 1999, 2000 and 2001, respectively.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally
of cash investments and trade receivables. The Company has cash
investment policies to protect the value of its fixed income
investment portfolio and to minimize principal risk by earning
rates of return based on current interest rates. With respect to
trade receivables, the Company performs ongoing credit
evaluations of its customers financial condition.
Additionally, the Company establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of
specific customers, historical trends related to past losses and
other relevant information. As of December 31, 2000 and
2001, approximately 77.0% and 78.0% of accounts receivable,
respectively, were concentrated with ten customers.

53



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |          
| | ---------
| | Inventory

Inventory is stated at the lower of cost
(first-in, first out) or market and include material, labor and
manufacturing overhead costs. Provisions, when required, are
made to reduce excess and obsolete inventories to their
estimated net realizable value. Inventory consists of the
following (in thousands):

|                |  |              |        |      |  |   |        | 
|--------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                |  |             
|                |  | December 31,
|                |  |             
|                |  | 2000         |        | 2001
|                |  |              |        |     
|Raw materials   |  | $            | 3,628  |      |  | $ | 11,364 | 
|Work-in-process |  |              | 1,646  |      |  |   | 491    | 
|Finished goods  |  |              | 5,675  |      |  |   | 8,051  | 
|                |  |              |        |      |  |   |        | 
|                |  | $            | 10,949 |      |  | $ | 19,906 | 
|                |  |              |        |      |  |   |        | 

Reserves for excess and obsolete inventory were
$1.4 million and $3.0 million as of December 31,
2000 and 2001, respectively.



| |                                      
| | -------------------------------------
| | Equipment and Leasehold
	Improvements

Equipment is recorded at cost and depreciated
using the straight-line method based upon the estimated useful
lives of the assets, which range from three to seven years.
Leasehold improvements are recorded at cost and are amortized
over the estimated lives of the improvements or the term of the
lease, whichever is shorter. Maintenance and repairs that do not
improve or extend the life of assets are expensed as incurred.



| |                                      
| | -------------------------------------
| | Goodwill and Other Intangible
	Assets

Goodwill represents the excess of cost over the
fair market value of net assets acquired. Goodwill pushed down
from the 1995 acquisition of the Company by GTI totals
$22.0 million (see Note 1). This goodwill is being
amortized on a straight-line basis over its estimated useful
life of 30 years, or $0.7 million per year.

Goodwill and other intangible assets related to
the acquisition of Ubiquity (see Note 1) totaled
$6.8 million. In March 2001, the Company recorded an
impairment of the Ubiquity goodwill and other intangible assets
of $4.3 million as a result of closing the Ubiquity
operations. The amount of the charge equals the unamortized
amount of these intangible assets as of the date of closure of
the Ubiquity operations as no future benefit is anticipated,
since Ubiquity was replaced by WirelessHome as the developer of
point-to-multipoint systems. The Ubiquity intangible asset of
$229,000 is being amortized on a straight-line basis over its
estimated useful life of three years, or $76,000, per year.

Goodwill related to the acquisition of
WirelessHome totaled $24.7 million. This goodwill was being
amortized on a straight-line basis over an estimated useful life
of five years. This goodwill was subject to subsequent
adjustments upon WirelessHome meeting certain development
milestones and other considerations. After WirelessHome met
those development milestones, the goodwill was adjusted to
$22.5 million in the fourth quarter of 2001. (See
Note 1).

Assembled work force related to the acquisition
of WirelessHome totaled $1.0 million and is being amortized on a
straight-line basis over an estimated useful life of two years.

Subsequent to its acquisitions, the Company
assesses long-lived assets acquired for impairment under SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of
(SFAS 121). Under those rules, the Company
reviews long-lived assets and certain identifiable intangibles
to be held and used for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company evaluates any possible

54



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

impairment of long-lived assets using estimates
of undiscounted future cash flows. If an impairment loss is to
be recognized, it is measured as the amount by which the
carrying amount of the asset exceeds the fair value of the
asset. Management evaluates the fair value of its long-lived
assets and intangibles using primarily the estimated discounted
future cash flows method. Management uses other alternative
valuation techniques whenever the estimated discounted future
cash flows method is not applicable.

Goodwill and other intangible assets, net consist
of the following (in thousands):

|                              |              |              |        |        |  |   |        |        | 
|----------------------------- | ------------ | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                              |              |             
|                              |              | December 31,
|                              |              |             
|                              |              | 2000         |        | 2001  
|                              |              |              |        |       
|Goodwill:                     |              |              |        |        |  |   |        |       
|                              | GTI          |              | $      | 17,806 |  |   | $      | 17,126 | 
|                              | Ubiquity     |              |        | 4,877  |  |   |        |       | 
|                              | WirelessHome |              |        |       |  |   |        | 18,775 | 
|                              |              |              |        |        |  |   |        |       
|                              |              | $            | 22,683 |        |  | $ | 35,901 |       
|                              |              |              |        |        |  |   |        |       
|Acquired intangibles; assets: |              |              |        |        |  |   |        |       
|                              | Ubiquity     |              |        | 223    |  |   |        | 95     | 
|                              | WirelessHome |              |        |       |  |   |        | 617    | 
|                              |              |              |        |        |  |   |        |       
|                              |              |              | 223    |        |  |   | 712    |       
|                              |              |              |        |        |  |   |        |       
|                              |              | $            | 22,906 |        |  | $ | 36,613 |       
|                              |              |              |        |        |  |   |        |       

In July 2001, the Financial Accounting Standards
Board issued SFAS No.s 141 and 142, Business
Combinations and Goodwill and Other
Intangibles, respectively. SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS
No. 142, effective January 1, 2002, goodwill is no
longer subject to amortization over its estimated useful life.
Rather, goodwill is subject to at least an annual assessment for
impairment, applying a fair-value based test. Additionally, an
acquired intangible asset should be separately recognized if the
benefit of the intangible asset is obtained through contractual
or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented, or exchanged, regardless of the
acquirers intent to do so.

As a result of the Companys adoption of
SFAS 142, as of January 1, 2002, the Company will no
longer amortize goodwill. Goodwill amortization for the year
ended December 31, 2001 was approximately $5.0 million.

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 144 Accounting for
the Impairment or Disposal of Long-Lived Assets. SFAS
No. 144 addresses financial accounting and reporting for
the long-lived assets to be held and used, and disposed of. The
statement will be effective for financial statements issued for
fiscal years beginning after December 15, 2001. Although
the Company does not currently expect the adoption of SFAS
No. 144 to have a material impact on its financial
statements, the Company will continue to assess any impairment
of its long lived assets.



| |                         
| | ------------------------
| | Research and Development

Research and development costs are expensed as
incurred and consist primarily of payroll costs, other direct
expenses and overhead.

55



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | Earnings Per Share

Basic and diluted earnings per share are
presented in conformity with SFAS No. 128, Earnings
Per Share. Basic earnings (loss) per share under
SFAS 128 were computed using the weighted average number of
shares outstanding of 73,000,000, 47,044,568 and 57,559,434 for
the years ended December 31, 1999, 2000 and 2001,
respectively.

Diluted earnings per share is determined in the
same manner as basic earnings per share except that the number
of shares is increased assuming dilutive stock options and
warrants using the treasury stock method. Diluted earnings
(loss) per share were computed using the weighted average
number of shares outstanding of 73,000,000, 52,080,734 and
57,559,434 for the years ended December 31, 1999, 2000 and
2001, respectively. For the year ended December 31, 1999,
the treasury stock method resulted in no dilutive securities
and, accordingly, basic and dilutive earnings per share were the
same. For the year ended December 31, 2001, the incremental
shares of approximately 1,442,329 shares from the assumed
exercise of stock options and warrants were not included in
computing diluted per share amounts, as the Company had a net
loss for the period, and the effect of such assumed exercise
would be antidilutive.

For the years ended December 31, 2000 and
2001, 716,000 and 5,476,292 stock options, respectively, were
not included in the computation of diluted earnings per share
because the options exercise price was greater than the
average market price of the common shares and therefore, the
effect would be antidilutive.

The following is a reconciliation of the
numerators and denominators of the basic and diluted earnings
(loss) per share computations for the three years ended
December 31, 2001 (in thousands except per share
amounts):

|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |         |  
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------- | - | ------ |  | ---- | - | ------ |  |  | - | ------- | -
|                               |                                                                                                                                                              |                        
|                               |                                                                                                                                                              | Year Ended December 31,
|                               |                                                                                                                                                              |                        
|                               |                                                                                                                                                              | 1999                    |   | 2000   |  | 2001
|                               |                                                                                                                                                              |                         |   |        |  |     
|Net income (loss) (Numerator): |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Net income (loss)                                                                                                                                            |                         | $ | 1,177  |  |      | $ | 6,295  |  |  | $ | (25,598 | )
|Shares (Denominator):          |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Weighted average common shares outstanding                                                                                                                   |                         |   | 73,000 |  |      |   | 47,045 |  |  |   | 57,559  |  
|                               | Shares used in basic computation                                                                                                                             |                         |   | 73,000 |  |      |   | 47,045 |  |  |   | 57,559  |  
|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Common shares issuable upon exercise of stock
	options (treasury stock method), net of unamortized deferred
	compensation and tax credit on assumed exercise |                         |   |       |  |      |   | 2,398  |  |  |   |        |  
|                               | Common shares issuable upon exercise of warrants
	(treasury stock method)                                                                                    |                         |   |       |  |      |   | 2,638  |  |  |   |        |  
|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Shares used in diluted computation                                                                                                                           |                         |   | 73,000 |  |      |   | 52,081 |  |  |   | 57,559  |  
|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|Earnings (loss) per share:     |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Basic                                                                                                                                                        |                         | $ | 0.02   |  |      | $ | 0.13   |  |  | $ | (0.44   | )
|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        
|                               | Diluted                                                                                                                                                      |                         | $ | 0.02   |  |      | $ | 0.12   |  |  | $ | (0.44   | )
|                               |                                                                                                                                                              |                         |   |        |  |      |   |        |  |  |   |        

56



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Basic and diluted income (loss) per share on
extraordinary items for the three years in the period ended
December 31, 2001 are as follows (in thousands except per
share amounts):

|                                                                              |  |                         |        |      |  |      |        |   |  |   |        | 
|----------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                                                              |  |                        
|                                                                              |  | Year Ended December 31,
|                                                                              |  |                        
|                                                                              |  | 1999                    |        | 2000 |  | 2001
|                                                                              |  |                         |        |      |  |     
|Basic and diluted loss on early extinguishment of
	debt, net of tax per share |  | $                       |       |      |  | $    | (0.01  | ) |  | $ |       | 
|Shares used to compute the basic loss per share                               |  |                         | 73,000 |      |  |      | 47,045 |   |  |   | 57,559 | 
|Shares used to compute the diluted loss per share                             |  |                         | 73,000 |      |  |      | 52,081 |   |  |   | 57,559 | 



|   |                                     
|-- | ------------------------------------
|3. | Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of
the following (in thousands):

|                                                |  |              |        |      |  |   |        |  
|----------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | -
|                                                |  |             
|                                                |  | December 31,
|                                                |  |             
|                                                |  | 2000         |        | 2001
|                                                |  |              |        |     
|Production, engineering and testing equipment   |  | $            | 4,601  |      |  | $ | 6,191  |  
|Office and computer equipment                   |  |              | 4,174  |      |  |   | 6,850  |  
|Leasehold improvements                          |  |              | 686    |      |  |   | 1,871  |  
|                                                |  |              |        |      |  |   |        |  
|                                                |  | $            | 9,461  |      |  | $ | 14,912 |  
|Less: Accumulated depreciation and amortization |  |              | (4,080 | )    |  |   | (6,136 | )
|                                                |  |              |        |      |  |   |        |  
|Equipment and leasehold improvements, net       |  | $            | 5,381  |      |  | $ | 8,776  |  
|                                                |  |              |        |      |  |   |        |  

4.     Accrued
Liabilities

Accrued liabilities consist of the following (in
thousands):

|                                                                    |  |              |       |      |  |   |       | 
|------------------------------------------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                                                                    |  |             
|                                                                    |  | December 31,
|                                                                    |  |             
|                                                                    |  | 2000         |       | 2001
|                                                                    |  |              |       |     
|Accrued payroll and related benefits                                |  | $            | 5,693 |      |  | $ | 3,129 | 
|Accrued warranty costs                                              |  |              | 649   |      |  |   | 869   | 
|Accrued payments to WirelessHome related to
	milestone developments |  |              |      |      |  |   | 750   | 
|Deferred rent expense                                               |  |              | 185   |      |  |   | 724   | 
|Accrued restructuring costs                                         |  |              |      |      |  |   | 430   | 
|Income taxes payable                                                |  |              | 234   |      |  |   | 216   | 
|Customer deposits                                                   |  |              | 627   |      |  |   | 160   | 
|Accrued marketing programs                                          |  |              | 131   |      |  |   | 526   | 
|Other                                                               |  |              | 1,063 |      |  |   | 1,793 | 
|                                                                    |  |              |       |      |  |   |       | 
|                                                                    |  | $            | 8,582 |      |  | $ | 8,597 | 
|                                                                    |  |              |       |      |  |   |       | 

Restructuring
Charges

During the first and second quarter of 2001, the
Company recorded $1.2 million of restructuring charges
related to the closure of its former Ubiquity operations. The
charges include $1.0 million of cash provisions, which
include severance of $0.8 million for 12 employees and
$0.2 million for future lease commitments and exit costs
related to the Petaluma office facility. As of December 31,
2001, approximately $0.8 million of the $1.0 million
of cash provisions was incurred. The charge also includes
$0.2 million of non-cash provisions primarily related to
fixed assets and other assets that will no longer be used at the
facility.

57



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In addition, during the second and third quarter
of 2001, the Company recorded $0.6 million associated with
restructuring the operations at the Companys headquarters
primarily related to employee severances.

The following table summarizes the restructuring
activity in 2001 (in thousands):

|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ---- | ----- |  | - | --- | - |  | - | ------ | -
|                                |  | Severances |        | Facilities |  | Other |      | Total
|                                |  |            |        |            |  |       |      |      
|Balance as of December 31, 2000 |  | $          |       |            |  | $     |     |       |  | $ |    |   |  | $ |       |  
|Provision charged to operations |  |            | 1,382  |            |  |       | 208  |       |  |   | 226 |   |  |   | 1,816  |  
|Charges utilized                |  |            | (1,184 | )          |  |       | (156 | )     |  |   | (46 | ) |  |   | (1,386 | )
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  
|Balance as of December 31, 2001 |  | $          | 198    |            |  | $     | 52   |       |  | $ | 180 |   |  | $ | 430    |  
|                                |  |            |        |            |  |       |      |       |  |   |     |   |  |   |        |  

5.     Long-Term
Debt

On November 1, 1999, the Company entered
into a credit agreement with Credit Suisse First Boston, as
agent. The credit agreement included two term notes and a
$10 million revolving credit facility maturing in November
2002. The Company may prepay the term notes at any time upon
adequate notice to the lender. In August 2000, subsequent to the
Company having completed its initial public offering, the
Company repaid the term notes and all borrowings outstanding
under the revolving credit facility (see Note 1). As of
December 31, 2001, the Company had no borrowings
outstanding under the revolving credit facility.

Upon acquiring WirelessHome in March 2001, the
Company assumed outstanding debt of $1.7 million of which
all was repaid in April 2001.

6.     Commitments
and Contingencies



| |                 
| | ----------------
| | Operating Leases

The Company leases its facilities under
noncancellable operating lease agreements expiring at various
dates through November 2010. Straight-line rent expense for the
operating leases was approximately $559,000, $478,000 and
$3.7 million in 1999, 2000 and 2001, respectively. Future
minimum lease payments under all noncancellable operating lease
agreements as of December 31, 2001 are summarized as
follows (in thousands):

|           |  |   |        | 
|---------- |  | - | ------ | 
|2002       |  | $ | 3,838  | 
|2003       |  |   | 3,979  | 
|2004       |  |   | 4,196  | 
|2005       |  |   | 4,133  | 
|2006       |  |   | 3,600  | 
|Thereafter |  |   | 14,159 | 
|           |  |   |        | 
|           |  | $ | 33,905 | 
|           |  |   |        | 



| |                                                        
| | -------------------------------------------------------
| | Employment Agreements and Change of Control
	Provisions

The Company has entered into employment
agreements with seven of its officers to provide for payments of
their base salaries for a period of up to twelve months plus
bonuses in the event employment is terminated without cause or
if the employee resigns with good reason, as defined. A change
of control does not qualify as a good reason for terminating
employment.

In addition, in the event of a change of control,
all outstanding options become fully vested and exercisable
immediately prior to the change of control for one of the
officers.

58



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Legal Proceedings

From time to time, the Company is involved in
legal proceedings, claims and litigation arising in the ordinary
course of business. The Company believes that the disposition of
these matters will not have a materially adverse effect on the
consolidated financial condition of the Company.

7.     Income
Taxes

The Company provides for income taxes under the
provisions of SFAS No. 109, Accounting for Income
Taxes. SFAS No. 109 requires an asset and liability
based approach in accounting for income taxes. Deferred income
tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue
and expense items for financial statement and income tax
purposes. Valuation allowances are provided against assets that
are not likely to be realized.

The components of the provision (benefit) for
income taxes for the years ended December 31, 1999, 2000
and 2001 are as follows:

|        |          |      |       |       |  |      |       |       |   |   |        |        |  
|------- | -------- | ---- | ----- | ----- |  | ---- | ----- | ----- | - | - | ------ | ------ | -
|        |          | 1999 |       | 2000  |  | 2001
|        |          |      |       |       |  |     
|Federal |          |      |       |       |  |      |       |       |   |   |        |       
|        | Current  |      | $     | 2,367 |  |      | $     | 6,135 |   |   | $      |       |  
|        | Deferred |      |       | 241   |  |      |       | (137  | ) |   |        | (2,854 | )
|State   |          |      |       |       |  |      |       |       |   |   |        |       
|        | Current  |      |       | 212   |  |      |       | 864   |   |   |        | 13     |  
|        | Deferred |      |       | 11    |  |      |       | (62   | ) |   |        | (1,255 | )
|        |          |      |       |       |  |      |       |       |   |   |        |       
|        |          | $    | 2,831 |       |  | $    | 6,800 |       |   | $ | (4,096 | )     
|        |          |      |       |       |  |      |       |       |   |   |        |       

The provision for income taxes differs from the
amounts which would result by applying the applicable statutory
Federal income tax rate to income before taxes, as follows (in
thousands):

|                                           |                                                            |                 |       |       |       |      |       |       |       |   |         |       |        |  
|------------------------------------------ | ---------------------------------------------------------- | --------------- | ----- | ----- | ----- | ---- | ----- | ----- | ----- | - | ------- | ----- | ------ | -
|                                           |                                                            | 1999            |       | 2000  |       | 2001
|                                           |                                                            |                 |       |       |       |     
|Provision at Federal statutory rate of 35% |                                                            | $               | 1,403 |       |       | $    | 4,721 |       |       | $ | (10,393 | )    
|Increases in taxes resulting from          |                                                            |                 |       |       |       |      |       |       |       |   |         |      
|                                           | State income taxes, net of Federal benefits                |                 |       | 143   |       |      |       | 742   |       |   |         | (242  | )     
|                                           | Nondeductible amortization of goodwill                     |                 |       |      |       |      |       | 668   |       |   |         | 1,632 |       
|                                           | Nondeductible amortization of deferred stock
	compensation |                 |       |      |       |      |       | 1,545 |       |   |         | 1,819 |       
|                                           | Nondeductible recapitalization costs                       |                 |       | 1,068 |       |      |       |      |       |   |         |      |       
|                                           | Research and development tax credit                        |                 |       |      |       |      |       | (798  | )     |   |         | (850  | )     
|                                           | Nondeductible goodwill impairment                          |                 |       |      |       |      |       |      |       |   |         | 1,516 |       
|                                           | Nondeductible in-process R&D write-off                     |                 |       |      |       |      |       |      |       |   |         | 2,240 |       
|                                           | Other                                                      |                 |       | 217   |       |      |       | (78   | )     |   |         | 182   |       
|                                           |                                                            |                 |       |       |       |      |       |       |       |   |         |      
|                                           |                                                            | Total provision |       | $     | 2,831 |      |       | $     | 6,800 |   |         | $     | (4,096 | )
|                                           |                                                            |                 |       |       |       |      |       |       |       |   |         |      

For the years ended December 31, 1999, 2000,
and 2001, the effective income tax rates were 70.6%, 50.4%, and
13.8% respectively.

59



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The major components of the net deferred tax
asset are as follows (in thousands):

|                     |                                             |                          |   |       |       |  |   |       |        |  
|-------------------- | ------------------------------------------- | ------------------------ | - | ----- | ----- |  | - | ----- | ------ | -
|                     |                                             |                         
|                     |                                             | December 31,            
|                     |                                             | 2000                     |   | 2001 
|                     |                                             |                          |   |      
|Deferred Tax Assets: |                                             |                          |   |       |       |  |   |      
|                     | Tax goodwill amortization in excess of book |                          | $ | 3,565 |       |  | $ | 2,736 |       
|                     | Inventory reserve                           |                          |   | 554   |       |  |   | 1,224 |       
|                     | Warranty reserve                            |                          |   | 179   |       |  |   | 269   |       
|                     | Allowance for doubtful accounts             |                          |   | 388   |       |  |   | 1,732 |       
|                     | Other reserves and accruals                 |                          |   | 264   |       |  |   | 2,611 |       
|                     | Net operating losses carry over             |                          |   |      |       |  |   | 5,096 |       
|                     | Research & credit and Other credits         |                          |   |      |       |  |   | 1,011 |       
|                     | Prepaid taxes and other                     |                          |   | 188   |       |  |   | 1,044 |       
|                     |                                             |                          |   |       |       |  |   |      
|                     |                                             | Gross deferred tax asset |   | $     | 5,138 |  |   | $     | 15,723 |  
|                     |                                             | Valuation allowance      |   |       |      |  |   |       | (4,374 | )
|                     |                                             |                          |   |       |       |  |   |      
|                     |                                             | Net deferred tax asset   |   | $     | 5,138 |  |   | $     | 11,349 |  
|                     |                                             |                          |   |       |       |  |   |      

Prior to the recapitalization, the Company had a
tax sharing agreement with Glenayre. The principal provisions of
the method by which the consolidated amount of current and
deferred tax expense was allocated to members of the group
(including the Company) were based on the results of each member
as if each were a stand-alone entity.

The Company recorded a $4.4 valuation allowance
on all Net operating losses related to stock option deductions.
The Company will realize this benefit as stockholders
equity increase when and if it will effectively offset these net
operating losses against future or past taxable income.

The Company made a tax election to treat the
share purchase by WMC Holding Corp. as an asset purchase
for Federal income taxes in accordance with the terms of the
Agreement. As a result of the recapitalization, the Company
recorded a deferred tax asset of approximately
$3.9 ($3.1 million as of December 31, 2001)
million with a corresponding increase to paid-in capital.

The Company has recorded a net deferred tax asset
of approximately $11.4 million at December 31, 2001, of
which approximately $5.1 million relates to net operating
losses generated during the current year which expire on
December 31, 2021, as well as approximately $0.9 in tax
credits which expire in at various dates starting in 2009.
Although realization is not assured, management believes that it
is more likely than not that the deferred tax assets will be
realized through refunds from the carryback of the current year
net operating loss and the generation of future taxable income.
Although the deferred tax asset is considered realizable, actual
amounts could be reduced if sufficient future taxable income is
not achieved.

The Internal Revenue Code of 1986, as amended,
contains provisions that may limit the net operating loss and
credit carryforwards available for use in any given period upon
the occurrence of certain events, including a significant change
in ownership interests, such as the merger with Proxim (see
Note 1).

8.     Common
Stock



| |             
| | ------------
| | Common Stock

The Companys common stock consists of
Class A and Class B common stock. Holders of
Class A common stock are entitled to one vote per share.
Holders of Class B common stock are entitled to ten votes
per share. Each share of Class B common stock is
convertible into one share of Class A common stock at the
election of the stockholder or automatically in the event of an
initial public offering of the Company.

60



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In conjunction with the recapitalization
transaction discussed in Note 1, the Company repurchased
42,000,000 shares of Class B common stock for
$21.0 million from Glenayre and held these shares as
treasury stock.

Simultaneously with the closing of the
Companys initial public offering as discussed in
Note 1, all of the Companys then outstanding
38,000,000 shares of Class B common stock and 42,000,000
shares of Class B treasury stock were automatically
converted into 38,000,000 shares of Class A common stock
and 42,000,000 shares of Class A treasury stock,
respectively.

In conjunction with WirelessHome having met the
development milestones and other considerations as discussed in
Note 1, the Company repurchased 107,396 shares of
Class A common stock for $400,0000 from the WirelessHome
common stockholders and held these shares as treasury stock.

As of December 31, 2001, there were
59,218,105 shares of Class A common stock issued and
outstanding and 42,000,000 shares of Class A treasury stock.



| |         
| | --------
| | Warrants

In connection with the recapitalization discussed
in Note 1, the Company issued 4,370,000 warrants to a
holding company, owned by the Chief Executive Officer of the
Company, and a trust, of which a director of the Company is
trustee and beneficiary. Each new warrant is convertible into
one share of Class A common stock of the Company at an
exercise price of $.50 per share. These warrants expire on the
tenth anniversary from date of issuance. As of December 31,
2001, all of the 4,370,000 warrants had been exercised.

In connection with the new operating lease
entered into in September 2000 as discussed in Note 6, the
Company issued 25,000 warrants to the lessor in November 2000.
Each new warrant is convertible into one share of Class A
common stock of the Company at an exercise price of $14.01 per
share. These warrants are exercisable during the period
beginning on December 1, 2000 and ending on
December 1, 2005. The Company has estimated the fair value
of the warrants using the Black-Scholes option valuation model
and has determined the expense throughout the life of the lease
to be immaterial.

In connection with the acquisition of
WirelessHome Corporation, the Company assumed a warrant to
purchase 4,162 shares of the Companys Class A
common stock at an exercise price of $9.61 per share. These
warrants expire on December 19, 2009.



| |            
| | -----------
| | Stock Split

In connection with the recapitalization
transaction discussed in Note 1, the Company increased the
number of authorized shares for Class A common stock and
Class B common stock to 100,000,000 common shares each and
effected an 80,000-for-1 stock split of the then 1,000
outstanding Class B common shares. All share and per share
amounts have been restated to retroactively reflect this stock
split for all periods presented.



| |            
| | -----------
| | Stock Sales

During the year ended December 31, 2000,
certain Western Multiplex employees and consultants entered into
co-investment agreements with WMC Holding Corp. Under the
co-investment agreements, 3,830,351 shares were purchased of WMC
Holding at $0.50 per share and WMC Holding used the proceeds to
purchase 3,830,351 shares of Class A common stock of the
Company at $0.50 per share. Included in the stock sales were
55,000 shares of Class A common stock of the Company
sold to a seconded employee and a consultant at a price of $.50
per share. As the seconded employee and the consultant were
working full time for the Company and the

61



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Company exercised sufficient control over these
individuals to establish an employer-employee relationship, the
Company considered them as being equivalent to full time
employees for accounting purposes and applied
APB No. 25 which resulted in deferred stock
compensation expense of $180,000 for the year ended
December 31, 2000. Both transactions were completed prior
to the adoption of FIN No. 44. The consultant and the
seconded employee effectively became full time employees on
July 1, 2000 and January 23, 2001, respectively. The
resulting deferred stock compensation recognized represented the
difference between the estimated fair value of the common stock
for accounting purposes and the stock sale price at the date of
sale.



| |                            
| | ---------------------------
| | Deferred Stock Compensation

In connection with the grant of certain stock
options and sales of certain stock to employees and directors
during fiscal 2000, the Company recorded deferred stock
compensation within stockholders equity of
$8.5 million, representing the difference between the
estimated fair value of the common stock for accounting purposes
and the option exercise price of these options at the date of
grant or the stock sale price at the date of sale. Such amount
is presented as a reduction of stockholders equity. The
portion of deferred stock compensation associated with the stock
options will be amortized over the vesting period of the
applicable options using an accelerated method of amortization.
Under the accelerated method, each vested tranche of options is
accounted for as a separate option grant awarded for past
services. Accordingly, the compensation expense is recognized
over the period during which the services will be provided;
however, the method results in a front-loading of the
compensation expense. For the portion of deferred stock
compensation associated with stock sales, the Company records
the expense over the period the shares are vested using the
accelerated method. For the year ended December 31, 2001,
the Company recorded amortization of deferred compensation, net
of cancellations, of $5.2 million.

As part of the WirelessHome acquisition, the
Company assumed certain vested and unvested options that when
exercised would result in approximately 14,400 and
113,000 shares of common stock outstanding, respectively.
These options have an average exercise price of $3.01 per share
of the Companys common stock. The unvested options
resulted in additional deferred compensation of
$0.3 million recorded as of the date of acquisition which
is amortized over the remaining vesting period using the
accelerated method.

During the first quarter of 2001, the Company
reversed approximately $1.8 million of deferred stock
compensation previously recorded due to cancellations of
unexercised stock options. As of December 31, 2001, the
total deferred stock compensation outstanding was $614,000.

During the fourth quarter of 2001, as a result of
WirelessHome meeting the development milestones, the Company
released and issued 558,950 shares to individuals who were
directly involved in the completion of the development
milestones and accordingly recorded $2.2 million of stock
compensation expense.

Employees
Stock Forward Sale Agreements

On December 20, 2001 the Company entered
into stock forward sale agreements with certain employees. Under
these agreements the Company will buy back 78,138 shares at
$7.91 in March 2002. The Company recorded the difference between
the stock price on December 20, 2001, $5.45 and the
guaranteed price per share of $7.91 as stock compensation
expense for a total of $192,000 in the fourth quarter of 2001.

9.     Stock Option
Plans



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

In June 2000, the Company adopted the Western
Multiplex Corporation Employee Stock Purchase Plan
(ESPP), which is intended to qualify as an employee
stock purchase plan under Section 423 of the Internal
Revenue Code of 1986. An annual increase in shares reserved will
occur on the first day of each of the

62



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Companys fiscal years beginning in 2001,
2002, 2003, 2004 and 2005 as defined in the ESPP. As of
December 31, 2001, 1,250,000 shares of Class A common
stock was reserved for issuance under the ESPP.

In August 2000, subsequent to the completion of
the initial public offering, the Company began to administer the
plan by enrolling participants in the plan and processing
payroll deductions. The first day of the offering period was
August 1, 2000. On January 31, 2001, the Company
issued 123,025 shares at $10.20 per share to employees
participating in the ESPP. On July 31, 2001, the Company
issued 7,241 shares at $4.80 per share to employees
participating in the ESPP.



| |                          
| | -------------------------
| | 1999 Stock Incentive Plan

In November 1999, the Company adopted the Western
Multiplex Corporation 1999 Stock Incentive Plan (the 1999
Plan) for key employees, officers, directors, and
consultants. The Company has reserved for issuance 13,500,000
shares of Class A common stock under the 1999 Plan. The
type of awards that may be made under the 1999 Plan are
incentive stock options, non-qualified options, stock
appreciation rights, and other stock-based awards.

The exercise price for stock options may not be
less than 100% of the fair market value of the Companys
Class A common stock on the date of the grant (110% for any
option granted to any stockholder who owns more than 10% of the
total combined voting power of all classes of stock of the
Company or its parent or subsidiary corporation), as determined
by the Compensation Committee. An option may not vest at less
than 20% per year over five years, and will vest on the specific
schedule established by the Compensation Committee.



| |                             
| | ----------------------------
| | Ubiquity Communication Plans

In connection with the acquisition of Ubiquity
Communication, Inc. on March 24, 2000, the Company assumed
the obligations under Ubiquity Communications equity
incentive plans (Ubiquity Plans). As a result, all
options granted under the Ubiquity Plans became options to
purchase shares of the Companys common stock. As of
March 24, 2000, the Company assumed 137,727 options that
had been granted under these plans. As of December 31,
2001, the Company had no options outstanding under the Ubiquity
Plans.



| |                                  
| | ---------------------------------
| | Platinum IP Stock Incentive
	Plan

In connection with the acquisition of
WirelessHome on March 22, 2001, the Company assumed
obligations under WirelessHomes Platinum IP Stock
Incentive Plan (WirelessHome Plan). As a result, all
options granted under the WirelessHome Plan became options to
purchase shares of the Companys common stock. As of
March 22, 2001, the Company assumed certain vested and
unvested options that when exercised would result in
approximately 14,400 and 113,000 shares of common stock
outstanding. As a result of WirelessHome meeting the development
milestones, in the fourth quarter of 2001 the Company issued
75,380 options, which were previously held in escrow to
employees who were directly involved in the completion of the
development milestones (see Note 1).



| |                                                   
| | --------------------------------------------------
| | 2000 Stock Option Plan for Non-Employee
	Directors

In June 2000, the Company adopted the Western
Multiplex Corporation 2000 Stock Option Plan for Non-Employee
Directors. The Company has reserved for issuance a maximum of
1,500,000 shares of common stock pursuant to the grant of
non-qualified stock options to newly elected members of the
board of directors who are not employees of our Company.

The exercise price of any option granted under
this plan is the per share fair market value of the
Companys common stock on the date the option is granted
except with respect to the initial grants made as of
June 8, 2000 for which the exercise price is $8.50. An
individual who becomes a director will receive an initial

63



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

grant of an option to purchase 100,000 shares of
the Companys common stock, which option will be
immediately vested upon grant as to one-third of the shares
subject to the option. The option will then become vested as to
one-third of the shares on each of the first and second
anniversaries of the date of the initial grant, so long as the
director continues to serve on the Companys board of
directors on each vesting date. In addition, so long as a
director continues to serve on the Companys board of
directors, the director will, as of the third anniversary of the
date of the initial grant and triennially thereafter, receive an
additional option to purchase 15,000 shares, the terms of which
will be the same as those described above. On December 31,
2001 the Company had issued 60,000 stock options at an exercise
price of $4.08.

The following table summarizes stock options
activity under the 1999 Plan, the Ubiquity Plans, the
WirelessHome Plan and the 2000 Plan:

|                             |                              |                   |            |                     |   |                  |           |            |   |   |      |      | 
|---------------------------- | ---------------------------- | ----------------- | ---------- | ------------------- | - | ---------------- | --------- | ---------- | - | - | ---- | ---- | 
|                             |                              |                   |            |                    
|                             |                              |                   |            | Options Outstanding
|                             |                              |                   |            |                    
|                             |                              |                   |            |                     |   | Weighted Average
|                             |                              | Options Available |            | Number of Shares    |   | Exercise Price  
|                             |                              |                   |            |                     |   |                 
|Balance at December 31, 1999 |                              |                   | 10,500,000 |                     |   |                  |          |            |   |   |     |     
|                             | Authorized                   |                   |            | 1,637,727           |   |                  |           |            |   |   |      |      | 
|                             | Granted                      |                   |            | (7,633,227          | ) |                  |           | 7,633,227  |   |   |      | 4.62 | 
|                             | Exercised                    |                   |            |                    |   |                  |           | (16,000    | ) |   |      | 0.50 | 
|                             | Cancelled                    |                   |            | 183,499             |   |                  |           | (183,499   | ) |   |      | 6.71 | 
|                             |                              |                   |            |                     |   |                  |           |            |   |   |      |     
|Balance at December 31, 2000 |                              |                   | 4,687,999  |                     |   |                  | 7,433,728 |            |   | $ | 4.53 |     
|                             | Authorized                   |                   |            | 3,185,998           |   |                  |           |            |   |   |      |      | 
|                             | Granted                      |                   |            | (5,832,825          | ) |                  |           | 5,832,825  |   |   |      | 6.55 | 
|                             | Exercised                    |                   |            |                    |   |                  |           | (1,328,782 | ) |   |      | 0.56 | 
|                             | Cancelled                    |                   |            | 1,679,122           |   |                  |           | (1,679,122 | ) |   |      | 5.92 | 
|                             |                              |                   |            |                     |   |                  |           |            |   |   |      |     
|                             | Balance at December 31, 2001 |                   |            | 3,720,294           |   |                  |           | 10,258,659 |   |   | $    | 5.91 | 
|                             |                              |                   |            |                     |   |                  |           |            |   |   |      |     

At December 31, 2000, options to purchase
2,080,120 of Class A common stock with a weighted average
exercise price of $1.79 per share were exercisable under the
1999 Plan. The following table summarizes options outstanding
and options exercisable at December 31, 2001 under the 1999
Plan, the Ubiquity Plans, the WirelessHome Plan and the 2000
Plan:

|                         |  |                     |            |                     |  |          |     |           |  |          |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ------------------- | ---------- | ------------------- |  | -------- | --- | --------- |  | -------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |                     |            |                     |  |         
|                         |  | Options Outstanding |            |                    
|                         |  |                     |            | Options Exercisable
|                         |  |                     |            | Weighted            |  |          |     |          
|                         |  |                     |            | Average             |  | Weighted |     |           |  | Weighted
|                         |  |                     |            | Contractual         |  | Average  |     |           |  | Average 
|                         |  | Number of           |            | Life                |  | Exercise |     | Number    |  | Exercise
|Range of Exercise Prices |  | Shares              |            | (in years)          |  | Price    |     | of Shares |  | Price   
|                         |  |                     |            |                     |  |          |     |           |  |         
|$0.50                    |  |                     | 2,647,483  |                     |  |          | 8.1 |           |  | $        | 0.50  |  |  |  | 1,662,599 |  |  | $ | 0.50  | 
|$2.77 - $5.55            |  |                     | 1,857,798  |                     |  |          | 9.5 |           |  | $        | 4.21  |  |  |  | 217,546   |  |  | $ | 3.22  | 
|$5.95 - $7.00            |  |                     | 2,676,250  |                     |  |          | 9.3 |           |  | $        | 6.78  |  |  |  | 15,003    |  |  | $ | 6.76  | 
|$7.06 - $10.56           |  |                     | 1,659,002  |                     |  |          | 7.0 |           |  | $        | 8.87  |  |  |  | 679,276   |  |  | $ | 8.87  | 
|$10.94 - $21.44          |  |                     | 1,418,126  |                     |  |          | 8.8 |           |  | $        | 13.14 |  |  |  | 484,403   |  |  | $ | 13.47 | 
|                         |  |                     |            |                     |  |          |     |           |  |          |       |  |  |  |           |  |  |   |       | 
|$0.50 - $21.44           |  |                     | 10,258,659 |                     |  |          | 8.6 |           |  | $        | 5.91  |  |  |  | 3,058,827 |  |  | $ | 4.64  | 
|                         |  |                     |            |                     |  |          |     |           |  |          |       |  |  |  |           |  |  |   |       | 

The Company follows the provisions of SFAS
No. 123, which calls for companies to measure employee
stock compensation expense based on the fair value method of
accounting. As allowed by SFAS No. 123, the Company elected
the continued use of APB Opinion No. 25, with pro forma
disclosure of net loss determined as if the fair value method
had been applied in measuring compensation cost. Had
compensation cost for the

64



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Companys stock based compensation awards
been determined under the fair value method consistent with SFAS
No. 123, the Companys net income (loss) for the years
ended December 31, 2000 and 2001, respectively, would have
resulted in the following pro forma amounts (in thousands except
per share amounts):

|                                                                |                                   |              |      |        |   |   |      |         |  
|--------------------------------------------------------------- | --------------------------------- | ------------ | ---- | ------ | - | - | ---- | ------- | -
|                                                                |                                   |             
|                                                                |                                   | Years Ended 
|                                                                |                                   | December 31,
|                                                                |                                   |             
|                                                                |                                   | 2000         |      | 2001  
|                                                                |                                   |              |      |       
|As Reported:                                                    |                                   |              |      |        |   |   |      |        
|                                                                | Net income (loss)                 |              | $    | 6,295  |   |   | $    | (25,598 | )
|                                                                | Basic earnings (loss) per share   |              | $    | 0.13   |   |   | $    | (0.44   | )
|                                                                | Diluted earnings (loss) per share |              | $    | 0.12   |   |   | $    | (0.44   | )
|Pro Forma:                                                      |                                   |              |      |        |   |   |      |        
|                                                                | Net loss                          |              | $    | (5,826 | ) |   | $    | (49,865 | )
|                                                                | Basic loss per share              |              | $    | (0.12  | ) |   | $    | (0.87   | )
|                                                                | Diluted loss per share            |              | $    | (0.12  | ) |   | $    | (0.87   | )
|Weighted average fair value of options granted
	during the year |                                   | $            | 4.40 |        |   | $ | 6.06 |        

The fair value of each option grant for the year
ended December 31, 2000 and 2001 was estimated on the date
of grant using the Black-Scholes option valuation model with the
following assumptions:

|                                |  |              |         |      |  |  |         |  
|------------------------------- |  | ------------ | ------- | ---- |  |  | ------- | -
|                                |  |             
|                                |  | Year Ended  
|                                |  | December 31,
|                                |  |             
|                                |  | 2000         |         | 2001
|                                |  |              |         |     
|Risk-free interest rate         |  |              | 6.00    | %    |  |  | 4.00    | %
|Average expected life of option |  |              | 4 years |      |  |  | 4 years |  
|Dividend yield                  |  |              | 0       | %    |  |  | 0       | %
|Volatility of common stock      |  |              | 2.92    |      |  |  | 1.43    |  

Consistent with SFAS No. 123, there was no
pro forma amount for the year ended December 31, 1999,
because no options were outstanding as of December 31, 1999.

10.     Employee
Benefit Plan

The Company adopted an Employees Investment
401(k) Plan that covers all employees and provides that the
Company match employees salary deferrals up to 4% of
eligible employee compensation. The amounts charged to
continuing operations were $521,000 and $795,000 in 2000 and
2001, respectively.

11.     Related Party
Transactions

The Company was a wholly owned subsidiary of GTI
from April 25, 1995 through October 31, 1999. Over
that period, a variety of costs were incurred by GTI and its
affiliates on behalf of the Company. The costs directly
attributable to the Company have been charged to the Company in
the period such costs were incurred and included in the
accompanying statements of operations. In addition to those
charges, certain other indirect costs were incurred by GTI and
its affiliates, as follows:



| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Glenayre and affiliates shared certain services
	to assist the Company in international sales, marketing and
	customer support services. The estimated costs of such services
	were approximately $20,000 for 1999. These costs are included in
	sales and marketing expenses in the accompanying statement of
	operations.

65



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Glenayre and affiliates have provided or incurred
	certain other costs for various administrative services through
	the date of the recapitalization. These administrative services
	included preparation of certain tax returns, employee benefits
	planning and administration, limited general accounting and
	limited legal services. Such costs, based on managements
	best estimate using amounts provided by Glenayre finance
	personnel, are estimated to be $80,000 for 1999. These amounts
	are included in general and administrative expenses in the
	accompanying statement of operations.

Ripplewood Partners, L.P.
(Ripplewood) also provides consulting and management
advisory services to the Company beginning November 1,
1999. The Company was charged 1% of net revenue, or
$0.1 million for the two-month period ended
December 31, 1999. The fee has been reflected as a
component of general and administrative expenses in the
statement of operations for 1999. This agreement terminated on
June 30, 2000. Ripplewood also charged the Company
$1.7 million for fees and expenses associated with the
recapitalization transactions during 1999. These costs, along
with the attorneys, accountants and other fees all totaling
$3.1 million, were classified as recapitalization costs, an
operating expense in the statement of operations for 1999.
Ripplewood charged the Company $700,000 for fees and expenses
associated with the issuance of Class A common stock in
connection with the initial public offering in August 2000.
These issuance costs were netted against paid-in capital under
stockholders equity. No fees were paid by the Company to
Ripplewood in 2001.

The Company had a non-interest bearing demand
note payable to WMC Holding Corp. as of December 31,
1999 totaling $1.2 million, of which all was repaid as of
December 31, 2001.

66



---



##### Table of Contents








|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
	Accountants on Accounting and Financial Disclosure

Not applicable.




PART III




Item
10.     Directors and Executive
Officers of the Registrant

Executive Officers and Directors

Reference is hereby made to information
concerning Messrs. Zakin, Corsentino, Zoufonoun and
Abu-Hakima and Mses. Huber, Pance, Rulo and Khayat-Toubia under
the heading Executive Officers of the Registrant
found in Part I of this report. Messrs. Zakin and
Zoufonoun also serve as directors of the Company and
Mr. Zakin serves as Chairman of the Board.

Our directors and their ages as of
February 21, 2002 are as follows.

|                   |  |     |    | 
|------------------ |  | --- | -- | 
|Name               |  | Age
|                   |  |    
|Hironori Aihara    |  |     | 64 | 
|Michael J. Boskin  |  |     | 56 | 
|Timothy C. Collins |  |     | 45 | 
|Peter O. Crisp     |  |     | 69 | 
|Jeffery M. Hendren |  |     | 43 | 
|Michael Seedman    |  |     | 45 | 
|Stanley S. Shuman  |  |     | 66 | 

The Company has seven non-employee directors.
Information regarding the business experience of each
non-employee director during the last five years is provided
below.

Hironori Aiharahas
served as a member of the Board of Directors and the audit
committee since June 8, 2000. Mr. Aihara is currently
the Executive Vice President and a Director of Mitsubishi
Corporation. In addition, he is President, Director and Chief
Executive Officer of Mitsubishi International Corporation.
Mr. Aihara has been with the Mitsubishi Corporation since
1962 and has served in various executive level positions,
including Managing Director of Information Systems &
Services Group from 1994 to 1998 and Executive Vice President
since 1998. He also currently serves as Chairman of the Board of
Japan Space Imaging Corporation, Director of Digital Medial Lab
Company and Director of SPACEHAB Inc. Mr. Aihara received a
B.S. degree in aeronautical engineering from Tokyo University.

Michael J. Boskinhas served as a member of the Board of
Directors and the compensation committee since June 8,
2000. Dr. Boskin has been a professor of economics at
Stanford University since 1971. He is also an Adjunct Scholar at
the American Enterprise Institute and a Research Associate with
the national Bureau of Economic Research. He is the Chief
Executive Officer and President of Boskin & Co., Inc.,
a consulting firm. He was Chairman of the Presidents
Council of Economic Advisers from 1989 until 1993.
Dr. Boskin also serves as a director of Exxon Corporation,
Oracle Corp., Vodafone-AirTouch PLC and First Health Group Corp.
Dr. Boskin received Ph.D., M.A. and B.A. degrees from the
University of California at Berkeley.

Timothy C. Collinshas served as a member of the Board of
Directors since November 1, 1999. Mr. Collins is
Senior Managing Director and Chief Executive Officer of
Ripplewood Holdings L.L.C., a private investment firm formed by
him in October 1995. From February 1990 to October 1995,
Mr. Collins was a Senior Managing Director of the New York
office of Onex Corporation, a leveraged buy-out group
headquartered in Canada. Mr. Collins is also a director of
WRC Media, Inc., Asbury Automotive Group, Shinsei Bank and other
privately held Ripplewood portfolio companies. Mr. Collins
received an M.B.A. degree from Yale Universitys School of
Organization and Management and a B.A. degree in Philosophy from
DePauw University.

67



---



##### Table of Contents



Peter O. Crisphas
served as a member of the Board of Directors and the audit
committee since June 8, 2000. Mr. Crisp was a General
Partner of Venrock Associates, a venture capital investment firm
that invests in technology-based venture capital situations, for
more than five years until his retirement in September 1997. He
currently serves as Director of Venrock, Inc. and as Vice
Chairman of Rockefeller Financial Services, Inc., positions he
has held since December 1997. Mr. Crisp served as Chairman
of Venrock, Inc. from 1995 to 1997 and as President from 1980 to
1995. In addition, he serves as a director of American
Superconductor Corporation, Evans & Sutherland Computer
Corporation, Lexent Inc., Thermo Electron Corporation,
U.S. Trust Corporation and several private companies.
Mr. Crisp received an M.B.A. degree from Harvard Business
School and a B.A. degree from Yale University.

Jeffrey M. Hendrenhas served as a member of the Board of
Directors since November 1, 1999 and a member of the
compensation committee and the audit committee since
June 8, 2000. He is a Managing Director at Ripplewood
Holdings L.L.C. Prior to joining Ripplewood in 1998,
Mr. Hendren was a Vice President in the Mergers &
Acquisitions Department at Goldman, Sachs & Co. During
Mr. Hendrens eight years at Goldman Sachs, he focused
on transactions in healthcare and information technology.
Mr. Hendren received an M.B.A. degree from Harvard Business
School and a B.Sc. degree with honors in accounting and finance
from Indiana University.

Michael S. Seedmanhas served as a member of the Board of
Directors since November 1, 1999 and a member of the audit
and compensation committees since June 8, 2000. From 1997
to 1999, Mr. Seedman pursued non-business interests. From
1993 to 1997, he served as Senior Vice President and General
Manager of the Personal Communications Division at
U.S. Robotics where he focused on the design, manufacture
and sale of modems. From 1989 to 1993, Mr. Seedman was
President of Practical Peripherals, a company he founded in
1981, which was later sold to Hayes Microcomputer, Inc.

Stanley S. Shumanhas served as a member of the Board of
Directors since June 8, 2000. Mr. Shuman is an
Executive Vice President, Managing Director and member of the
Executive Committee of Allen & Company Incorporated, a New
York-based investment banking firm. He has held these positions
for more than the past five years. In addition, he is a Director
of The News Corporation Limited, Six Flags, Inc. and several
private companies. Mr. Shuman received M.B.A., J.D. and
B.A. degrees from Harvard University.




Item 11.     Executive
Compensation

Summary Compensation Table

The following table sets forth information
regarding executive compensation for services rendered during
the fiscal years ended December 31, 1999, 2000 and 2001 by
the Companys chief executive officer and its other four
most highly paid executive officers whose salary and bonus for
the last fiscal year exceeded

68



---



##### Table of Contents



$100,000. The compensation summarized in this
table does not include perquisites or other personal benefits
that do not in the aggregate exceed the lesser of $50,000 or 10%
of the officers salary and bonus.


|                             |                                                       |                     |      |           |  |       |         |              |  |   |         |         |  |   |           |         |    
|---------------------------- | ----------------------------------------------------- | ------------------- | ---- | --------- |  | ----- | ------- | ------------ |  | - | ------- | ------- |  | - | --------- | ------- | ---
|                             |                                                       |                    
|                             |                                                       | Annual Compensation
|                             |                                                       |                    
|                             |                                                       |                     |      | All Other
|Name and Principal Positions |                                                       | Fiscal Year         |      | Salary    |  | Bonus |         | Compensation
|                             |                                                       |                     |      |           |  |       |         |             
|Jonathan N. Zakin            |                                                       |                     | 2001 |           |  | $     | 257,830 |              |  | $ | 275,521 |         |  | $ |          |        
|                             | Chairman and Chief Executive Officer                  |                     |      | 2000      |  |       |         | 56,324       |  |   |         |        |  |   |           |        |    
|                             |                                                       |                     | 1999 |           |  |       | 8,333   |              |  |   |        |         |  |   |          |        
|Amir Zoufonoun               |                                                       |                     | 2001 |           |  |       | 228,725 |              |  |   | 189,283 |         |  |   | 3,168,173 | (1)    
|                             | President and Chief Operating Officer                 |                     |      | 2000      |  |       |         | 175,907      |  |   |         | 301,541 |  |   |           | 8,427   | (2)
|                             |                                                       |                     | 1999 |           |  |       | 174,793 |              |  |   | 729,104 |         |  |   |          |        
|Nancy Huber                  |                                                       |                     | 2001 |           |  |       | 203,632 |              |  |   | 118,473 |         |  |   | 527,360   | (3)    
|                             | Chief Financial Officer and Executive Vice
	President |                     |      | 2000      |  |       |         | 131,339      |  |   |         | 126,299 |  |   |           |        |    
|                             | of Finance and Operations                             |                     |      | 1999      |  |       |         |             |  |   |         |        |  |   |           |        |    
|Gordana Pance                |                                                       |                     | 2001 |           |  |       | 195,057 |              |  |   | 77,294  |         |  |   | 356,281   | (4)    
|                             | Vice President of Engineering                         |                     |      | 2000      |  |       |         | 142,451      |  |   |         | 106,061 |  |   |           | 213,221 |    
|                             |                                                       |                     | 1999 |           |  |       | 119,667 |              |  |   | 137,313 |         |  |   |          |        
|Fred Corsentino              |                                                       |                     | 2001 |           |  |       | 200,258 |              |  |   | 53,576  |         |  |   | 268,360   | (5)    
|                             | Executive Vice President of Worldwide Sales           |                     |      | 2000      |  |       |         | 122,112      |  |   |         | 93,136  |  |   |           | 143,947 | (6)
|                             |                                                       |                     | 1999 |           |  |       |        |              |  |   |        |         |  |   |          |        



---



|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This amount represents automobile allowances paid
	of $8,400 and gains on the sale of shares acquired on exercise
	of non-qualified stock options of $3,159,733.                           
|   
|(2) | This amount represents automobile allowances paid.                                                                                                                                         
|   
|(3) | This amount represents gains on sale of
	non-qualified stock options.                                                                                                                      
|   
|(4) | This amount represents gains on sale of
	non-qualified stock options.                                                                                                                      
|   
|(5) | This amount represents commissions paid of
	$76,695, automobile allowances paid of $6,000 and gains on the
	sale of shares acquired on exercise of non-qualified stock
	options of $185,665
|   
|(6) | This amount represents commissions paid of
	$139,332 and automobile allowances paid of $4,615.                                                                                             

Option/ SAR Grants in Last Fiscal
Year

The following table provides information
regarding stock options granted during 2001 to persons listed in
the Summary Compensation Table.

|                |  |                   |         |                            |  |           |      |                              |  |                |      |     |  |  |           |  |  |   |           |  |  |   |           | 
|--------------- |  | ----------------- | ------- | -------------------------- |  | --------- | ---- | ---------------------------- |  | -------------- | ---- | --- |  |  | --------- |  |  | - | --------- |  |  | - | --------- | 
|                |  |                   |         |                            |  |          
|                |  | Individual Grants |         |                           
|                |  |                   |         | Potential Realizable Value
|                |  | Number of         |         | % of Total                 |  |           |      | At Assumed Annual Rate of   
|                |  | Securities        |         | Options                    |  |           |      | Stock Price Appreciation for
|                |  | Underlying        |         | Granted to                 |  | Exercise  |      |                              |  | Option Term(1)
|                |  | Options           |         | Employees                  |  | Price     |      | Expiration                   |  |               
|Name            |  | Granted           |         | During 2001                |  | ($/Share) |      | Date                         |  | 5%             |      | 10%
|                |  |                   |         |                            |  |           |      |                              |  |                |      |    
|Jonathan Zakin  |  |                   | 900,000 |                            |  |           | 15.4 | %                            |  | $              | 7.00 |     |  |  | 5/9/2011  |  |  | $ | 1,616,428 |  |  | $ | 6,305,588 | 
|Amir Zoufonoun  |  |                   | 100,000 |                            |  |           | 1.7  | %                            |  | $              | 6.97 |     |  |  | 4/2/2011  |  |  | $ | 182,723   |  |  | $ | 703,741   | 
|Nancy Huber     |  |                   | 50,000  |                            |  |           | 0.9  | %                            |  | $              | 6.97 |     |  |  | 4/2/2011  |  |  | $ | 91,362    |  |  | $ | 351,870   | 
|                |  |                   | 120,000 |                            |  |           | 2.1  | %                            |  | $              | 3.37 |     |  |  | 10/2/2011 |  |  | $ | 651,124   |  |  | $ | 1,276,345 | 
|Gordana Pance   |  |                   | 50,000  |                            |  |           | 0.9  | %                            |  | $              | 6.97 |     |  |  | 4/2/2011  |  |  | $ | 91,362    |  |  | $ | 351,870   | 
|Fred Corsentino |  |                   | 75,000  |                            |  |           | 1.3  | %                            |  | $              | 6.97 |     |  |  | 4/2/2011  |  |  | $ | 137,042   |  |  | $ | 527,806   | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The 5% and 10% assumed annual rates of compounded
	stock price appreciated are mandated by the rules of the SEC.
	The actual value, if any, that an executive officer may realize
	will depend on the excess of the stock price over the exercise
	price on the date the option is exercised. There can be no
	assurance the value realized by an executive officer will be at
	or near the assumed 5% or 10% levels.

69



---



##### Table of Contents



Aggregated Option Exercises and Fiscal
Year-End Option Values

The following table sets forth information
regarding the exercise of stock options by persons named in the
Summary Compensation Table and year-end option values.

|                |  |                      |         |                       |  |                     |      |                        |  |               |           |             |  |               |         |  |  |  |         |  |  |  |           |  |  |  |           | 
|--------------- |  | -------------------- | ------- | --------------------- |  | ------------------- | ---- | ---------------------- |  | ------------- | --------- | ----------- |  | ------------- | ------- |  |  |  | ------- |  |  |  | --------- |  |  |  | --------- | 
|                |  |                     
|                |  | Value of Unexercised
|                |  |                     
|                |  |                      |         |                       |  |                    
|                |  |                      |         | Number of Unexercised |  | In-The-Money       
|                |  | Shares               |         |                       |  | Options at Year End |      | Options at Year-End(1)
|                |  | Acquired On          |         | Exercise              |  | Value               |      |                        |  |              
|Name            |  | Exercise             |         | Price                 |  | Realized            |      | Exercisable            |  | Unexercisable |           | Exercisable |  | Unexercisable
|                |  |                      |         |                       |  |                     |      |                        |  |               |           |             |  |              
|Jonathan Zakin  |  |                      |        |                       |  | $                   | 7.00 |                        |  |               |          |             |  |               |        |  |  |  | 900,000 |  |  |  |          |  |  |  |          | 
|Amir Zoufonoun  |  |                      | 320,550 |                       |  | $                   | 0.50 |                        |  | $             | 3,159,773 |             |  |               | 852,789 |  |  |  | 256,661 |  |  |  | 4,178,666 |  |  |  | 1,257,639 | 
|Nancy Huber     |  |                      | 72,000  |                       |  | $                   | 0.50 |                        |  | $             | 527,360   |             |  |               | 35,920  |  |  |  | 177,080 |  |  |  | 176,008   |  |  |  | 867,692   | 
|Gordana Pance   |  |                      | 36,000  |                       |  | $                   | 0.50 |                        |  | $             | 356,381   |             |  |               | 152,339 |  |  |  | 121,661 |  |  |  | 746,461   |  |  |  | 596,139   | 
|Fred Corsentino |  |                      | 45,200  |                       |  | $                   | 0.50 |                        |  | $             | 185,665   |             |  |               | 121,054 |  |  |  | 143,746 |  |  |  | 593,139   |  |  |  | 704,355   | 



---



|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Assumes that the value of unexercised options at
	fiscal year-end was $5.40 per share, the closing price of our
	common stock on the Nasdaq National Market on December 31,
	2001.

Director Compensation

As of December 31, 2001 and for the fiscal
year then ended, all non-employee directors, other than
Messrs. Seedman, Collins and Hendren, have been paid as
follows:



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an annual retainer of $75,000 for serving on the
	Board of Directors, payable in cash or in shares of the
	Companys Class A common stock, at the election of
	each non-employee director;
|
| |  | a meeting fee of $10,000 for each meeting of the
	Board of Directors attended in person;                                                                                                  
|
| |  | a meeting fee of $1,000 for each meeting of the
	Board of Directors attended via telephone or teleconference;                                                                             
|
| |  | a meeting fee of $5,000 for each meeting of a
	committee of the Board of Directors attended in person; and                                                                                
|
| |  | a meeting fee of $500 for each meeting of a
	committee of the Board of Directors attended via telephone or
	teleconference.                                                               

The Companys directors are entitled to
receive option grants under the Western Multiplex 2000 Stock
Option Plan for Non-Employee Directors. Any awards which may be
granted in the future will be determined by the compensation
committee. However, the full Board of Directors must approve all
awards granted under the Western Multiplex 2000 Stock Option
Plan for Non-Employee Directors to directors who beneficially
own more than 10% of Western Multiplexs outstanding common
stock and, as a result, are subject to Section 16 of the
Securities and Exchange Act of 1934.

In addition, on November 15, 2001, Western
Multiplex issued options to purchase a total of 60,000 shares of
its common stock at an exercise price of $4.08 per share to
Messrs. Aihara, Boskin, Crisp and Shuman pursuant to the
Western Multiplex 2000 Stock Option Plan for Non-Employee
Directors.

Employment Agreements

Jonathan N. Zakin.On May 9, 2001 we entered into an agreement with Jonathan
Zakin, our Chief Executive Officer and Chairman of our Board of
Directors, to amend his employment agreement, dated as of
October 31, 1999. Pursuant to this amendment,
Mr. Zakins annual base salary was raised from $50,000
to $500,000 and Mr. Zakin is eligible to receive an
incentive bonus equal to 75% of his annual base salary based on
the achievement of performance targets established by our Board
of Directors. Mr. Zakin also received options to purchase
900,000 shares of our Class A common stock at an exercise
price of $7 per share under the terms of our 1999 Stock
Incentive Plan. Mr. Zakins options will vest and
become exercisable on January 1, 2004 if Mr. Zakin is
employed by us through that date, in accordance with a vesting
schedule based on the closing price of our common stock.
Notwithstanding this vesting schedule, all of these options will
become vested and exercisable upon the earlier of a change in
control of Western Multiplex or on January 2, 2008 if

70



---



##### Table of Contents



Mr. Zakin has remained continuously employed
by us through that date. As a result, these 900,000 unvested
options held by Mr. Zakin will vest and become fully
exercisable upon completion of our proposed merger with Proxim.


The Company may terminate Mr. Zakins
employment at any time, and Mr. Zakin may terminate his
employment on 90 days prior written notice.
Mr. Zakin has agreed not to disclose any confidential
information pertaining to the Companys business.
Furthermore, he has agreed not to compete with the Company
during his employment and for one year following the termination
of his employment.

Amir Zoufonoun.In
November 1999, the Company entered into an employment agreement
with Mr. Zoufonoun under which Mr. Zoufonoun agreed to
serve as our President and Chief Operating Officer. Under the
agreement, Mr. Zoufonoun is entitled to receive an annual
base salary and is eligible for an annual bonus based on
performance targets established by the Board of Directors.

If the Company terminates
Mr. Zoufonouns employment without cause or if he
terminates his employment for good reason, as defined in the
employment agreement, the Company will be required, for a period
of 12 months, to pay him his base salary and continue his
medical and other benefits, and all of his time-based options
will vest immediately. In addition, Mr. Zoufonoun will
receive payment of a pro-rated bonus, any accrued vacation days,
any deferred compensation and any unreimbursed expenses. For
purposes of his employment agreement, a change of control of
Western Multiplex does not qualify as good reason for
Mr. Zoufonoun to leave. The Company may terminate
Mr. Zoufonouns employment at any time, and
Mr. Zoufonoun may terminate his employment on
90 days prior written notice. Mr. Zoufonoun has
agreed not to disclose any confidential information pertaining
to the Companys business. Furthermore, he has agreed not
to compete with the Company during his employment and for one
year following the termination of his employment.

Mr. Zoufonouns employment agreement
was amended in April 2001 to provide that his annual base salary
be raised to $250,000 and that he be eligible to receive an
annual incentive cash bonus of up to 60% of his base salary.

In connection with the pending merger with
Proxim, Inc., Mr. Zoufonoun will enter into an amended and
restated employment agreement with Western Multiplex that
provides the terms and conditions of his employment as Executive
Vice President, Technology of the combined company. At the
completion of the proposed merger with Proxim,
Mr. Zoufonouns amended and restated employment
agreement will take effect and provide:



| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | debt forgiveness equal to 50% of the principal
	and accrued but unpaid interest on a promissory note held by
	Western Multiplex if Mr. Zoufonoun continues to render
	services to the combined company for six months following the
	completion of the merger;    
|
| |  | debt forgiveness equal to 100% of the principal
	and accrued but unpaid interest on a promissory note held by
	Western Multiplex if Mr. Zoufonoun continues to render
	services to the combined company for twelve months following the
	completion of the merger;
|
| |  | acceleration of any outstanding unvested options
	to purchase shares of our common stock held by
	Mr. Zoufonoun as of the completion of the merger;                                                                                                               
|
| |  | various termination benefits depending on the
	circumstances under which Mr. Zoufonouns employment
	ends, whether terminated by him or the combined company or upon
	Mr. Zoufonouns death or disability as follows:                                             

In the event of Mr. Zoufonouns death,
his beneficiaries will be entitled to receive:



| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a cash lump sum payment of accrued but unused
	vacation days, compensation earned but not yet paid and
	reasonable expenses incurred in carrying out his duties and
	responsibilities;
|
| |  | a prorated amount of his incentive bonus;                                                                                                                                             

71



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any death benefits provided under the combined
	companys employee benefit programs, plans and practices;                                                                                                                                                                         
|
| |  | payments under applicable plans or programs to
	which his estate or designated beneficiaries are entitled
	pursuant to the terms of these plans or programs; and                                                                                                                  
|
| |  | debt forgiveness equal to 100% of the principal
	and accrued but unpaid interest on a promissory note held by
	Western Multiplex if Mr. Zoufonouns employment is
	terminated by reason of his death at any time during the twelve
	months following the completion of the merger.

If Mr. Zoufonoun is terminated by the
combined company without cause or resigns for good reason, then
he will be entitled to receive:



| |   |                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continued payment of his base salary for the
	subsequent 12 months;                                                                                                                                                                                                                                                                   
|
| |  | a cash lump sum payment of accrued but unused
	vacation days, compensation earned but not yet paid and
	reasonable expenses incurred in carrying out his duties and
	responsibilities;                                                                                                                                                
|
| |  | continuation of health benefits for a period
	ending on the earlier of 12 months or the date on which
	Mr. Zoufonoun becomes covered under comparable benefit
	plans of a new employer;                                                                                                                                               
|
| |  | acceleration of the unvested portion of any
	option or other stock award granted to him following the
	completion of the merger so that such options are fully
	exercisable and vested;                                                                                                                                               
|
| |  | a prorated amount of his incentive bonus; and                                                                                                                                                                                                                                                                                         
|
| |  | debt forgiveness equal to 100% of the principal
	and accrued but unpaid interest on a promissory note held by
	Western Multiplex if Mr. Zoufonouns employment is
	terminated by the combined company without cause or by
	Mr. Zoufonoun for good reason at any time during the twelve
	months following the completion of the merger.

Nancy Huber.In
February 2000, the Company entered into an employment agreement
with Ms. Huber under which Ms. Huber agreed to serve
as its Chief Financial Officer and Vice President of Finance.
Under the employment agreement, Ms. Huber is entitled to
receive an annual base salary and is eligible for an annual
bonus pursuant to an annual incentive plan, with the amount of
the bonus based on performance targets established by the Board
of Directors. The employment agreement also provides that,
immediately prior to a change of control, all of
Ms. Hubers outstanding, unvested time-based options
will vest immediately. In addition, transfer restrictions on any
shares of the Companys common stock held by Ms. Huber
will lapse.

If the Company terminates Ms. Hubers
employment without cause or if she terminates her employment for
good reason, as defined in the employment agreement, the Company
will be required, for a period of 12 months, to pay her
base salary, her annual target bonus for the year in which her
employment terminates, and continue her medical and other
benefits. In addition, Ms. Huber will receive any accrued
vacation days, any deferred compensation and any unreimbursed
expenses. For purposes of the employment agreement, a change of
control of the Company does not qualify as good reason for
Ms. Huber to leave. The Company may terminate
Ms. Hubers employment at any time, and Ms. Huber
may terminate her employment on 90 days prior written
notice. Ms. Huber has agreed not to disclose any
confidential information pertaining to the Companys
business. Furthermore, she has agreed not to compete with the
Company during her employment and for one year following the
termination of her employment.

Fred Corsentino.In
May 2000, the Company entered into an employment agreement with
Mr. Corsentino under which Mr. Corsentino has agreed
to serve as its Vice President of Sales. Mr. Corsentino is
entitled to receive an annual base salary and is eligible for an
annual bonus based on performance targets as established by the
Board of Directors and sales commissions based upon achievement
of certain sales quota as established by the Board of Directors.

If the Company terminates
Mr. Corsentinos employment without cause or if he
terminates his employment for good reason, as defined in the
employment agreement, the Company will be required, for a period
of 12 months, to pay him his base salary, any accrued
commissions, any accrued vacation days, any

72



---



##### Table of Contents



deferred compensation and any unreimbursed
expenses. For purposes of the employment agreement, a change of
control of the Company does not qualify as good reason for
Mr. Corsentino to leave. The Company may terminate Mr.
Corsentinos employment at any time for cause, or upon
90 days prior written notice for any other reason.
Mr. Corsentino may terminate his employment on
90 days prior written notice. Mr. Corsentino has
agreed not to disclose any confidential information pertaining
to the Companys business. Furthermore, he has agreed not
to compete with the Company during his employment for one year
following the termination of his employment.


Gordana Pance.In
February 2000, the Company entered into an employment agreement
with Ms. Pance under which Ms. Pance agreed to serve
as its Director of Engineering. Under the employment agreement,
Ms. Pance is entitled to receive an annual base salary and
is eligible for an annual bonus pursuant to an annual incentive
plan, with the amount of the bonus based on performance targets
established by the Board of Directors.

If the Company terminates Ms. Pances
employment without cause or if she terminates her employment for
good reason, as defined in the employment agreement,
Ms. Pance will be entitled to receive her base salary
through the date of termination, any annual bonus earned but
unpaid as of the date of termination and reimbursement for any
unreimbursed business expenses. In addition, the Company will be
required, for a period of 12 months, to pay her base salary
and her annual target bonus for the year prior to the year in
which her employment terminates, which amount will be reduced by
the value of any other cash severance or termination benefits
payable to her under any plan, program or arrangements other
than those set forth in her employment agreement, and continue
her medical and other benefits. In addition, Ms. Pance will
receive continued vesting of stock options granted to her prior
to her termination for a period of 12 months. For purposes
of the employment agreement, a change of control of the Company
does not qualify as good reason for Ms. Pance to leave. The
Company may terminate Ms. Pances employment at any
time, and Ms. Pance may terminate her employment on
90 days prior written notice. Ms. Pance has
agreed not to disclose any confidential information pertaining
to the Companys business. Furthermore, she has agreed not
to compete with the Company during her employment and for one
year following the termination of her employment.

Ihab Abu-Hakima.In
March 2001, the Company entered into an employment agreement
with Mr. Abu-Hakima under which Mr. Abu-Hakima agreed
to serve as its Vice President, Business Development. Under the
employment agreement, Mr. Abu-Hakima is entitled to receive an
annual base salary and is eligible for an annual bonus pursuant
to an annual incentive plan, with the amount of the bonus based
on performance targets established by the Board of Directors;
provided that in fiscal year 2001, Mr. Abu-Hakimas
annual bonus was equal to 40% of his base salary.

If the Company terminates
Mr. Abu-Hakimas employment without cause or if he
terminates his employment for good reason, as defined in the
employment agreement, Mr. Abu-Hakima will be entitled to
receive his base salary through the date of termination, any
annual bonus earned but unpaid as of the date of termination,
reimbursement for any unreimbursed business expenses and any
employee benefits to which he may be entitled under the employee
benefit plans of the Company. In addition, the Company will be
required, for a period of 12 months, to pay his base
salary, which amount will be reduced by the value of any other
cash severance or termination benefits payable to him under any
plan, program or arrangements other than those set forth in his
employment agreement. For purposes of the employment agreement,
a change of control of the Company does not qualify as good
reason for Mr. Abu-Hakima to leave. The Company may
terminate Mr. Abu-Hakimas employment at any time, and
Mr. Abu-Hakima may terminate his employment on
90 days prior written notice. Mr. Abu-Hakima has
agreed not to disclose any confidential information pertaining
to the Companys business. Furthermore, he has agreed not
to compete with the Company during his employment and for one
year following the termination of his employment.

Christina Rulo.In
March 2001, the Company entered into an employment agreement
with Ms. Rulo under which Ms. Rulo agreed to serve as
its Vice President, Human Resources. Under the employment
agreement, Ms. Rulo is entitled to receive an annual base
salary and is eligible for an annual bonus pursuant to an annual
incentive plan, with the amount of the bonus based on
performance targets established by the Board of Directors;
provided that in fiscal year 2001, Ms. Rulos annual
bonus was equal to 30% of her base salary.

73



---



##### Table of Contents



If the Company terminates Ms. Rulos
employment without cause or if she terminates her employment for
good reason, as defined in the employment agreement,
Ms. Rulo will be entitled to receive her base salary
through the date of termination, any annual bonus earned but
unpaid as of the date of termination, reimbursement for any
unreimbursed business expenses and any employee benefits to
which she may be entitled under the employee benefit plans of
the Company. In addition, the Company will be required, for a
period of 12 months, to pay her base salary, which amount
will be reduced by the value of any other cash severance or
termination benefits payable to her under any plan, program or
arrangements other than those set forth in her employment
agreement. For purposes of the employment agreement, a change of
control of the Company does not qualify as good reason for
Ms. Rulo to leave. The Company may terminate
Ms. Rulos employment at any time, and Ms. Rulo
may terminate her employment on 90 days prior written
notice. Ms. Rulo has agreed not to disclose any
confidential information pertaining to the Companys
business. Furthermore, she has agreed not to compete with the
Company during her employment and for one year following the
termination of her employment.

Change of Control Severance
Arrangements

The employment of Nancy Huber, Fred Corsentino,
Christina Rulo and Gary Boss, Vice President, Operations, will
be terminated if the merger with Proxim is completed. As
severance, and without regard to any contrary provisions in
their employment agreements, each will receive:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | a lump-sum payment equal to the sum of his or her
	annual salary and target bonus;                          
|
| |  | the acceleration of all of his or her unvested
	options to acquire shares of Western Multiplex Common Stock;
|
| |  | the right to exercise those options for one year
	following termination; and                                
|
| |  | the continuation of health care and other
	employment benefits for one year following termination.          

At the request of Mr. Zakin, Ms. Huber
and Mr. Corsentino have also agreed to provide consulting
services to aid in the integration of Western Multiplex and
Proxim for no additional compensation.

Compensation Committee Interlocks and Insider
Participation

Other than Messrs. Boskin, Hendren and
Seedman, no other persons served on the compensation committee
during fiscal year 2001. Mr. Hendren is a Managing Director
at Ripplewood Holdings L.L.C. In connection with Western
Multiplexs pending merger with Proxim, Western Multiplex
has generally agreed to indemnify affiliates of Ripplewood
Holdings L.L.C. against any losses or expenses incurred by them
that arise from the merger agreement, the consummation or
proposed consummation of the merger and the transactions related
thereto.




Item
12.     Security Ownership of
Certain Beneficial Owners and Management

The following table sets forth certain
information with respect to the beneficial ownership of the
Companys Class A common stock as of February 21,
2002 by (i) each stockholder that we know is the beneficial
owner of more than 5% of our common stock, (ii) each
executive officer of the Company, (iii) each director and
(iv) all executive officers and directors of the Company as
a group. Percentages for each person are based on
59,291,283 shares outstanding at February 21, 2002,
plus the total number of outstanding options or warrants held by
such person that are exercisable within 60 days of such
date. Shares issuable upon exercise of outstanding options and
warrants, however, are not deemed outstanding for purposes of
computing the percentage ownership of any other person.

74



---



##### Table of Contents



Unless otherwise indicated below, the address for
each listed 5% stockholder, director and executive officer
is c/o Western Multiplex, 1196 Borregas Avenue,
Sunnyvale, California 94089.

|                                                                                                |  |            |            |             |  |  |      |  
|----------------------------------------------------------------------------------------------- |  | ---------- | ---------- | ----------- |  |  | ---- | -
|                                                                                                |  | Amount and |            |            
|                                                                                                |  | Nature of  |            | Percent of 
|                                                                                                |  | Beneficial |            | Outstanding
|Name and Address of Beneficial Owner                                                            |  | Ownership  |            | Shares     
|                                                                                                |  |            |            |            
|Affiliates of Ripplewood Holdings L.L.C.(1)(2)
	One Rockefeller Plaza
	New York, New York 10020 |  |            | 37,168,278 |             |  |  | 62.7 | %
|Jonathan N. Zakin(2)                                                                            |  |            | 5,078,222  |             |  |  | 8.6  | %
|Michael S. Seedman(3)                                                                           |  |            | 3,600,922  |             |  |  | 6.1  | %
|Timothy C. Collins(4)                                                                           |  |            |           |             |  |  |     |  
|Jeffrey M. Hendren(4)                                                                           |  |            |           |             |  |  |     |  
|Amir Zoufonoun(5)                                                                               |  |            | 1,992,789  |             |  |  | 3.4  | %
|Nancy Huber(6)                                                                                  |  |            | 360,920    |             |  |  | *    |  
|Fred Corsentino(7)                                                                              |  |            | 456,054    |             |  |  | *    |  
|Hironori Aihara(8)                                                                              |  |            | 102,680    |             |  |  | *    |  
|Michael J. Boskin(9)                                                                            |  |            | 102,680    |             |  |  | *    |  
|Peter O. Crisp(10)                                                                              |  |            | 102,680    |             |  |  | *    |  
|Stanley S. Shuman(11)                                                                           |  |            | 102,680    |             |  |  | *    |  
|All executive officers and directors as a
	group(12)                                            |  |            | 11,899,627 |             |  |  | 20.1 | %



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Represents less than 1.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(1) | An affiliate of Ripplewood Holdings L.L.C.
	controls Ripplewood Partners, L.P. and Ripplewood Employee
	Co-Investment Fund I, L.L.C. Therefore, the beneficial
	ownership of affiliates of Ripplewood Holdings L.L.C. includes
	30,992,522 shares of common stock beneficially owned by
	Ripplewood Partners, L.P. and 1,097,534 shares of common
	stock beneficially owned by Ripplewood Employee Co-Investment
	Fund I, L.L.C.                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Includes 5,078,222 shares of common stock held by
	Jonathan N. Zakin for which Ripplewood Holdings L.L.C. is
	entitled to direct voting pursuant to a voting agreement entered
	into by certain parties including Ripplewood Partners, L.P.,
	Jonathan N. Zakin and Western Multiplex.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(3) | Includes options to acquire 200,000 shares
	of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(4) | Mr. Collins is the Chief Executive Officer
	of Ripplewood Holdings L.L.C. and through his affiliates may be
	deemed to control Ripplewood Holdings L.L.C. Mr. Collins
	disclaims beneficial ownership of Western Multiplex common stock
	that is beneficially owned by affiliates of Ripplewood Holdings
	L.L.C., except to the extent of any pecuniary interest that he
	has in those shares. Mr. Hendren is a Managing Director of
	Ripplewood Holdings L.L.C. Mr. Hendren disclaims beneficial
	ownership of Western Multiplex common stock that is beneficially
	owned by affiliates of Ripplewood Holdings, L.L.C. The address
	of Messrs. Collins and Hendren is c/o Ripplewood
	Holdings L.L.C., One Rockefeller Plaza, New York,
	New York 10020.
|   
|(5) | Includes options to acquire 852,789 shares
	of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(6) | Includes options to acquire 35,920 shares of
	common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(7) | Includes options to acquire 131,054 shares
	of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(8) | Includes options to acquire 71,666 shares of
	common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(9) | Includes options to acquire 71,666 shares of
	common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



|     |                                                               
|---- | --------------------------------------------------------------
|(10) | Includes options to acquire 71,666  shares
	of common stock.  
|    
|(11) | Includes options to acquire 71,666 shares of
	common stock.   
|    
|(12) | Includes options to acquire 1,506,427 shares
	of common stock.

75



---



##### Table of Contents



Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Securities Exchange Act
of 1934 requires our directors and executive officers, and
persons who own more than ten percent of a registered class of
our equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of our common
stock and other equity securities. Officers, directors and
greater than ten percent stockholders are required by
SEC regulation to furnish us with copies of all
Section 16(a) forms they file.

To our knowledge, except as specified in the
following sentence, based solely on a review of the copies of
such reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
December 31, 2001, all Section 16(a) filing
requirements applicable to our officers, directors and greater
than ten percent beneficial owners were complied with. Due to
administrative error arising in connection with the
administration of our stock ledger, affiliates of Ripplewood
Holdings L.L.C. and Mr. Zakin may have failed to timely
report the transition from indirect to direct beneficial
ownership of certain shares of our common stock held by them.




Item
13.     Certain Relationships and
Related Transactions

Stockholders Agreement

As an inducement for Proxim, Inc. to enter into
the merger agreement with us, we entered into a stockholders
agreement with WMC Holding L.L.C., Ripplewood Partners,
L.P. and Ripplewood Employee Co-Investment Fund I, L.L.C.,
each of which is an affiliate of Ripplewood Holdings L.L.C. This
stockholders agreement will become effective when and if the
merger is completed.



| |                      
| | ---------------------
| | Transfer restrictions

Subject to the exceptions described below,
affiliates of Ripplewood Holdings have agreed not to sell or
transfer their shares of our common stock until the earlier of
the one-year anniversary of the proposed merger with Proxim and
the date on which they collectively own less than 10% of our
outstanding common stock.

The exceptions to the transfer and sale
restrictions on the affiliates of Ripplewood Holdings described
above include each of the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | transfers of shares to their affiliates in
	transactions exempt from the registration requirements under the
	Securities Act if these affiliates become parties to the
	stockholders agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | any transfers or sales pursuant to the exercise
	of the registration rights described below;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | any transfers or sales pursuant to a tender offer
	for at least 25% of our outstanding common stock;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | during the initial 30-day period after the
	closing date of the merger, transfers or sales of up to an
	aggregate of 5,000,000 shares of our common stock, as well
	as any additional shares that J.P. Morgan Securities Inc.
	advises us, because of then current and expected market demand,
	can be reasonably absorbed by the trading market for our common
	stock and would not significantly negatively affect the price of
	our common stock; and                                                                                                                                                                                                                                     
|
| |  | during each subsequent 30-day period prior to the
	expiration of the transfer restrictions, transfers of a number
	of shares equal to the total of the following: (1) the
	average weekly trading volume in our common stock during the
	prior four-week period, plus (2) the number of shares that
	these affiliates of Ripplewood Holdings were entitled to
	transfer during any prior 30-day period pursuant to this bullet
	point and/or the immediately prior bullet point but have not so
	transferred previously, minus (3) the number of shares
	these affiliates of Ripplewood Holdings were able to transfer
	pursuant to the exercise of the registration rights described
	below.



| |                    
| | -------------------
| | Registration rights

Commencing on the six-month anniversary of the
proposed merger with Proxim and subject to various restrictions,
these affiliates of Ripplewood Holdings may make up to four
demands for registration under the

76



---



##### Table of Contents



Securities Act of their shares of Western
Multiplex common stock for sale in underwritten offerings or
otherwise. In addition, subject to customary limitations,
affiliates of Ripplewood Holdings will have the right to require
that their shares of our common stock be included in other
registered public offerings of our common stock. We will pay all
expenses related to any of these registered offerings other than
underwriting discounts and commissions, transfer taxes, if any,
and specified amounts of fees of counsel for these affiliates of
Ripplewood Holdings. We and these affiliates of Ripplewood
Holdings also have agreed to indemnify each other against
various liabilities associated with the registered offerings in
which these affiliates of Ripplewood Holdings participate.


The registration rights of these affiliates of
Ripplewood Holdings under the stockholders agreement generally
will terminate when (1) these affiliates of Ripplewood
Holdings are able to sell all of their shares under
Rule 144 during any 90-day period and (2) these
affiliates of Ripplewood Holdings hold less than 5% of our
outstanding common stock. If the proposed merger with Proxim is
completed, the current registration rights agreement between
Western Multiplex and WMC Holding L.L.C. will terminate.

Indemnification Agreement

In connection with our proposed merger with
Proxim, we have generally agreed to indemnify affiliates of
Ripplewood Holdings L.L.C. against any losses or expenses
incurred by them that arise from the merger agreement or the
voting agreements or the consummation or proposed consummation
of the proposed merger and the transactions related to the
merger.




PART IV




Item
14.     Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.

(a) The following documents are filed as
part of this Form:

|   |  |                                                                                                        |  |      |    | 
|-- |  | ------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|   |  |                                                                                                        |  | Page
|   |  |                                                                                                        |  |     
|1. |  | Financial Statements                                                                                   |  |      |    | 
|   |  | Included in Part II of this report:                                                                    |  |      |    | 
|   |  | Report of Independent Public
	Accountants                                                              |  |      | 42 | 
|   |  | Balance Sheets                                                                                         |  |      | 43 | 
|   |  | Income Statements                                                                                      |  |      | 44 | 
|   |  | Statements of Stockholders
	Equity                                                                    |  |      | 45 | 
|   |  | Notes to Financial Statements                                                                          |  |      | 47 | 
|   |  | Notes to Consolidated Financial
	Statements                                                            |  |      | 48 | 
|2. |  | Financial Statement Schedules                                                                          |  |      |    | 
|   |  | Included in Part IV of this report:                                                                    |  |      |    | 
|   |  | Schedule for the three years ended
	December 31, 2000 Schedule II  Valuation
	and Qualifying Accounts |  |      | 77 | 

(b) Reports on Form 8-K

A Current Report on Form 8-K/A was filed on
October 9, 2001 amending a Current Report on
Form 8-K/A filed by the Registrant on June 5, 2001,
concerning the financial statements of WirelessHome Corporation.

3.     Exhibits

The exhibits listed on the accompanying
Exhibit Index are filed or incorporated by reference as
part of this report and such Exhibit Index incorporated
herein by reference. Management contracts or compensatory plans
or arrangements are identified in the accompanying
Exhibit Index and such identification listing is
incorporated by reference.

77



---



##### Table of Contents



WESTERN MULTIPLEX CORPORATION

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                                                                       |                              |                |  |            |  |            |  |            |  |  |  |        |   |  |  |       | 
|---------------------------------------------------------------------- | ---------------------------- | -------------- |  | ---------- |  | ---------- |  | ---------- |  |  |  | ------ | - |  |  | ----- | 
|                                                                       |                              | Balance at     |  | Additions  |  |            |  | Balance at
|                                                                       |                              | the Beginning  |  | Charged to |  |            |  | the End of
|                                                                       |                              | of the Year    |  | Expense    |  | Deductions |  | the Year  
|                                                                       |                              |                |  |            |  |            |  |           
|                                                                       |                              |               
|                                                                       |                              | (In thousands)
|Accounts receivable                                                    |                              |                |  |            |  |            |  |            |  |  |  |        |   |  |  |      
|Allowances for doubtful amounts, sales returns,
	and price protection: |                              |                |  |            |  |            |  |            |  |  |  |        |   |  |  |      
|                                                                       | Year ended December 31, 1999 |                |  | 100        |  |            |  | 239        |  |  |  |       |   |  |  | 339   | 
|                                                                       | Year ended December 31, 2000 |                |  | 339        |  |            |  | 618        |  |  |  |       |   |  |  | 957   | 
|                                                                       | Year ended December 31, 2001 |                |  | 957        |  |            |  | 7,331      |  |  |  | (2,882 | ) |  |  | 5,406 | 

78



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities
Act, the Registrant has duly caused this Form 10-K and any
amendments thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, on February 25,
2002.



| |                              
| | -----------------------------
| | WESTERN MULTIPLEX CORPORATION



| |     |                
| | --- | ---------------
| | By: | /s/ NANCY HUBER

| |                                                                 
| | ----------------------------------------------------------------
| |                                                                 
| | Nancy Huber                                                     
| | Chief Financial Officer, Executive Vice
	President and Secretary

Pursuant to the requirements of the Securities
Act of 1933, as amended, this Form 10-K has been signed by
the following persons in the capacities indicated on
February 25, 2002:

|                                         |  |                                                                                                                               
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Signature                                |  | Title                                                                                                                         
|                                         |  |                                                                                                                               
|/s/ JONATHAN N. ZAKINJonathan N. Zakin   |  | Chairman, Chief Executive Officer and Director
	(Principal Executive Officer)                                                 
|/s/ NANCY HUBERNancy Huber               |  | Chief Financial Officer (Principal Financial
	Officer), Executive Vice President (Principal Accounting
	Officer) and Secretary
|/s/ AMIR ZOUFONOUNAmir Zoufonoun         |  | President, Chief Operating Officer and Director                                                                               
|/s/ MICHAEL SEEDMANMichael Seedman       |  | Director                                                                                                                      
|/s/ TIMOTHY C. COLLINSTimothy C. Collins |  | Director                                                                                                                      
|/s/ JEFFREY M. HENDRENJeffrey M. Hendren |  | Director                                                                                                                      
|/s/ HIRONORI AIHARAHironori Aihara       |  | Director                                                                                                                      
|/s/ MICHAEL J. BOSKINMichael J. Boskin   |  | Director                                                                                                                      
|/s/ PETER O. CRISPPeter O. Crisp         |  | Director                                                                                                                      
|/s/ STANLEY S. SHUMANStanley S. Shuman   |  | Director                                                                                                                      

79



---



##### Table of Contents






EXHIBIT INDEX

|        |           |             |  |                                                                                                                                                                                                                   
|------- | --------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|Number  |           | Description
|        |           |            
|        | 2.1(2)    |             |  | Agreement and Plan of Reorganization, dated as of
	January 16, 2002, among the Registrant, Walnut-Pine Merger
	Corp. and Proxim, Inc.                                                                             
|        | 2.2(1)    |             |  | Amended and Restated Acquisition Agreement, dated
	as of September 30, 1999, by and among GTI Acquisition
	Corp., Glenayre Technologies, Inc., the Registrant and WMC
	Holding Corp.                              
|        | 2.3(1)    |             |  | Amendment to Acquisition Agreement, dated as of
	October 31, 1999, by and among GTI Acquisition Corp.,
	Glenayre Technologies, Inc., the Registrant and WMC Holding Corp.                                         
|        | 3.1(1)    |             |  | Amended and Restated Certificate of Incorporation
	of the Registrant.                                                                                                                                             
|        | 3.2(2)    |             |  | Amended and Restated By-laws of the Registrant.                                                                                                                                                                   
|        | 4.1(1)    |             |  | Form of the Registrants Class A Common
	Stock Certificate.                                                                                                                                                       
|        | 4.2(1)    |             |  | Stockholders Agreement, dated as of
	October 31, 1999, among the Registrant, WMC Holding Corp.,
	GTI Acquisition Corp. and Glenayre Technologies, Inc.                                                            
|        | 4.3(1)    |             |  | Registration Rights Agreement, dated as of
	June 8, 2000, among the Registrant, Ripplewood Holdings
	L.L.C. and WMC Holding Corp.                                                                                 
|        | 4.4(2)    |             |  | Stockholders Agreement, dated as of
	January 16, 2002, among Ripplewood Partners, L.P.,
	Ripplewood Employee Co-Investment Fund, L.P., WMC Holding L.L.C.
	and the Registrant.                                    
|        | 10.1(1)*  |             |  | Employment and Co-Investment Agreement, dated as
	of October 31, 1999, among Ripplewood Partners L.P., WMC
	Holding Corp., Seaview Holdings L.L.C., the Registrant and
	Jonathan N. Zakin.                        
|        | 10.2(1)*  |             |  | Co-Investment Agreement, dated as of
	October 31, 1999, among Ripplewood Partners L.P., WMC
	Holding Corp., The Michael and Roberta Seedman Revocable Trust,
	Michael Seedman and the Registrant.                 
|        | 10.3(1)*  |             |  | Employment Agreement, dated as of
	November 1, 1999, by and between the Registrant and Amir
	Zoufonoun.                                                                                                           
|        | 10.4(1)*  |             |  | Subscription and Employee Stockholders
	Agreement, dated as of January 31, 2000, among WMC Holding
	Corp., the Registrant, Ripplewood Partners, L.P. and Amir
	Zoufonoun.                                        
|        | 10.5(1)*  |             |  | Employment Agreement, dated as of
	February 16, 2000, by and between the Registrant and Nancy
	Huber.                                                                                                             
|        | 10.6(1)*  |             |  | Subscription and Employee Stockholders
	Agreement, dated as of February 28, 2000, among WMC Holding
	Corp., the Registrant, Ripplewood Partners, L.P. and Nancy Huber.                                           
|        | 10.7(1)*  |             |  | Employment Agreement, dated as of May 2,
	2000, among the Registrant and Fred Corsentino.                                                                                                                         
|        | 10.8(1)*  |             |  | Subscription and Employee Stockholders
	Agreement, dated as of February 25, 2000, among WMC Holding
	Corp., the Registrant, Ripplewood Partners, L.P. and Fred
	Corsentino.                                      
|        | 10.9(1)*  |             |  | 1999 Western Multiplex Corporation Stock
	Incentive Plan.                                                                                                                                                         
|        | 10.10(1)* |             |  | Western Multiplex Corporation Employee Stock
	Purchase Plan.                                                                                                                                                      
|        | 10.11(1)* |             |  | Western Multiplex Corporation 2000 Stock Option
	Plan for Non-Employee Directors.                                                                                                                                 
|        | 10.12(1)  |             |  | Stocking Distributor Agreement, dated
	May 27, 1998, by and between the Registrant and Somera
	Communications Inc.                                                                                                
|        | 10.13(1)  |             |  | Credit Agreement, dated as of November 1,
	1999, among the Registrant, Credit Suisse First Boston as Lead
	Arranger and as Agent and the several financial institutions
	from time to time party to the agreement.
|        | 10.14(1)  |             |  | Assignment and Assumption Agreement, dated
	October 18, 1999, between the Registrant and Glenayre
	Electronics, Inc., including the Lease, dated July 1, 1996,
	between Glenayre Electronics, Inc. and Yercaf N.V.
|        | 10.15(1)  |             |  | Lease, dated February 27, 1998, between
	Ubiquity Communication, Inc. and G&W/ Copley Redwood
	Business Park, L.P.                                                                                                



---



##### Table of Contents



|        |           |             |  |                                                                                                                                                                                            
|------- | --------- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|Number  |           | Description
|        |           |            
|        | 10.16*    |             |  | Amended Promissory Note, dated as of
	January 26, 2001, made by Amir Zoufonoun in favor of the
	Registrant.                                                                                
|        | 10.17*    |             |  | Amended Promissory Note, dated as of
	January 26, 2001, made by Nancy Huber in favor of the
	Registrant.                                                                                   
|        | 10.18*    |             |  | Amended Promissory Note, dated as of
	January 26, 2001, made by Fred Corsentino in favor of the
	Registrant.                                                                               
|        | 10.19*    |             |  | Amended Promissory Note, dated as of
	January 26, 2001, made by Joe Tavormina in favor of the
	Registrant.                                                                                 
|        | 10.20(1)* |             |  | Amendment No. 1 to 1999 Western Multiplex
	Corporation Stock Incentive Plan, dated June 8, 2000.                                                                                           
|        | 10.21(1)  |             |  | Intellectual Property Assignment, dated
	November 1, 1999, from Glenayre Electronics, Inc. to the
	Registrant.                                                                             
|        | 10.22(1)  |             |  | License Agreement, dated November 1, 1999,
	by and between Glenayre Electronics, Inc. and the Registrant.                                                                                  
|        | 10.23(1)* |             |  | Ubiquity Communication, Inc. 1997 Stock Option
	Plan.                                                                                                                                      
|        | 10.24(1)* |             |  | Ubiquity Communication, Inc. 1998 Stock Plan.                                                                                                                                              
|        | 10.25(1)* |             |  | Ubiquity Communication, Inc. 1999 Stock Plan.                                                                                                                                              
|        | 10.26(1)* |             |  | Amendment No. 1 to Western Multiplex
	Corporation 2000 Stock Option Plan for Non-Employee Directors,
	dated June 19, 2000.                                                                 
|        | 10.27(1)  |             |  | Management Services Agreement between Ripplewood
	Holdings L.L.C. and the Registrant, dated November 1, 1999.                                                                              
|        | 10.28(1)  |             |  | Security Agreement, dated as of November 1,
	1999, made by the Registrant in favor of Credit Suisse First
	Boston, as Agent.                                                               
|        | 10.29(1)  |             |  | Intellectual Property Security Agreement, dated
	as of November 1, 1999, between Credit Suisse First Boston,
	as Agent, and the Registrant.                                                
|        | 10.30(2)  |             |  | Indemnification Agreement, dated as of
	January 15, 2002, among the Registrant, WMC Holding L.L.C.,
	Ripplewood Partners, L.P. and Ripplewood Employee Co-Investment
	Fund, L.P.           
|        | 10.31(2)* |             |  | Employment Agreement, dated January 16,
	2002, between the Registrant and David C. King.                                                                                                   
|        | 10.32(2)  |             |  | Voting Agreement, dated as of January 16,
	2002, between the Registrant and David C. King.                                                                                                 
|        | 10.33*    |             |  | Amended Employment and Co-Investment Agreement,
	dated as of May 9, 2001, among Ripplewood Partners L.P.,
	WMC Holding LLC, Seaview Holdings L.L.C., the Registrant and
	Jonathan N. Zakin.
|        | 10.34*    |             |  | Employment Agreement, dated as of March 26,
	2001 between the Registrant and Christina Rulo.                                                                                               
|        | 10.35*    |             |  | Employment Agreement, dated as of March 29,
	2001 between the Registrant and Ihab Abu-Hakima.                                                                                              
|        | 10.36*    |             |  | Amendment No. 2 to Western Multiplex
	Corporation Stock Incentive Plan, dated May 18, 2001.                                                                                                
|        | 10.37*    |             |  | Employment Agreement, dated as of
	February 23, 2000 between the Registrant and Gordana Pance.                                                                                             
|        | 21(2)     |             |  | Subsidiaries of the Registrant.                                                                                                                                                            
|        | 23        |             |  | Consent of Independent Public Accountants.                                                                                                                                                 
|        | 99.1(2)   |             |  | Form of Voting Agreements dated as of
	January 16, 2002 between Proxim, Inc. and affiliates of
	Ripplewood Holdings L.L.C.                                                                 



---



##### Table of Contents



|        |         |             |  |                                                                                                                                                       
|------- | ------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 99.2(2) |             |  | Form of Voting Agreement dated as of
	January 16, 2002 between Proxim, Inc., Jonathan N. Zakin
	and Amir Zoufonoun.                                   
|        | 99.3(2) |             |  | Voting Agreement dated as of January 16,
	2002 between Western Multiplex Corporation and Keith Glover,
	Jeffrey Saper, Raymond Chin and Leslie Denend.



---



|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the like named
	exhibit to the Registrants Registration Statement on
	Form S-1 (File No. 333-35200) as amended.
|   
|(2) | Incorporated by reference to the like named
	exhibit to the Registrants Registration Statement on
	Form S-4 (File No. 333-82014).           
|   
|*   | Management contract or compensatory plan or
	arrangement.