<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549




(Mark One)

[X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

For the quarterly period ended   September 30, 1998

                                       OR

[ ]         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 0-07428

                           CALIFORNIA MICROWAVE, INC.
             (Exact name of registrant as specified in its charter)


        DELAWARE                                                94-1668412
(State or other jurisdiction                                 (I.R.S. Employer 
 of Incorporation)                                        Identification Number)

1143 BORREGAS AVENUE, SUNNYVALE, CALIFORNIA                      94089
(Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code            (408) 732-4000

--------------------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report.

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 X NO_________

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

        Classes                                  Outstanding at October 30, 1998
---------------------------                      -------------------------------
Common Stock $.10 Par Value                                 15,024,269




                                      -1-
<PAGE>   2

                          Part I. Financial Information

Item 1.  Financial Statements

                           CALIFORNIA MICROWAVE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars In Thousands, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended
                                                       September 30
                                                  ----------------------
                                                    1998          1997
                                                  --------      --------
<S>                                               <C>           <C>     
Revenue                                           $ 34,731      $ 39,258
Costs of revenue                                    23,086        23,860
                                                  --------      --------
Gross margin                                        11,645        15,398

Expenses:
Research and development                             5,434         4,194
Sales, marketing and administration                 10,725         8,305
Amortization of intangible assets                      395           344
Purchased in-process research and development        8,210            --
                                                  --------      --------
      Total expenses                                24,764        12,843
                                                  --------      --------
Operating income (loss)                            (13,119)        2,555
Interest expense, net                                 (872)       (1,113)
                                                  --------      --------
Income (loss) from continuing operations
    before income taxes                            (13,991)        1,442
Provision for (benefit from) income taxes           (3,065)          519
                                                  --------      --------
Income (loss) from continuing operations           (10,926)          923

Income from discontinued operations, net
    of income taxes                                  1,075         1,389
                                                  --------      --------
Net income (loss)                                 $ (9,851)     $  2,312
                                                  ========      ========
Basic earnings (loss) per share:
Income (loss) from continuing operations          $  (0.72)     $   0.06
Income from discontinued operations                   0.07          0.08
                                                  --------      --------
Net income (loss)                                 $  (0.65)     $   0.14
                                                  ========      ========

Weighted average common shares                      15,115        16,495

Diluted earnings (loss) per share:
Income (loss) from continuing operations          $  (0.72)     $   0.06
Income from discontinued operations                   0.07          0.08
                                                  --------      --------
Net income (loss)                                 $  (0.65)     $   0.14
                                                  ========      ========
Weighted average common shares and dilutive
     common share equivalents                       15,115        16,653
</TABLE>



See Notes to Condensed Consolidated Financial Statements



                                      -2-
<PAGE>   3


                           CALIFORNIA MICROWAVE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         September 30,    June 30,
                                                             1998           1998
                                                          ---------      ---------
<S>                                                      <C>             <C>      
Assets
Current assets:
        Cash and cash equivalents                         $   1,825      $  24,630
        Short-term investments                                2,587          2,636
        Accounts receivable                                  35,432         35,918
        Inventories                                          26,598         25,710
        Deferred income taxes                                26,512         15,714
        Prepaid expenses                                        357            512
        Net current assets of discontinued operations        15,692         11,971
                                                          ---------      ---------
                  Total current assets                    $ 109,003      $ 117,091
                                                          ---------      ---------

Property, plant and equipment, net                           19,010         19,065
Deferred income taxes                                         8,396         16,448
Intangible assets                                            29,819         27,887
Other assets                                                  4,782          3,698
Net long-term assets of discontinued operations               5,973          6,323
                                                          ---------      ---------
                                                          $ 176,983      $ 190,512
                                                          =========      =========

Liabilities and Shareholders' Equity
Current liabilities:
        Current portion of long-term debt                 $     355      $     352
        Note payable                                          4,383             --
        Accounts payable                                     13,117         13,142
        Accrued liabilities                                  27,865         30,217
                                                          ---------      ---------
                  Total current liabilities                  45,720         43,711
                                                          ---------      ---------

Long-term Liabilities:
Long-term debt                                                2,708          2,748
Convertible subordinated notes                               57,500         57,500
Other long-term liabilities                                   1,700          2,000
                                                          ---------      ---------
                  Total long-term liabilities                61,908         62,248
                                                          ---------      ---------

Shareholders' equity:
        Common stock                                          1,663          1,663
        Capital in excess of par value                       95,673         95,673
        Treasury stock                                      (32,659)       (27,831)
        Retained earnings                                     4,678         15,048
                                                          ---------      ---------
                  Total shareholders' equity                 69,355         84,553
                                                          ---------      ---------
                                                          $ 176,983      $ 190,512
                                                          =========      =========
</TABLE>



See Notes to Condensed Consolidated Financial Statements


                                      -3-
<PAGE>   4


                           CALIFORNIA MICROWAVE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                      September 30,
                                                                    1998          1997
                                                                  --------      --------
<S>                                                               <C>           <C>     
Operating activities:
Income (loss) from continuing operations                          $(10,926)     $    923
Adjustments to reconcile net income to net
        cash provided by (used in) operating activities:
        Purchased in-process research and development                8,210            --
        Depreciation and amortization                                1,663         1,719
        Amortization of intangible assets                              395           344
        Deferred taxes                                              (3,065)        1,364
        Debt issuance costs                                             52            73
        Other                                                          104          (275)
Net effect of changes in:
        Accounts receivable                                            792        (6,975)
        Refundable income taxes                                         --        10,085
        Inventories                                                   (888)          562
        Prepaid expenses                                               155          (751)
        Accounts payable                                               (25)       (1,511)
        Other assets and accrued liabilities                        (2,623)        1,863
                                                                  --------      --------
Net cash provided by (used in) continuing operations                (6,156)        7,421
                                                                  --------      --------

Investing activities:
Capital expenditures                                                (1,460)       (2,296)
Acquisition of Adaptive Broadband Ltd.                             (10,354)           --
Other                                                               (1,072)         (738)
                                                                  --------      --------
Net cash used in continuing operations investing activities        (12,886)       (3,034)
Net cash used in discontinued operations investing activities       (2,488)       (1,719)
                                                                  --------      --------
Net cash used in investing activities                              (15,374)       (4,753)
                                                                  --------      --------

Financing activities:
Payments on long-term debt                                             (37)          (37)
Proceeds from issuance of common stock                               1,070         1,047
Proceeds from (payments on) bank credit facilities                   4,383        (6,000)
Purchase of treasury stock                                          (6,691)           --
                                                                  --------      --------
Net cash used in financing activities                               (1,275)       (4,990)
                                                                  --------      --------

Net decrease in cash and cash equivalents                          (22,805)       (2,322)
Cash and cash equivalents at beginning of year                      24,630         5,705
                                                                  --------      --------
Cash and cash equivalents at end of period                        $  1,825      $  3,383
                                                                  ========      ========

Cash paid during the period for:
        Interest                                                  $    293      $    321
        Income taxes                                                    --            --

</TABLE>


See Notes to Condensed Consolidated Financial Statements



                                      -4-
<PAGE>   5


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Note 1 -             Basis of Presentation

                     The unaudited condensed consolidated financial statements
                     include the accounts of California Microwave, Inc. and its
                     subsidiaries (the Company) and have been prepared by the
                     Company pursuant to the rules and regulations of the
                     Securities and Exchange Commission. All significant
                     intercompany balances and transactions have been
                     eliminated. Certain prior year amounts have been
                     reclassified to conform to the current year presentation.
                     These unaudited condensed consolidated financial statements
                     include all adjustments (consisting only of normal
                     recurring adjustments) which, in the opinion of management,
                     are necessary to fairly state the financial position,
                     results of operation and cash flows for the periods
                     presented. Interim results are not necessarily indicative
                     of results for a full year. The condensed consolidated
                     interim financial statements should be read in conjunction
                     with the audited consolidated financial statements for the
                     year ended June 30, 1998, included in the California
                     Microwave, Inc. 1998 Annual Report to Shareholders.

                     The Company has adopted Statement of Financial Accounting
                     Standards No. 130 (SFAS 130), "Reporting Comprehensive
                     Income," and for the three months ended September 30, 1998
                     and September 30, 1997, the Company's comprehensive loss
                     was the same as its net loss.

Note 2 -             Segment Information

                     California Microwave, Inc.'s two continuing segments are
                     business units that develop, manufacture, and distribute
                     products and solutions for distinct markets.

                     1.   The Satellite Communications Division (Satellite)
                          consists of EFData and provides products and services
                          principally to telecommunications carriers and
                          Internet service providers. These products and
                          services enable customers to provide voice, video, and
                          data services via satellite.

                     2.   The Terrestrial Wireless Division (Terrestrial)
                          represents the combination of Microwave Radio
                          Communications (MRC), Microwave Data Systems (MDS) and
                          Adaptive Broadband Limited (ABL). MRC and MDS provide
                          products and services, based upon microwave radio
                          technology, primarily to the television broadcast,
                          oil, gas and utility industries. ABL provides
                          high-speed wireless Internet connectivity technology,
                          and is a newly acquired development stage business
                          with product targeted for the second half of fiscal
                          year 1999.


                                      -5-
<PAGE>   6

<TABLE>
<CAPTION>
Three months ended September 30, 1998                                         (Dollars in millions)
-------------------------------------                                         ---------------------
                                              Satellite       Terrestrial             Total
                                              ---------       -----------             -----
<S>                                           <C>              <C>                    <C>  
Bookings:
Domestic                                      $  6.8             $14.3                 $21.1
International                                   11.2               4.8                  16.0
                                              ------            ------                ------
                                               $18.0             $19.1                 $37.1

Revenue:
Domestic                                      $  6.0            $ 13.1                $ 19.1
International                                   10.2               5.4                  15.6
                                              ------            ------                ------
                                               $16.2             $18.5                 $34.7

Operating income (loss)                        $(2.6)            $ 1.2                 $(1.4)

</TABLE>

<TABLE>
<CAPTION>
Three months ended September 30, 1997         Satellite       Terrestrial             Total
-------------------------------------         ---------       -----------             -----
<S>                                           <C>             <C>                     <C>  
Bookings:
Domestic                                      $10.2             $12.9                 $23.1
International                                  12.5               6.2                  18.7
                                             ------            ------                ------
                                              $22.7             $19.1                 $41.8
Revenue:
Domestic                                     $  7.9             $11.5                 $19.4
International                                  12.9               7.0                  19.9
                                             ------            ------                ------
                                              $20.8             $18.5                 $39.3

Operating income                              $ 2.3             $ 2.3                 $ 4.6
</TABLE>

<TABLE>
<CAPTION>
Reconciliation to Income (Loss) from Continuing Operations       Three months ended September 30,
                                                                 --------------------------------
                                                                     1998               1997
                                                                    -------             -----
<S>                                                                 <C>                 <C>  
Operating income (loss) from reportable segments                    $  (1.4)            $ 4.6
Corporate expenses                                                     (3.1)             (1.8)
Amortization of intangible assets                                      (0.4)             (0.3)
Purchased in-process research and development                          (8.2)                -
Interest expense, net                                                  (0.9)             (1.1)
                                                                    -------             -----
Income (loss) from continuing operations before
    income taxes                                                    $ (14.0)            $ 1.4
                                                                    =======             =====
</TABLE>

<TABLE>
<CAPTION>
Operating Assets Reconciliation to Total Assets                   September 30,       June 30,
                                                                     1998               1998
                                                                    -------           -------
<S>                                                                 <C>               <C>    
Satellite assets                                                    $  50.9           $  52.3
Terrestrial assets                                                     32.1              32.4
                                                                    -------           -------
Operating assets from reportable segments                              83.0              84.7
Corporate assets                                                        7.6              27.4
Deferred income taxes                                                  34.9              32.2
Net intangible assets from business acquired                           29.8              27.9
Net assets of discontinued operations                                  21.7              18.3
                                                                    -------           -------
        Total assets                                                $ 177.0           $ 190.5
                                                                    =======           =======
</TABLE>


                                      -6-
<PAGE>   7


Note 3 -             Discontinued Operations

                     In October 1998, the Company's Board of Directors adopted a
                     formal plan to sell its Government Division, which consists
                     of the Government Electronics Division (GED), and Airborne
                     Systems Division (ASID). Historically, the Government
                     Division included the Company's Services Division (SD),
                     which was sold in the fourth quarter of fiscal year 1998 to
                     Telscape International, Inc. (Telscape) for $8.2 million in
                     cash with a pre-tax gain of $6.3 million. These operations
                     contract principally with the United States Department of
                     Defense and provide products and services principally in
                     the areas of communication, reconnaissance, and
                     surveillance systems. The operating results and financial
                     position of the Government Division have been classified as
                     discontinued operations in the Company's financial
                     statements for all periods presented. Revenue from the
                     Government Division discontinued operations was $19.8
                     million and $25.1 million for the first quarter of fiscal
                     years 1999 and 1998. Income from discontinued operations
                     (net of income taxes) for the Government Division was $1.1
                     million and $1.4 million for the first quarter of fiscal
                     years 1999 and 1998.

                     In June 1997, the Company's Board of Directors adopted a
                     formal plan to sell its Microwave Networks (MN) and
                     Satellite Transmission Systems (STS) divisions, and
                     provided $8.4 million (net of income taxes) for anticipated
                     operating losses prior to disposal and for expected losses
                     on their eventual sale.

                     In February 1998, STS was sold to L-3 Communications
                     Corporation (L-3) for $27 million in cash, and in April
                     1998, MN was sold to Tadiran Ltd. (Tadiran) for $31.5
                     million in cash. During the second half of fiscal year
                     1998, the Company recorded additional provisions of $15.1
                     million (net of income taxes) for additional losses on
                     disposal of these divisions. These provisions were
                     primarily for adjustments to the combined losses on sale
                     and for higher than anticipated operating losses prior to
                     disposal of both divisions. The operating results, loss on
                     disposal, and financial position of these divisions have
                     been classified as discontinued operations in the Company's
                     financial statements for all periods presented. Revenue
                     from the MN and STS discontinued operations was $29.4
                     million for the period ended September 30, 1997. The loss
                     from discontinued operations (net of income taxes) for MN
                     and STS for the period ended September 30, 1997 was $2.2
                     million and was accrued at June 30, 1997 as part of the net
                     loss on disposal.

                     Final accounting for these divestitures is subject to
                     completion of the post-closing procedures provided for in
                     the Telscape, L-3 and Tadiran agreements.

                     In May 1995, the Company's MN division entered into certain
                     agreements with Nokia Telecommunications Oy (Nokia)
                     pursuant to which MN was to provide to Nokia certain
                     microwave radios and related software and services, and was
                     to carry out certain development programs. In September
                     1997, Nokia informed MN of a purported failure of certain
                     of the products sold to Nokia to meet certain contractual
                     specifications. MN was sold to Tadiran in April 1998 and
                     under the terms of the sale agreement, Tadiran assumed and
                     indemnified the Company with respect to the Nokia claims.
                     Tadiran has now taken the position that the Company is
                     responsible for the Nokia claims, based upon allegations
                     that the Company failed to provide adequate disclosures and
                     financial reserves with respect to such claims. Also, in
                     September 1998, the Company received notices from Nokia
                     that Nokia has decided to terminate the May 1995 agreements
                     and has begun arbitration proceedings to recover damages, 


                                      -7-
<PAGE>   8

                     which Nokia provisionally claims are $9.6 million. The
                     Company believes that it has good defenses and will
                     vigorously defend the Nokia and Tadiran claims. No accruals
                     have been recorded for expenses which may be incurred to
                     resolve the dispute, and the Company believes final
                     resolution of this matter will not have a material impact
                     on the Company's financial position, results of operations
                     or cash flow.

Note 4 -             Inventories

<TABLE>
<CAPTION>
                                                                 (Dollars in thousands)
                                                              September 30,      June 30,
                                                                   1998            1998
                                                              -------------      --------
<S>                                                           <C>                <C>  
                     Work-in-process and finished goods           10,560            8,766
                     Raw materials                                16,038           16,944
                                                                --------         --------
                                                                $ 26,598         $ 25,710
                                                                ========         ========
</TABLE>

Note 5 -             Credit Facility

                     In November 1998, the Company terminated its asset-based
                     bank credit facility due to expire in June 2000 and entered
                     into an unsecured revolving credit facility with available
                     credit of $30 million that expires in March 1999. The
                     annual commitment fee on the unused portion of the facility
                     and the interest rate for borrowings vary based upon the
                     Company's ratio of funded debt to earnings before interest,
                     amortization and taxes, with the maximum commitment fee set
                     at .40% and the maximum borrowing rate set at the bank's
                     rate plus .25%. The maximum borrowing rate was 8.25% at
                     November 2, 1998.

Note 6 -             Shareholders' Equity

                     On February 5, 1998, the Company announced that its Board
                     of Directors authorized the repurchase of up to three
                     million shares of its common stock on the open market. On
                     October 7, 1998, the Company announced that its Board of
                     Directors had increased the number of shares authorized for
                     repurchase to six million. During the three months ended
                     September 30, 1998, the Company acquired 375 thousand
                     shares of common stock for $6.7 million, bringing the total
                     shares repurchased subsequent to February 5, 1998 to
                     approximately two million.

                     The following table summarizes the changes in shareholders'
                     equity for the three months ended September 30, 1998

<TABLE>
<CAPTION>
                                                                           Capital                                      Total share-
                                             Common Stock                 in excess of      Treasury       Retained     holders'
(Dollars in thousands)               Shares Issued       Amount            par value         stock          earnings     equity
-------------------------           ---------------     ------------     --------------   ------------    -----------  -------------
<S>                                 <C>                 <C>              <C>              <C>             <C>          <C>    
Balance at June 30, 1998            16,629,031             $1,663           $95,673          $(27,831)       $15,048      $84,553
                                    ----------             ------           -------          --------         ------      -------

Treasury stock purchases                                                                       (6,691)                     (6,691)
Common stock issued from
   treasury shares for stock option
   and stock purchase plans                                                                     1,863           (519)       1,344
Net loss                                                                                                      (9,851)      (9,851)
                                    ----------             ------           -------          --------         ------      -------
Balance at September 30, 1998       16,629,031             $1,663           $95,673          $(32,659)        $4,678      $69,355
                                    ==========             ======           =======          ========         ======      =======
</TABLE>


Note 7 -   Shareholder Rights

                     In October 1989, the Board of Directors of the Company
                     approved a Rights Agreement which provided for the issuance
                     to holders of Common Stock of Rights to purchase additional
                     Common Stock and other securities. These Rights become
                     exercisable in the event, among other things, that a person
                     or group acquires 20% or more of the Company's Common Stock


                                      -8-
<PAGE>   9

                     as described in the Agreement. In light of the Company's
                     Common Stock repurchase program (discussed in Note 6
                     above), planned repurchases of Common Stock by the Company
                     could cause the ownership of one or more stockholders to
                     cross the 20% threshold, which could inadvertently trigger
                     the exercisability of the Rights. Accordingly, on November
                     6, 1998, the rights Agreement was amended to provide that
                     the exercisability of the Rights will not be triggered if a
                     person becomes a beneficial owner of 20% or more of the
                     Company's Common Stock as a result of an acquisition of
                     Common Stock by the Company which, by reducing the number
                     of shares outstanding, increases the proportionate number
                     of shares beneficially owned by such stockholder to 20% or
                     more. Exercisability would still, however, be triggered if
                     such person, following notice or disclosure of stock
                     repurchases, then becomes the beneficial owner of an
                     aggregate of 3,000,000 shares of Common Stock or more. (In
                     addition, the Rights Agreement was also amended to permit
                     the Board to authorize, issue or pay, upon exercise of
                     Rights, cash or other property.) The Company also effected
                     certain other changes to the Rights Agreement, including
                     the change of its Rights Agent to BankBoston, N.A.

Note 8 -             Income Taxes

                     At September 30, 1998, the Company has a cumulative net
                     deferred tax asset of $34.9 million that will be available
                     to reduce payments on future tax liabilities. The Company's
                     management believes it is more likely than not that the
                     deferred tax asset will be realized based on the Company's
                     operating history in its continuing operations, its
                     projected future results, and the anticipated gain on the
                     sale of its Government Division.

Note 9 -             Contingent Liabilities

                     The Company is subject to legal proceedings and claims that
                     arise in the normal course of its business. The Company
                     believes these proceedings will not have a material adverse
                     effect on the financial position, results of operations or
                     cash flows of the Company.

Note 10 -            Acquisition

                     On August 20, 1998, the Company acquired Adaptive Broadband
                     Limited a United Kingdom based company developing
                     high-speed wireless Internet connectivity technology. The
                     acquisition was accounted for under the purchase method.
                     The initial purchase price was approximately $10.9 million
                     including cash payments, direct costs, and the assumption
                     of ABL's net liabilities. The purchase price will include
                     additional future payments of up to $7 million contingent
                     on ABL's performance exceeding certain targets. The assets
                     and liabilities assumed by the Company were recorded based
                     on their fair values at the date of acquisition. The
                     purchase price was allocated $8.2 million to in-process
                     research and development, $0.4 million to tangible assets,
                     $0.4 million to intangible assets, and $1.9 million to
                     goodwill. The amount allocated to in-process research and
                     development was expensed at the time of acquisition. The
                     Company's management believes that the allocation of the
                     majority of the initial purchase price to purchased
                     in-process research and development is appropriate given
                     the stage of development of ABL's potential products and
                     the considerable potential of these products to contribute
                     to the future operations of the Company. The Company's
                     results of operations for the first quarter of fiscal year
                     1999, include ABL's results from August 20, 1998.



                                      -9-
<PAGE>   10


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

Statements made below and in the 1998 Annual Report to Shareholders that are not
historical facts, including any statements about expectations for fiscal year
1999 and beyond, involve certain risks and uncertainties. Factors that could
cause the Company's actual results to differ materially from management's
projections, estimates and expectations include, but are not limited to, delays
in the receipt of orders or in the shipment of products, delays in the disposal
of discontinued operations and other factors referred to under "Information
Regarding Forward Looking Statements" in the Company's Consolidated Financial
Statements and Notes to Financial Statements and in the Company's Form 10-K
Annual Report for its fiscal year ended June 30, 1998. The Consolidated
Financial Statements should be read in conjunction with this Management's
Discussion and Analysis of Financial Condition and Results of Operations.

In October 1998, the Company's board of director's adopted a formal plan to sell
its Government Division. During fiscal 1998, the Company sold its Microwave
Networks (MN), Satellite Transmission Systems (STS), and Services (SD)
divisions. The operating results, loss on disposal, and financial position of
these divisions have been classified separately as discontinued operations for
all periods presented in the accompanying Condensed Consolidated Financial
Statements. See Note 3 - Discontinued Operations of Notes to Condensed
Consolidated Financial Statements for further discussion of these transactions.

RESULTS OF OPERATIONS

        Overview California Microwave, Inc. reported a net loss of $9.9 million,
or $0.65 per share, for the three months ended September 30, 1998, compared to
net income of $2.3 million, or $0.14 per share, for the three months ended
September 30, 1997. Operating results for the first quarter of fiscal 1999
include a one-time purchased in-process research and development charge for the
Adaptive Broadband Limited (ABL) acquisition of $7.2 million (net of income
taxes) or $0.48 per share. Excluding the one-time charge, the Company's net loss
for the three months ended September 30, 1998 was $2.6 million, or $0.17 per
share.

        New orders booked from continuing operations were $37.1 million and
$41.8 million for the three months ended September 30, 1998 and 1997,
representing an 11% decrease. Revenue from continuing operations was $34.7
million and $39.3 million for the three months ended September 30, 1998 and
1997, representing a 12% decrease. The decrease for the first quarter of fiscal
1998 was primarily a result of weakness in the Company's international markets,
primarily in Latin America and Asia, for both satellite and terrestrial
products, as well as weakness in satellite sales to domestic systems integrators
who ship internationally. This was only partially offset by an increase in
terrestrial domestic business.



                                      -10-
<PAGE>   11


Business Segment Information The Company's continuing operations include two
divisions: the Satellite Communications Division (Satellite) and the Terrestrial
Wireless Division (Terrestrial). The following table sets forth certain
information for these business segments for the periods indicated.

<TABLE>
<CAPTION>
(Dollars in millions)           Three months ended September 30,
                                  1998                 1997
                            -----------------     ----------------
<S>                         <C>        <C>        <C>        <C>
Bookings
Satellite:
   Domestic                 $ 6.8        38%      $10.2        45%
   International             11.2        62%       12.5        55%
                            -----      ----       -----      ----
   Total                     18.0       100%       22.7       100%

Terrestrial:
   Domestic                  14.3        75%       12.9        68%
   International              4.8        25%        6.2        32%
                            -----      ----       -----      ----
   Total                     19.1       100%       19.1       100%

Total Domestic               21.1        57%       23.1        55%
Total International          16.0        43%       18.7        45%
                            -----      ----       -----      ----
Total Bookings              $37.1       100%      $41.8       100%

Revenue
Satellite:
   Domestic                 $ 6.0        37%      $ 7.9        38%
   International             10.2        63%       12.9        62%
                            -----      ----       -----      ----
   Total                     16.2       100%       20.8       100%

Terrestrial:
   Domestic                  13.1        71%       11.5        62%
   International              5.4        29%        7.0        38%
                            -----      ----       -----      ----
   Total                     18.5       100%       18.5       100%

Total Domestic               19.1        55%       19.4        49%
Total International          15.6        45%       19.9        51%
                            -----      ----       -----      ----
Total Revenue               $34.7       100%      $39.3       100%

Gross Margin
Satellite                   $ 4.0        25%      $ 8.1        39%
Terrestrial                   7.6        41%        7.3        39%
                            -----      ----       -----      ----
Total                       $11.6        34%      $15.4        39%

Operating Income (loss)
Satellite                   $(2.6)      (16)%     $ 2.3        11%
Terrestrial                   1.2         6%        2.3        12%
Corporate and other (1)     (11.7)       --        (2.0)       --
                            -----      ----       -----      ----
Total                       $(13.1)     (38)%     $ 2.6         7%
</TABLE>


(1) The three months ended September 30, 1998 includes a one-time purchased
in-process research and development charge of $8.2 million for the Adaptive
Broadband Limited acquisition.



                                      -11-
<PAGE>   12

        Satellite Communications

        The Satellite Communications Division consists of EFData which provides
products and services primarily to telecommunications carriers and Internet
service providers. These products and services enable customers to provide
voice, video, and data services via satellite.

        Satellite revenue was $16.2 million and $20.8 million for the three
months ended September 30, 1998 and 1997, representing a decrease of $4.6
million or 22%. International revenue decreased $2.7 million or 21% and domestic
revenue decreased $1.9 million or 24% for the three months ended September 30,
1998. The international revenue decrease was due to financial conditions in Asia
and to a delay in the privatization of the public telecommunications company in
Brazil. While the Company does not expect conditions to improve in Asia in the
near future, the Company anticipates that business volume in Brazil will
increase in the second half of fiscal year 1999. Domestic revenue decreased due
to lower demand from systems integrators whose ultimate customers are in the
international markets. Satellite book-to-bill ratios were 111% and 109% for the
three months ended September 30, 1998 and 1997.

        Satellite gross margin was $4.0 million and $8.1 million, or as a
percentage of revenue 25% and 39%, for the three months ended September 30, 1998
and 1997. The decrease was due to the reduction in revenue, unfavorable
manufacturing variances driven by the revenue reduction, and a change in the
revenue mix to lower margin products.

        Satellite operating loss was $2.6 million for the three months ended
September 30, 1998 compared to operating income of $2.3 million for the three
months ended September 30, 1997.

        Terrestrial Wireless 

        The Terrestrial Wireless Division represents the combination of
Microwave Radio Communications (MRC), Microwave Data Systems (MDS) and Adaptive
Broadband Limited. MRC and MDS provide products and services, based upon
microwave radio technology, primarily to the television broadcast, oil, gas and
utility industries. ABL is developing high-speed, wireless Internet connectivity
technology and is in the development stage for a product launch in the second
half of fiscal year 1999.

           Terrestrial revenue was $18.5 million for the three months ended
September 30, 1998 and 1997. While overall revenue for the Terrestrial Division
was constant, domestic revenue increased 14% and international revenue decreased
23% for the three months ended September 30, 1998. The decrease in international
revenue was due to financial conditions in Asia and Latin America. Bookings for
the Company's video broadcast products increased in the later portion of the
first quarter of fiscal year 1999, driving the domestic terrestrial increase,
and the Company anticipates continued growth in the second half of fiscal year
1999 due to the timing of the FCC-mandated digital video broadcast conversion.
Terrestrial book-to-bill ratios were 103% for the three months ended September
30, 1998 and 1997.

        Terrestrial gross margin was $7.6 million and $7.3 million, or as a
percentage of revenue 41% and 39% for the three months ended September 30, 1998
and 1997. The increase in gross margin is a result of the increase in volume of
higher margin products.

        Terrestrial operating income was $1.2 million and $2.3 million for the
three months ended September 30, 1998 and 1997. The decrease in operating income
was primarily driven by research and development investments in wideband and
broadband products, including ABL, and international sales and marketing
investments.

        Operating Expenses 

        Research and development expenses for continuing operations were $5.4
million and $4.2 million, a 30% increase. As a percentage of revenue, research
and development expenses were 16% and 11%. The increase was primarily due to
research and development spending for ABL and other terrestrial wideband and 


                                      -12-
<PAGE>   13

broadband products as well as broadband satellite products such as the
Multimedia Integrated Digital Access System (MIDAS). The Company believes that
the continual and rapid introduction of new products and technologies is
critical to sustaining growth within its current and future target markets. In
addition, the Company plans to continue to add to its technologies by completing
strategic acquisitions.

        Sales, marketing and administrative expenses for continuing operations
were $10.7 million and $8.3 million for the three months ended September 30,
1998 and 1997. The increase in sales, marketing and administrative expenses was
due to focused sales and marketing investments in certain international markets
with high-growth potential.

        Amortization expense associated with intangible assets in the continuing
businesses was $0.4 million and $0.3 million for the three months ended
September 30, 1998 and 1997.

        Purchased in-process research and development associated with the
Company's acquisition of ABL was $8.2 million for the three months ended
September 30, 1998. See Note 10 - Acquisition, of Notes to Condensed
Consolidated Financial Statements for further discussion of the ABL acquisition.

        Interest Expense, Net 

        Net interest expense was $0.9 million and $1.1 million for the three
months ended September 30, 1998 and 1997, representing a 22% decrease. The
decrease in net interest expense reflects a reduction in average borrowings
primarily from the repayment of $5.7 million of convertible subordinated notes
in the third quarter of fiscal 1998, and an increase in interest income for the
three months ended September 30, 1998.

        Provision for Income Taxes 

        The Company's income tax benefit for continuing operations was $3.1
million for the three months ended September 30, 1998 and the Company's
provision for income taxes was $0.5 million for the three months ended September
30, 1997. Excluding the impact of the benefit associated with the purchased
in-process research and development charge, the effective income tax rate for
the first quarter of fiscal year 1999 was 36%, consistent with the 36% rate for
the first quarter of fiscal year 1998.

LIQUIDITY AND CAPITAL RESOURCES

        At September 30, 1998, the Company had net working capital of $63.3
million, including $1.8 million of cash and cash equivalents, compared with net
working capital of $73.4 million, including cash and cash equivalents of $24.6
million, at June 30, 1998.

        Net cash used in continuing operating activities was $6.2 million for
the three months ended September 30, 1998, due to a loss from operations and the
payment of certain year-end accruals. Net cash provided by continuing operating
activities was $7.4 million for the three months ended September 30, 1997.
During the three months ended September 30, 1997, the Company obtained $10.1
million from income tax refunds, which was offset by an increase in accounts
receivables of $7.0 million.

        Net cash used in investing activities for the three months ended
September 30, 1998 was $15.4 million including the acquisition of ABL for $10.4
million, capital expenditures of $1.5 million and a net investment in
discontinued operations of $2.5 million. Net cash used in investing activities
for the three months ended September 30, 1997, was $4.8 million.


                                      -13-
<PAGE>   14

        On February 5, 1998, the Company announced that its Board of Directors
had authorized the repurchase of up to three million shares of its common stock
on the open market. On October 7, 1998, the Company announced that its Board of
Directors had increased the number of shares authorized for repurchase to six
million. During the first quarter of fiscal year 1999, the Company acquired 375
thousand shares for $6.7 million bringing the total shares repurchased
subsequent to February 5, 1998 to approximately two million.

        In addition to the common stock repurchased, the Company's financing
activities for the three months ended September 30, 1998 included credit
facility borrowings of $4.4 million and the receipt of $1.1 million from the
sale of the Company's common stock under stock option and stock purchase plans.

        In November 1998, the Company terminated its asset-based bank credit
facility due to expire in June 2000 and entered into an unsecured revolving
credit facility with available credit of $30 million that expires in March 1999.
The annual commitment fee on the unused portion of the facility and the interest
rate on the borrowings vary based upon the Company's ratio of funded debt to
earnings before interest, amortization, and taxes, with the maximum commitment
fee set at .40% and the maximum borrowing rate set at the bank's reference rate
plus .25%.

        The Company believes that its current cash position, funds generated
from operations and funds it believes will be available from its credit
facilities will be adequate to meet the Company's requirements for working
capital, capital expenditures and debt service for the foreseeable future.

Impact of Year 2000

        The Company is assessing the potential impact of the Year 2000 computer
problem on its products, information systems, embedded systems (including
computers used in the manufacturing process) and on the ability of certain third
parties to supply critical materials and services. The Company expects to
complete the assessment of its products, computer systems, embedded systems,
certain third party suppliers, and major customers by March 31, 1999, and to
take necessary remediation action by the end of calendar year 1999. Expenditures
to date have not been material and have consisted of the limited use of outside
consultants and the time of certain company personnel. Based on the partial
assessment completed through September 30, 1998, the Company does not currently
expect the future costs of completing the assessment, making system
modifications, purchasing replacement computer systems and assessing the Year
2000 readiness of material third party suppliers and major customers to be
material. The Company has begun to assess the impact of Year 2000 on its
products. The worst case scenario is unknown and unanticipated Year 2000
failures in the Company's products could have a material adverse impact on the
Company's results of operations and financial condition. While the Company does
not anticipate a material business interruption to result from the Year 2000
problem, the Company gives no assurances that its systems will be Year 2000
ready and the Company cannot guarantee the Year 2000 readiness of key third
party suppliers and service providers and major customers. Pending the
completion of the assessment of the Company's Year 2000 readiness, the Company
may make certain contingency plans but currently such plans have not been
developed. If any of the Company's computer systems, embedded systems, key third
party suppliers and services providers and major customers are not Year 2000
ready, the Company may experience a business interruption which would have a
material adverse impact on the Company's results of operations and financial
condition.



                                      -14-
<PAGE>   15


                          Part II - Other Information

Item 1.         Legal Proceedings

                In May 1995, the Company's MN division entered into certain
                agreements with Nokia Telecommunications Oy (Nokia) pursuant to
                which MN was to provide to Nokia certain microwave radios and
                related software and services, and was to carry out certain
                development programs. In September 1997, Nokia informed MN of a
                purported failure of certain of the products sold to Nokia to
                meet certain contractual specifications. MN was sold to Tadiran
                in April 1998 and under the terms of the sale agreement, Tadiran
                assumed and indemnified the Company with respect to the Nokia
                claims. Tadiran has now taken the position that the Company is
                responsible for the Nokia claims, based upon allegations that
                the Company failed to provide adequate disclosures and financial
                reserves with respect to such claims. Also, the Company, in
                September 1998, received notices from Nokia that Nokia has
                decided to terminate the May 1995 agreements and has begun
                arbitration proceedings to recover damages which Nokia
                provisionally claims are $9.6 million. The Company believes that
                it has good defenses and will vigorously defend the Nokia and
                Tadiran claims. No accruals have been recorded for expenses
                which may be incurred to resolve the dispute, and the Company
                believes final resolution of this matter will not have a
                material impact on the Company's financial position, results of
                operations or cash flow.


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

                At the Annual Meeting of Shareholders of registrant held on 
                October 22, 1998, the shareholders:

                1. Elected Directors for the ensuing year as follows:

<TABLE>
<CAPTION>
                                                          For          Withheld
                                                      ----------       -------
<S>                                                   <C>              <C>    
                   Frederick D. Lawrence              13,611,828       206,161
                   William B. Marx, Jr.               13,617,269       200,720
                   Terry W. Ward                      13,622,470       195,519
                   Frederick W. Whitridge, Jr.        13,623,130       194,859
                   George A. Joulwan                  13,613,699       204,290
                   Leslie G. Denend                   13,620,544       197,445
</TABLE>

                2. To authorize the Board of Directors to change the name of the
Company:

<TABLE>
<CAPTION>
                      For               Against            Abstain
                   ----------           -------            ------
<S>                <C>                  <C>                <C>   
                   13,676,951           108,857            32,181
</TABLE>

                3. To approve an amendment to the Company's Employee Stock
Purchase Plan:

<TABLE>
<CAPTION>
                      For               Against            Abstain           Non-Vote
                   ----------           -------            -------           -------
<S>                <C>                  <C>                <C>               <C>    
                   13,470,123           152,232            92,005            103,629
</TABLE>



                                      -15-
<PAGE>   16


Item 6.     Exhibits

            Exhibit 4.9 - Amendment to Rights Agreement, dated November 6, 1998.

            Exhibit 10.22 - Agreement, dated August 20, 1998, between (1)
            Olivetti Research Limited, Olivetti Telemedia S.p.A. and Oracle
            Corporation and (2) Pitcomp 174 Limited (a wholly-owned subsidiary
            of the Company), to be renamed Adaptive Broadband Limited.


            Exhibit 10.23 - Credit Agreement among Union Bank of California,
            N.A. and California Microwave, Inc. dated as of November 2, 1998.

            Exhibit 27 - Financial Data Schedule for the period ended September
            30, 1998.

            Exhibit 27.1 - Restated Financial Data Schedule for the first three
            quarters of and fiscal year ended June 30, 1998.

            Exhibit 99 - 1998 Financial Results by Fiscal Quarter.



                                      -16-
<PAGE>   17

                                   SIGNATURES



        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



CALIFORNIA MICROWAVE, INC.




November 16, 1998                 BY      /s/  Frederick D. Lawrence
-----------------                    -------------------------------------------
Date                                      Frederick D. Lawrence
                                          Chairman of the Board
                                          President and Chief Executive Officer




November 16, 1998                 BY      /s/  Donna S. Birks
-----------------                    -------------------------------------------
Date                                      Donna S. Birks
                                          Executive Vice President
                                          Chief Financial Officer

                                      -17-
<PAGE>   18

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number              Description
------              -----------
<S>                 <C>
Exhibit 4.9   -     Amendment to Rights Agreement, dated November 6, 1998.

Exhibit 10.22 -     Agreement, dated August 20, 1998, between (1) Olivetti
                    Research Limited, Olivetti Telemedia S.p.A. and Oracle Corporation
                    and (2) Pitcomp 174 Limited (a wholly-owned subsidiary of the
                    Company), to be renamed Adaptive Broadband Limited.

Exhibit 10.23 -     Credit Agreement among Union Bank of California, N.A. and
                    California Microwave, Inc. dated as of November 2, 1998.

Exhibit 27    -     Financial Data Schedule for the period ended September 30,
                    1998.

Exhibit 27.1  -     Restated Financial Data Schedule for the first three quarters
                    of and fiscal year ended June 30, 1998.

Exhibit 99    -     1998 Financial Results by Fiscal Quarter.

</TABLE>