<PAGE>

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                                 UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549

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

                                  FORM 10-Q

 (MARK ONE)

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

     For the quarterly period ended March 31, 1999

                                     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

                      ADAPTIVE BROADBAND CORPORATION
        (Exact name of registrant as specified in its charter)

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

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

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

                     CALIFORNIA MICROWAVE, INC.
          (Former name, 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 April 30, 1999
              -------                       -----------------------------
     Common Stock $.10 Par Value                    14,792,092
 (and related share purchase rights)

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                                      -1-

<PAGE>

PART I.   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       ADAPTIVE BROADBAND CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollar in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED         NINE MONTHS ENDED
                                                       MARCH 31,                  MARCH 31,
                                                  ------------------         -----------------
                                                   1999        1998           1999        1998
                                                   ----        ----           ----        ----
<S>                                             <C>          <C>           <C>         <C>
Revenue                                         $ 38,553     $ 44,340      $ 116,458   $ 129,553
Costs of revenue                                  27,442       27,037         77,477      77,845
                                                --------     --------      ---------   ---------
Gross margin                                      11,111       17,303         38,981      51,708
Expenses:
Research and development                           6,784        4,459         18,179      13,203
Sales, marketing and administration               10,953        9,055         32,524      29,113
Amortization of intangible assets                    540          344          1,408       1,032
Purchased in-process research and development        -            -           11,775         -  
Restructuring and other charges                    3,325          -            3,325         -  
                                                --------     --------      ---------   ---------
     Total expenses                               21,602       13,858         67,211      43,348
                                                --------     --------      ---------   ---------
Operating income (loss)                          (10,491)       3,445        (28,230)      8,360
Interest expense, net                             (1,245)        (880)        (3,224)     (2,886)
                                                --------     --------      ---------   ---------
Income (loss) from continuing operations
    before income taxes                          (11,736)       2,565        (31,454)      5,474
Provision for (benefit from) income taxes         (4,226)         912         (8,494)      1,960
                                                --------     --------      ---------   ---------
Income (loss) from continuing operations          (7,510)       1,653        (22,960)      3,514

Discontinued operations:
Income (loss) from discontinued operations,
     net of income taxes                             -          1,452          1,963       3,775
Gain (loss) on disposal, net of income taxes         -        (12,500)           -       (12,500)
                                                --------     --------      ---------   ---------
                                                     -        (11,048)         1,963      (8,725)
                                                --------     --------      ---------   ---------

Net loss                                         $(7,510)    $ (9,395)     $ (20,997)   $ (5,211)
                                                --------     --------      ---------   ---------
                                                --------     --------      ---------   ---------

Basic earnings (loss) per share:
Income (loss) from continuing operations         $ (0.51)    $   0.10      $   (1.54)   $   0.21
Income (loss) from discontinued operations           -          (0.67)          0.13       (0.53)
                                                --------     --------      ---------   ---------
Net loss                                         $ (0.51)    $  (0.57)     $   (1.40)   $  (0.32) 
                                                --------     --------      ---------   ---------
                                                --------     --------      ---------   ---------

Weighted average common shares                    14,779       16,505         14,953      16,509
                                                --------     --------      ---------   ---------
                                                --------     --------      ---------   ---------

Diluted earnings (loss) per share:
Income (loss) from continuing operations         $ (0.51)    $   0.10      $   (1.54)   $   0.21
Income (loss) from discontinued operations           -          (0.66)          0.13       (0.52)
                                                --------     --------      ---------   ---------
Net loss                                         $ (0.51)    $  (0.56)     $   (1.40)   $  (0.31)
                                                --------     --------      ---------   ---------
                                                --------     --------      ---------   ---------

Weighted average common shares and dilutive 
     common share equivalents                     14,779       16,780         14,953      16,753
                                                --------     --------      ---------   ---------
                                                --------     --------      ---------   ---------
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                      -2-

<PAGE>

                          ADAPTIVE BROADBAND CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                 MARCH 31,     JUNE 30,
                                                                  1999          1998
                                                                 ---------     --------
<S>                                                           <C>            <C>
ASSETS
Current assets:
     Cash and cash equivalents                                 $   4,638      $  24,630
     Short-term investments                                        2,149          2,636
     Accounts receivable                                          35,040         35,918
     Inventories                                                  24,258         25,710
     Deferred income taxes                                        36,739         15,714
     Prepaid expenses                                              2,602            512
     Net current assets of discontinued operations                14,386         11,971
                                                               ---------      ---------
          Total current assets                                   119,812        117,091
                                                               ---------      ---------

Property, plant and equipment, net                                20,345         19,065
Deferred income taxes                                              3,005         16,448
Other assets                                                       5,945          3,698
Intangible assets                                                 32,607         27,887
Net long-term assets of discontinued operations                    3,014          6,323
                                                               ---------      ---------
                                                               $ 184,728      $ 190,512
                                                               ---------      ---------
                                                               ---------      ---------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                          $  13,505      $  13,142
     Accrued liabilities                                          28,513         30,217
     Current portion of long-term debt                             1,970            352
     Note payable                                                 25,250            -  
                                                               ---------      ---------
          Total current liabilities                               69,238         43,711
                                                               ---------      ---------

Long-term liabilities:
Long-term debt                                                     1,016          2,748
Convertible subordinated notes                                    57,500         57,500
Other long-term liabilities                                        1,790          2,000
                                                               ---------      ---------
     Total long-term liabilities                                  60,306         62,248
                                                               ---------      ---------

Shareholders' equity:
     Common stock                                                  1,663          1,663
     Capital in excess of par value                               95,673         95,673
     Treasury stock                                              (34,352)       (27,831)
     Retained earnings (deficit)                                  (7,800)        15,048
                                                               ---------      ---------
          Total shareholders' equity                              55,184         84,553
                                                               ---------      ---------
                                                               $ 184,728      $ 190,512
                                                               ---------      ---------
                                                               ---------      ---------
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                      -3-

<PAGE>

                         ADAPTIVE BROADBAND CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED
                                                                               MARCH  31,
                                                                           ------------------
                                                                           1999          1998
                                                                           ----          ----
<S>                                                                     <C>            <C>
Operating activities:
Income (loss) from continuing operations                                $ (22,960)     $  3,514
Adjustments to reconcile net income to net
     Cash provided by (used in) operating activities:
     Purchased in-process research and development                         11,775           -  
     Depreciation and amortization                                          5,264         5,269
     Amortization of intangible assets                                      1,408         1,032
     Deferred income taxes                                                 (8,494)        4,147
     Debt issuance costs                                                      157           238
     Other                                                                 (2,570)         (575)
Net effect of changes in:
     Accounts receivable                                                    1,212       (15,064)
     Refundable income taxes                                                  -          10,085
     Inventories                                                            1,759           742
     Prepaid expenses                                                      (2,090)       (1,056)
     Accounts payable                                                         146        (4,185)
     Other assets and accrued liabilities                                  (2,584)        3,668
                                                                        ---------     ---------
Net cash provided by (used in) continuing operations                      (16,977)        7,815
                                                                        ---------     ---------
Investing activities:
Capital expenditures                                                       (5,465)       (4,498)
Acquisitions and investments in businesses                                (18,761)       27,000 
Other                                                                         487        (2,608)
                                                                        ---------     ---------
Net cash provided by (used in) continuing operations 
  investing activities                                                    (23,739)       19,894
Net cash provided by (used in) discontinued operations 
  activities                                                                3,960       (11,858)
                                                                        ---------     ---------
Net cash provided by (used in) investing activities                       (19,779)        8,036
                                                                        ---------     ---------

Financing activities:
Payments on long-term debt                                                   (114)         (109)
Proceeds from issuance of common stock                                      2,019         2,600
Proceeds from (payments on) bank credit facilities                         25,250        (6,000)
Purchase of treasury stock                                                (10,391)       (8,057)
Repayment of convertible subordinated notes                                   -          (5,700)
                                                                        ---------     ---------
Net cash provided by (used in) financing activities                        16,764       (17,266)
                                                                        ---------     ---------

Net decrease in cash and cash equivalents                                 (19,992)       (1,415)
Cash and cash equivalents at beginning of year                             24,630         5,705
                                                                        ---------     ---------
Cash and cash equivalents at end of period                              $   4,638      $  4,290
                                                                        ---------     ---------
                                                                        ---------     ---------

Supplemental cash flow information:
Cash paid (received) during the period for:
     Interest                                                           $   2,232      $  2,339
     Income taxes                                                               5          (300)
</TABLE>

See Notes to Condensed Consolidated Financial Statements.


                                      -4-

<PAGE>

                       ADAPTIVE BROADBAND CORPORATION
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1.     BASIS OF PRESENTATION

     The unaudited condensed consolidated financial statements include the 
accounts of Adaptive Broadband Corporation (formerly California Microwave, 
Inc.) and its subsidiaries (the Company).  See Note 13 - Corporate Name 
Change.  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 and nine 
months ended March 31, 1999 and March 31, 1998, the Company's comprehensive 
loss was the same as its net loss.

NOTE 2.     SEGMENT INFORMATION

     During the third quarter of fiscal year 1999, the Company completed the 
reorganization of its continuing operations from a holding company operating 
in two business segments to an integrated organization operating in one 
business segment.  The Company is a supplier of terrestrial wireless and 
satellite-based systems to support ultra-high speed Internet access, 
broadcast digital TV transport and worldwide Internet backbones.  The Company 
also provides industry-leading solutions for satellite-based data 
communications and terrestrial wireless telemetry networks.  The Company's 
operations are treated as one operating segment as it reports operating 
results on an aggregate basis to the chief operating decision maker in the 
Company.  Prior to the reorganization, the Company reported its continuing 
operation through the Satellite Communications Division and the Terrestrial 
Wireless Division.  See "Results of Operations" in Management's Discussion 
and Analysis of Financial Condition and Results of Operations. 

NOTE 3.     RESTRUCTURING AND OTHER CHARGES

     During the third quarter of fiscal year 1999, the Company completed the 
reorganization of its continuing operations from a holding company to one 
integrated organization and recorded pre-tax charges of $3.3 million.  The 
charges included $2.5 million for severance and $0.8 million for fixed asset 
write-offs.  The severance was associated with work force reductions of 
approximately 130 employees in manufacturing operations and product 
management.  The work force reductions and fixed asset write-offs were 
primarily driven by the reduction of manufacturing capacity at the Company's 
satellite communications operation in Tempe, AZ.  The Company utilized $ 0.8 
million of the $2.5 million of severance reserve through cash payment for 
termination benefits.  The Company expects to utilize the remainder of the 
severance accrual through additional cash payments for termination benefits 
by December 31, 1999.

     During the fourth quarter of fiscal year 1998, the Company reviewed and 
refocused its operations and business processes in connection with its 
strategic and operational initiatives and recorded $4.6 million for 
restructuring and other charges, primarily for severance and excess 
facilities.  The severance charge was $2.9 million associated with workforce 
reductions of approximately 160 employees.  The workforce reductions were 
primarily driven by the elimination of manufacturing capacity in the 
Company's Satellite division and factory consolidation in the Company's 
Terrestrial division, as well as the elimination of the Company's historical 
holding company structure and impacted employees in all functional areas of 
the Company.  During the first nine months of fiscal year 1999, the Company 
terminated approximately all of the 160 employees and utilized $2.2 million 
of the $2.9 million reserve recorded at June 30, 1998 through cash payments 
for termination benefits.  During the first nine months of the fiscal year 
1999, there have been no adjustments to the reserve, and the Company expects 
to utilize the remainder of the severance accrual through additional cash 
payments for termination benefits by June 30, 1999.

NOTE 4.     DISCONTINUED OPERATIONS

     In October 1998, the Company's Board of Directors adopted a formal plan 
to sell its Government Division, which consisted 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 contracted principally with 
the United States Department of Defense and provided products and services 
principally in the areas of communication, reconnaissance, and surveillance 
systems.  On April 26, 1999, the Company completed the sale of its Government 
Division to Northrop Grumman Corporation for $93 million in cash, for an 
approximate net gain of $38 million (net of income taxes).  The Company used 
a portion of the proceeds to pay down the entire outstanding balance of its 
credit facility. The Company plans to use the remaining proceeds to pay down 
long term debt, resume its share buyback program and continue to invest in 
the development and marketing of its new wireless broadband products.  The 
Government Division sale price will include up to an additional $5 million 
contingent upon the future performance of the divested business.

                                      -5-

<PAGE>

     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 $19.9 million and $22.3 million for the three 
months ended March 31, 1999 and 1998, and $59.7 million and $68.1 million for 
the nine months ended March 31, 1999 and 1998.  Income from discontinued 
operations (net of income taxes) for the Government Division was recorded 
breakeven and $1.5 million for the three months ended March 31, 1999 and 
1998, and $2.0 million and $3.8 million for the nine months ended March 31, 
1999 and 1998.  The loss from discontinued operations for the Government 
Division for the third quarter of fiscal year 1999 has been deferred in 
accordance with discontinued operation accounting and will be offset against 
the gain from the Government Division sale in the fourth quarter of fiscal 
year 1999.

     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, including 
$12.5 million (net of income taxes) during the quarter ended March 31, 1998.  
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 through the divestiture dates. Revenue 
from the MN and STS discontinued operations was $12.9 million and $75.4 
million for the three-month and nine-month periods ended March 31, 1998. The 
loss from discontinued operations (net of income taxes) for MN and STS for 
the three month and nine month periods ended March 31, 1998, was $3.6 million 
and $8.3 million, and was accrued as part of the net loss on disposal. 

     Final accounting for the MN divestiture is subject to completion of the 
post-closing procedures provided for in the Tadiran agreement.  The Company 
believes that the completion of these procedures will not have a material 
impact on the Company's financial position, results of operations or cash 
flows.

     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, 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 that 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 flows.

NOTE 5.     INVENTORIES

<TABLE>
<CAPTION>
     (DOLLARS IN THOUSANDS)                  MARCH 31, 1999      JUNE 30, 1998
     ----------------------                  --------------      -------------
<S>                                          <C>                 <C>
     Work-in-process and finished goods         $  12,455          $   8,766
     Raw materials                                 11,803             16,944
                                                ---------          ---------
                                                 $ 24,258          $  25,710
                                                ---------          ---------
                                                ---------          ---------
</TABLE>

NOTE 6.     INTANGIBLE ASSETS OF BUSINESSES ACQUIRED

     For acquisitions accounted for under the purchase method, the excess 
purchase price over the fair value of net tangible assets acquired is 
allocated to intangible assets based on fair value. The carrying value of the 
intangible assets are reviewed if the facts and circumstances suggest that 
the asset may be impaired. If this review indicates that the intangible 
assets are not recoverable, the Company's carrying value is reduced 
appropriately.  The following table summarizes net intangible assets of 
businesses acquired:

<TABLE>
<CAPTION>
                             AMORTIZATION
     (DOLLARS IN THOUSANDS)      PERIOD      MARCH 31, 1999      JUNE 30, 1998
     ----------------------  ------------    --------------      -------------
<S>                          <C>             <C>                 <C>
Goodwill                     10-30 years       $ 40,222             $37,033
Developed technology             8 years          2,074                 -
Assembled workforce          3 - 4 years            865                 -
                                               --------             -------
                                                 43,161              37,033
Accumulated amortization                        (10,554)             (9,146)
                                               --------             -------
                                               $ 32,607             $27,887
                                               --------             -------
                                               --------             -------
</TABLE>


                                      -6-

<PAGE>

NOTE 7.     BORROWING ARRANGEMENTS

     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 June 
1999.  The Company increased its revolving credit facility to $36 million 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 0.4% and the maximum borrowing rate set at the 
bank's reference rate plus 0.5%.  The maximum borrowing rate was 8.0% at 
March 31, 1999.  The net borrowing capacity under the Company's credit 
facility was $9.4 million as of March 31, 1999.  In April 1999, the Company 
used a portion of the proceeds from the sale of its Government Division to 
pay down the entire outstanding balance of the credit facility.  See Note 4 
-Discontinued Operations.

     At March 31, 1999, the Company was not in compliance with certain 
covenants of its bank credit facility and one of its industrial development 
bond agreements.  The credit facility lender waived such non-compliance at 
March 31, 1999, and the credit facility and industrial development bond 
balances are classified as current liabilities.  The Company plans to use a 
portion of the proceeds from the sale of its Government Division to pay down 
the balance of the industrial development bond. 

NOTE 8.     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 6, 1998, the Company announced that its Board 
of Directors had increased the number of shares authorized for repurchase to 
six million.  During the nine months ended March 31, 1999, the Company 
acquired 732,000 shares of common stock for $10.4 million, bringing the total 
shares repurchased subsequent to February 5, 1998 to approximately 2.3 
million.

     The following table summarizes the changes in shareholders' equity for 
the nine months ended March 31, 1999.

<TABLE>
<CAPTION>
                                                        CAPITAL IN                RETAINED         TOTAL   
                                SHARES                  EXCESS OF      TREASURY   EARNINGS      SHAREHOLDERS'
(DOLLARS IN THOUSANDS)          ISSUED        AMOUNT    PAR VALUE       STOCK     (DEFICIT)       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 repurchase                                                (10,391)                 (10,391)
Common stock issued from 
treasury shares for stock 
option and stock purchase 
plans                                                                      3,870    (1,851)         2,019
Net loss                                                                           (20,997)       (20,997)
                              -------------------------------------------------------------------------------
Balance at March 31, 1999     16,629,031       $1,663    $95,673        $(34,352)  $(7,800)      $ 55,184
                              -------------------------------------------------------------------------------
</TABLE>

NOTE 9.     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 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 as described in the 
Agreement.  In light of the Company's common stock repurchase program 
(discussed in Note 8 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 of Directors 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 10.     INCOME TAXES

     At March 31, 1999, the Company has a cumulative net deferred tax asset 
of $39.7 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 
gain on the sale of its Government Division.


                                      -7-

<PAGE>

NOTE 11.     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 12.     ACQUISITIONS

     On August 20, 1998, the Company acquired Adaptive Broadband Limited 
(ABL) 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 net tangible assets, $0.4 million to identified 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 for these products to contribute to the future 
operations of the Company. The Company's results of operations for the first 
nine months of fiscal year 1999 include ABL's results from August 20, 1998.

     On November 19, 1998, the Company acquired Crown Satellite (Crown), 
which is developing and supplying products and software for the network 
delivery of Internet Protocol (IP) data and multimedia services, from Crown 
International, Inc.  The acquisition was accounted for under the purchase 
method. The initial purchase price was approximately $7.7 million including 
cash payments, direct costs, and the assumption of Crown's net liabilities.  
The purchase price will include additional future payments contingent on 
Crown's performance.  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 $3.6 million to in-process research and development, $0.3 
million to net tangible assets, $2.5 million to identified intangible assets, 
and $1.3 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 purchased in-process research and development is 
appropriate given the stage of development of certain of Crown's data 
products and the potential for these products to contribute to the future 
operations of the Company. The Company's results of operations for the first 
nine months of fiscal year 1999 include Crown's results from November 19, 
1998.

NOTE 13.     CORPORATE NAME CHANGE

     Effective April 29, 1999, the Company changed its corporate name from 
California Microwave, Inc. to Adaptive Broadband Corporation.  During the 
past two years, the Company has targeted its market and product focus to 
concentrate on wireless broadband solutions.  The Company bears little 
resemblance to the California supplier of defense electronics and microwave 
components that was founded in 1968.  The California Microwave name has a 
traditionally strong presence in the intelligence community, and the Company 
included the name as part of the sale of the Company's Government Division to 
Northrop Grumman Corporation.  The Company's stock symbol of ADAP was listed 
on the Nasdaq national market trading system on April 29, 1999.



                                      -8-

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS

STATEMENTS MADE BELOW AND IN THE ADAPTIVE BROADBAND CORPORATION, FORMERLY 
CALIFORNIA MICROWAVE, INC. (THE COMPANY), 1998 ANNUAL REPORT TO SHAREHOLDERS 
THAT ARE NOT HISTORICAL FACTS, INCLUDING ANY STATEMENTS ABOUT EXPECTATIONS 
FOR FISCAL YEAR 1999 AND BEYOND, MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT 
INVOLVE CERTAIN RISKS AND UNCERTAINTIES.  WORDS SUCH AS "BELIEVES," 
"ANTICIPATES," "EXPECTS," "INTENDS," AND SIMILAR EXPRESSIONS ARE INTENDED TO 
IDENTIFY FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE EXCLUSIVE MEANS OF 
IDENTIFYING SUCH STATEMENTS. READERS ARE CAUTIONED THAT FORWARD-LOOKING 
STATEMENTS REFLECT MANAGEMENT'S ANALYSIS ONLY AS THE DATE HEREOF, AND THE 
COMPANY ASSUMES NO OBLIGATION TO UPDATE THESE STATEMENTS. ACTUAL EVENTS OR 
RESULTS MAY DIFFER MATERIALLY FROM THE EVENTS OR RESULTS DISCUSSED IN THE 
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH A DIFFERENCE 
INCLUDE, BUT ARE NOT LIMITED TO, DELAYS IN THE RECEIPT OF ORDERS OR IN THE 
SHIPMENT OF PRODUCTS, CHANGES IN DEMAND FOR PRODUCTS, PRICE COMPETITION, NEW 
PRODUCT INTRODUCTIONS BY COMPETITORS OR THE COMPANY, COST OVERRUNS, FOREIGN 
CURRENCY EXCHANGE RATE FLUCTUATIONS, TIMELY AVAILABILITY OF SUPPLY OF 
COMPONENTS, DEPENDENCE ON MAJOR ORDERS FROM A SMALL NUMBER OF CUSTOMERS, 
LIMITATIONS ON THE COMPANY'S ABILITY TO REDUCE INVENTORY AND EXPENSES IF 
FORECASTS AND EXPECTED DEMAND ARE NOT REALIZED, GENERAL ECONOMIC CONDITIONS, 
THE IMPACT OF YEAR 2000 AND OTHER FACTORS DISCUSSED ELSEWHERE HEREIN. SEE 
ALSO THE RISK 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.  The Government Division was sold on April 
26, 1999.  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 4 -- Discontinued Operations, of Notes to Condensed 
Consolidated Financial Statements for further discussion of these 
transactions.

RESULTS OF OPERATIONS

OVERVIEW

     The Company reported a net loss from continuing operations of $7.5 
million, or $0.51 per share, for the three months ended March 31, 1999, 
compared to net income from continuing operations of $1.7 million, or $0.10 
per share for the three months ended March 31, 1998.  Operating results from 
continuing operations for the third quarter of fiscal year 1999 include 
restructuring and other charges of $2.1 million after income taxes. Excluding 
the restructuring and other charges, the Company's net loss from continuing 
operations for the three months ended March 31, 1999 would have been $5.4 
million, or $0.36 net loss per share.

     In addition to the restructuring and other charges, the fiscal 1999 
third quarter includes excess manufacturing costs of $1.9 million after 
income taxes, related to factory floor and inventory reductions, and 
manufacturing process changes in the Company's satellite communications 
operations.

     The Company reported a net loss from continuing operations of $23.0 
million, or $1.54 per share, for the first three quarters of fiscal year 
1999, compared to net income from continuing operations of $3.5 million, or 
$0.21 per share for the same period during fiscal year 1998.  Results of 
fiscal year 1998 included a litigation settlement charge of $1.2 million 
after income taxes.  Operating results from continuing operations for the 
first three quarters of fiscal year 1999 include one-time charges of $10.4 
million after income taxes for purchased in-process research and development 
related to the company's acquisitions of Adaptive Broadband Limited (ABL) and 
Crown Satellite (Crown) and restructuring and other charges of $2.1 million 
after income taxes. Excluding the purchased in-process research and 
development charges and restructuring and other charges, net loss from 
continuing operations for the nine months ended March 31, 1999 would have 
been $10.5 million, or $0.70 net loss per share.

     The Company records bookings for new orders received only if the product 
will be shipped to the customer within twelve months.  New orders booked from 
continuing operations were $41.7 million and $43.7 million for the three 
months ended March 31, 1999 and 1998, representing a 5% decrease.  For the 
first nine months of Fiscal 1999, new orders booked from continuing 
operations were $117.3 million, compared to $134.1 million for the same 
period during fiscal year 1998, representing a 13% decrease.  Revenue from 
continuing operations was $38.6 million and $44.3 million for the three 
months ended March 31, 1999 and 1998, representing a 13% decrease.  Revenue 
from continuing operations was $116.5 million and $129.6 million for the nine 
months ended March 31, 1999 and 1998, representing a 10% decrease.  These 
decreases were primarily a result of weakness in the Company's international 
markets, primarily in Latin America, for both satellite and terrestrial 
products, and in satellite product sales to domestic integrators who ship 
internationally. The decrease in international revenue was partially offset 
by an increase in domestic revenue during the third quarter and the first 
nine months of Fiscal 1999.

                                      -9-

<PAGE>

     During the third quarter of fiscal year 1999, the Company completed its 
transition from a holding company operating in two business segments to an 
integrated organization operating in one business segment.  The Company 
derives its revenue from two major product groups: Satellite Communications 
Products Group (Satellite) and Terrestrial Wireless Products Group 
(Terrestrial).  The supplemental information for these two product groups are 
as follows:

<TABLE>
<CAPTION>
(Dollars in millions)       Three months ended March 31,           Nine months ended March 31,
                             1999                1998                1999             1998
                              ----                ----               ----             ----
<S>                      <C>       <C>       <C>       <C>       <C>      <C>      <C>      <C>
BOOKINGS

Satellite:
   Domestic               $10.5     50%       $11.0     48%      $ 26.8    45%     $ 30.2     43%
   International           10.3     50%        12.0     52%        32.7    55%       40.3     57%
                          -------------       -------------      -------------     --------------
   Total                   20.8    100%        23.0    100%        59.5   100%       70.5    100%

Terrestrial:
   Domestic                16.7     80%        12.3     59%        43.4    75%       39.6     62%
   International            4.2     20%         8.4     41%        14.4    25%       24.0     38%
                          -------------       -------------      -------------     --------------
   Total                   20.9    100%        20.7    100%        57.8   100%       63.6    100%

Total Domestic             27.2     65%        23.3     53%        70.2    60%       69.8     52%
Total International        14.5     35%        20.4     47%        47.1    40%       64.3     48%
                          -------------       -------------      -------------     --------------
Total Bookings            $41.7    100%       $43.7    100%      $117.3   100%     $134.1    100%

REVENUE

Satellite:
   Domestic               $ 9.7     49%       $ 9.5     41%      $ 26.3    44%     $ 27.4     41%
   International           10.2     51%        13.5     59%        32.9    56%       40.1     59%
                          -------------       -------------      -------------     --------------
   Total                   19.9    100%        23.0    100%        59.2   100%       67.5    100%

Terrestrial:
   Domestic                13.9     74%        13.2     62%        40.4    71%       37.9     61%
   International            4.8     26%         8.1     38%        16.9    29%       24.2     39%
                          -------------       -------------      -------------     --------------
   Total                   18.7    100%        21.3    100%        57.3   100%       62.1    100%

Total Domestic             23.6     61%        22.7     51%        66.7    57%       65.3     50%
Total International        15.0     39%        21.6     49%        49.8    43%       64.3     50%
                          -------------       -------------      -------------     --------------
Total Revenue             $38.6    100%       $44.3    100%      $116.5   100%     $129.6    100%

GROSS MARGIN

Satellite                 $ 5.1     26%       $ 8.3     36%      $ 16.9    29%      $ 26.4    39%
Terrestrial                 6.0     32%         9.0     42%        22.1    39%        25.3    41%
                          -------------       -------------      -------------      -------------
Total                     $11.1     29%       $17.3     39%      $ 39.0    33%      $ 51.7    40%

GROSS MARGIN-EXCLUDING EXCESS MANUFACTURING COSTS


Satellite                 $ 7.2     36%       $ 8.3     36%      $ 19.0    32%      $ 26.4    39%
Terrestrial                 6.9     37%         9.0     42%        23.0    40%        25.3    41%
                          -------------       -------------      -------------      -------------
Total                     $14.1     37%       $17.3     39%      $ 42.0    36%      $ 51.7    40%
</TABLE>


SATELLITE COMMUNICATIONS 

     The Satellite Communications Products Group provides satellite modems 
and transceiver products and services primarily to telecommunications 
carriers and Internet service providers, it also develops and supplies 
products and software for the network delivery of Internet Protocol (IP) data 
and multimedia services.  These products and services enable customers to 
provide voice, video, and data services via satellite.

     Satellite revenue was $19.9 million and $23.0 million for the three 
months ended March 31, 1999 and 1998, representing a decrease of $3.1 million 
or 13%. Satellite revenue was $59.2 million and $67.5 million, for the nine 
months ended March 31, 1999 and 1998, representing a decrease of $8.3 million 
or 12%. International revenue decreased $3.3 million or 24% for the three 
months ended March 31, 1999, and for the nine months ended March 31, 1999, 
international revenue decreased $7.2 million or 18%. The international 
revenue decrease was due to economic conditions in developing countries, a 
delay in the privatization of the public telecommunications company 


                                      -10-

<PAGE>

in Brazil, and weakened demand in the satellite European markets.  Domestic 
revenue increased $0.2 million or 2% for the three months ended March 31, 
1999, and decreased $1.1 million or 4% for the nine months ended March 31, 
1999. The revenue decrease for the nine months ended March 31, 1999 was due 
primarily to lower demand from systems integrators whose ultimate customers 
are in the international markets.  Satellite book-to-bill ratios were 105% 
and 100% for the three months ended March 31, 1999 and 1998, and 101% and 
104% for the nine months ended March 31, 1999 and 1998. 

     Excluding excess manufacturing costs directly related to factory floor 
reductions, inventory reductions and manufacturing process changes of $2.1 
million, Satellite gross margin would have been $7.2 million and $8.3 
million, or as a percentage of revenue 36% and 36% for the three months ended 
March 31, 1999 and 1998.  Excluding the excess manufacturing costs, Satellite 
gross margin would have been $19.0 million and $26.4 million, or as a 
percentage of revenue 32% and 39% for the nine months ended March 31, 1999 
and 1998. 

TERRESTRIAL WIRELESS

     The Terrestrial Wireless Products Group provides products and services, 
based upon microwave radio technology, primarily to the television broadcast, 
oil, gas and utility, and transaction processing industries.  It is also 
developing high-speed, dynamic bandwidth management and wireless Internet 
connectivity technology.

     Terrestrial revenue was $18.7 million and $21.3 million for the three 
months ended March 31, 1999 and 1998, representing a decrease of $2.6 million 
or 12%. Terrestrial revenue was $57.3 million and $62.1 million for nine 
months ended March 31 1999 and 1998, representing a decrease of $4.8 million 
or 8%. International revenue decreased $3.3 million or 41% for the three 
months ended March 31, 1999, partially offset by an increase in domestic 
revenue of $0.7 million.  For the nine months ended March 31 1999, 
international revenue decreased $7.3 million or 30%, partially offset by an 
increase in domestic revenue of $2.5 million or 7%. The decrease in 
international revenue was due primarily to economic conditions in developing 
countries, including declines in oil and gas prices in Latin America.  
Terrestrial book-to-bill ratios were 112% and 97% for the three months ended 
March 31, 1999 and 1998, and 101% and 102% for the nine months ended March 
31, 1999 and 1998, respectively.

     Excluding excess manufacturing costs from inventory reductions of $0.9 
million, terrestrial gross margin would have been $6.9 million and $9.0 
million, or as a percentage of revenue 37% and 42% for the three months ended 
March 31, 1999 and 1998, and $23.0 million and $25.3 million, or as a 
percentage of revenue 40% and 41% for the nine months ended March 31, 1999 
and 1998. The decrease in gross margin was due primarily to lower revenue and 
a change in the revenue mix to lower margin products.

RESTRUCTURING AND OTHER CHARGES

     During the third quarter of fiscal year 1999, the Company completed its 
reorganization of its continuing operations from a holding company to one 
integrated organization and recorded pre-tax charges of $3.3 million.  The 
charges included $2.5 million for severance and $0.8 million for fixed asset 
write-offs.  The severance was associated with work force reductions of 
approximately 130 employees in manufacturing operations and product 
management.  The work force reductions and fixed asset write-offs were 
primarily driven by the reduction of manufacturing capacity at the Company's 
satellite communications operation in Tempe, AZ. 

     The completion of the reorganization included the consolidation of all 
company manufacturing operations under new leadership and the installation of 
a new management team in its Tempe, AZ, satellite communications operation.  
The new team has begun outsourcing the manufacturing of certain new products, 
reduced the Tempe factory floor space by 20%, consolidated its manufacturing 
operations into one building, and reduced by 32% the manufacturing operations 
headcount in Tempe.  By transitioning to a build-to-order process, inventory 
in Tempe has been reduced by 14%, and through improvements in bill of 
materials, inventory in the company's Chelmsford, MA, operation has been 
reduced by 17%.

OPERATING EXPENSES

     Research and development expenses for continuing operations were $6.8 
million and $4.5 million, or as a percentage of revenue 18% and 10% for the 
three months ended March 31, 1999 and 1998.  For the nine months ended March 
31, 1999 and 1998, research and development expenses were $18.2 million and 
$13.2 million, or as a percentage of revenue 16% and 10%.  The increase was 
primarily attributable to the Company's investment in research and 
development for AB-Access-TM- and other terrestrial wideband and broadband 
products, as well as research and development investment in broadband 
satellite products such as the Spectracast-TM- products and the Multimedia 
Integrated Digital Access System (MIDAS-TM-).  The Company believes that the 
continual and rapid introduction of new products and technologies is critical 
to the growth within its current and future target markets, thus expects to 
continue to commit substantial resources to product development and 
engineering in future periods.

     Sales, marketing and administrative expenses for continuing operations 
were $11.0 million and $9.1 million or as a percentage of revenue 28% and 
20%, for the three months ended March 31, 1999 and 1998.  For the nine months 
ended March 31, 1999 and 1998, sales, marketing and administrative expenses 
for continuing operations were $32.5 million and $29.1 million, or as a 
percentage of revenue 28% and 22%.  Included in sales, marketing and 
administrative expenses for the nine months ended March 31, 1998 was a $1.9 
million litigation settlement charge.  The increase reflects the Company's 
investment in new sales and marketing initiatives for its new products.

                                      -11-

<PAGE>

     Amortization expense associated with intangible assets for the 
continuing operations was $0.5 million and $0.3 million for the three months 
ended March 31, 1999 and 1998, and $1.4 million and $1.0 million for the nine 
months ended March 31, 1999 and 1998.  The increase was due to an increase in 
intangible assets from the ABL and Crown acquisitions during the first half 
of fiscal year 1999.

     During the first half of fiscal year 1999, the Company recorded 
purchased in-process research and development charges of $8.2 million 
associated with the ABL acquisition and $3.6 million associated with the 
Crown acquisition.  See Note 12 -- Acquisition, of Notes to Condensed 
Consolidated Financial Statements for further discussion of the  ABL and 
Crown acquisitions.

INTEREST EXPENSE, NET

     Net interest expense was $1.2 million and $0.9 million for the three 
months ended March 31, 1999 and 1998, and $3.2 million and $2.9 million for 
the nine months ended March 31, 1999 and 1998.  The increase in net interest 
expense during the three and nine months ended March 31, 1999 was due to 
higher average borrowings from the utilization of the Company's revolving 
credit facility.

PROVISION FOR INCOME TAXES

     The Company's income tax benefit from continuing operations was $4.2 
million and $8.5 million for the three months and nine months ended March 31, 
1999 compared to income taxes expense of $0.9 million and $2.0 million for 
the three months and nine months ended March 31, 1998.  The effective income 
tax rate for the three months ended March 31, 1999 and 1998 was consistent at 
36%.  Excluding the impact of the partial valuation allowance recorded 
against future deductions from the amortization of intangible assets acquired 
in the ABL and Crown acquisitions, the effective income tax rate for the nine 
months ended March 31, 1999 was consistent with the 36% rate for the same 
period in the prior year.

DISCONTINUED OPERATIONS

     Discontinued operations includes breakeven results for Government 
Division for the three months ended March 31, 1999.  For the three months 
ended March 31, 1998, discontinued operations includes net income from the 
Government Division of $1.5 million.  For the nine months ended March 31, 
1999 and 1998, discontinued operations includes net income from the 
Government Division of $2.0 million and $3.8 million.  Also included in 
discontinued operations for the three and nine months ended March 31, 1999, 
is a $12.5 million provision for losses on the disposal of Microwave Networks 
(MN) and Satellite Transmission Systems (STS).  The loss from discontinued 
operations for the Government Division for the third quarter of fiscal year 
1999 has been deferred in accordance with discontinued operation accounting 
and will be recognized against the gain from the Government Division sale in 
the fourth quarter of fiscal year 1999.  See Note 4 - Discontinued operations 
of Notes to Condensed Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 1999, the Company had working capital of $50.6 million, 
including $4.6 million of cash and cash equivalents, as compared to 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 $17.0 million for 
the nine months ended March 31, 1999, primarily due to a loss from operations 
before the write-off of purchased in-process research and development, offset 
by changes in assets and liabilities.  Net cash provided by continuing 
operating activities was $7.8 million for the nine months ended March 31, 
1998, primarily from operating income of $3.5 million and $10.1 million from 
income tax refunds, which was offset by an increase in accounts receivables 
of $15.1 million. 

     Net cash used in investing activities for the nine months ended March 
31, 1999 was $19.8 million including the acquisitions of ABL for $10.6 
million and Crown for $7.7 million, and capital expenditures of $5.5 million, 
offset by $4.0 million cash generated from discontinued operations.  Net cash 
from investing activities for the nine months ended March 31, 1998, was $8.0 
million, primarily from proceeds from the sale of STS for $27 million, 
partially offset by $11.9 million of cash used in discontinued operations.

     During the first nine months of fiscal year 1999, the Company acquired 
732,000 shares of its common stock for $10.4 million, bringing the total 
shares repurchased to approximately 2.3 million shares under the Board of 
Directors authorized common stock repurchase plan.

     In addition to the common stock repurchased, the Company's financing 
activities for the nine months ended March 31, 1999 included credit facility 
borrowings of $25.3 million and the receipt of $2.0 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 June 
1999.  The Company increased its revolving credit facility to $36 million 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 0.4% and the maximum borrowing rate set at the 
bank's reference rate plus 0.5%.  The maximum borrowing rate was 8.0% at 


                                      -12-

<PAGE>

March 31, 1999.  The net borrowing capacity under the Company's credit 
facility was $9.4 million as of March 31, 1999. 

     At March 31, 1999, the Company was not in compliance with certain 
covenants of its bank credit facility and one of its industrial development 
bond agreements.  The credit facility lender waived such non-compliance at 
March 31, 1999, and the credit facility and industrial development bond 
balances are classified as current liabilities.  In April 1999, the Company 
completed the sale of its Government Division to Northrop Grumman for $93 
million in cash.  The Company used a portion of the sale proceeds to pay down 
the entire outstanding balance of the credit facility.  The Company plans to 
use the remaining proceeds to pay down the balance of the industrial 
development bond, resume its share buyback program and continue to invest in 
the development and marketing of its new wireless broadband products. 

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

YEAR 2000 COMPLIANCE

STATE OF READINESS

     As of March 31, 1999, the Company has completed the assessment of the 
potential impact of the Year 2000 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 intends to complete the necessary remediation action 
by the end of calendar year 1999. 

COSTS ASSOCIATED WITH YEAR 2000

     Expenditures to date with respect to Year 2000 have not been material 
and have consisted primarily of the limited use of outside consultants and 
the time of certain Company personnel.  Based on the assessment completed 
through March 31, 1999, the Company currently expects the future costs of 
making system modifications, primarily consisting of the time of certain 
company personnel and the replacement of computer hardware to be 
approximately $0.7 million.  Based on the assessment completed through March 
31, 1999, the Company currently does not expect the future costs of assessing 
the Year 2000 readiness of material third party suppliers and major customers 
to be material.

RISKS OF YEAR 2000

     The Company has completed the assessment of 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, financial position and cash flows.  
While the Company does not anticipate a material business interruption to 
result from the Year 2000, the Company can give no assurances that its 
systems will be Year 2000 ready, and the Company cannot guarantee the Year 
2000 readiness of key third party suppliers, service providers and major 
customers. 

     If any of the Company's computer systems, embedded systems, key third 
party suppliers, service providers and major customers are not Year 2000 
ready, the Company may experience a business interruption which could have a 
material adverse impact on the Company's results of operations and financial 
condition.

CONTINGENCY PLANS

     The Company has developed a comprehensive plan to address situations 
that may result from the Year 2000 and is currently making significant 
progress in the implementation of this plan.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     The majority of the Company's revenue is denominated in U.S. dollars.  
The Company is engaged in minimal foreign currency hedging activity.  No 
foreign currency exchange contracts were outstanding at March 31, 1999, and 
the net currency gains and losses have not been material.

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 


                                      -13-

<PAGE>

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 that may be incurred to resolve the 
dispute, and, although no assurance can be given 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 5.     OTHER INFORMATION

     In April 1999, the Company completed the sale of its Government Division 
to Northrop Grumman Corporation.  The Company has filed a Current Report on 
Form 8-K on December 11, 1998 to provide supplemental information regarding 
the restatement of the operations of the Company's Government Division to 
discontinued operations for each of the four quarters and the fiscal year of 
1998.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit 27.1     Financial Data Schedule

(b) Reports on Form 8-K.

The Company field a Current Report on Form 8-K on March 23, 1999, relating to 
its change of the Company's name to Adaptive Broadband Corporation.

The Company also filed a Current Report on Form 8-K on March 17, 1999, for 
its announcement of having entered into an agreement for the sale of the 
Government Division. 


                                   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.


                                                 ADAPTIVE BROADBAND CORPORATION
                                                                   (Registrant)



May 14, 1999                                  BY  /s/  Donna S. Birks 
----------------------------                      ------------------------------
Date                                              DONNA S. BIRKS
                                                  EXECUTIVE VICE PRESIDENT
                                                  CHIEF FINANCIAL OFFICER





                                      -14-