UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C.
20549
 FORM 10-K
 
 R
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 29, 2007OR£
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For
      the transition period from    
      to
 
 Commission
File Number 000-51958
 NextWave
Wireless Inc.
 (Exact
name of registrant as specified in its charter)
 
 Delaware
              20-5361630(State
      or other jurisdiction of
              (I.R.S.
      EmployerIncorporation
      or organization)
              Identification
      No.)12670
      High Bluff Drive, San Diego, California 92130(Address
      of principal executive offices and ZIP
code)
 
 Registrant’s telephone number,
including area code: (858) 480-3100
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 Title of each
      class
              Name of each exchange
      on which registeredCommon
      Stock, par value $0.001 per share
              NASDAQ
 
 Securities registered pursuant to
Section 12(g) of the Act:None
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes £     No R
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934.  Yes £     No R
 
 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 R     No
£
 
 Indicate
by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.  £
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
 
 Large
Accelerated Filer £       Accelerated
Filer R       Non-Accelerated
Filer £       Smaller
Reporting Company £
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes £     No R
  
 
 The aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold as of the last business day of
the registrant’s most recently completed second fiscal quarter was
$432,644,069.
  Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of the securities under a plan
confirmed by a court.  Yes R     No £
 
 As of
March 10, 2008, there were outstanding 92,713,778 shares of common stock of the
Registrant.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 Certain
information contained in the Proxy Statement for the 2008 Annual Meeting of
Stockholders of the registrant is incorporated by reference into Part III of
this Form 10-K.
 
 
 
  
 
 FORM 10-K
 
 NEXTWAVE
WIRELESS INC.
 Table
of Contents
 
 PagePART IDEFINITIONSDISCLOSURE
      REGARDING FORWARD LOOKING STATEMENTS
              1Item
      1
              BUSINESS
              2Item
      1A
              RISK
      FACTORS
              30Item
      1B
              UNRESOLVED
      STAFF COMMENTS
              41Item
      2
              PROPERTIES
              41Item
      3
              LEGAL
      PROCEEDINGS
              41Item
      4
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              41PART IIItem
      5
              MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
              42Item
      6
              SELECTED
      FINANCIAL DATA
              45Item
      7
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
              47Item
      7A
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              67Item
      8
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
              68Item
      9
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSUREItem
      9A
              CONTROLS
      AND PROCEDURES
              107Item
      9B
              OTHER
      INFORMATION
              109PART IIIItem
      10
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
              109Item
      11
              EXECUTIVE
      COMPENSATION
              109Item
      12
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
              109Item
      13
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              110Item
      14
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
              110PART IVItem
      15
              EXHIBITS
              111SIGNATURES
              114
 
 
 
 
 
 DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
 
 This
Annual Report on Form 10-K and other reports, documents and materials we will
file with the Securities and Exchange Commission (the “SEC”) contain, or will
contain, disclosures that are forward-looking statements that are subject to
risks and uncertainties. All statements other than statements of historical
facts are forward-looking statements. These statements, which represent our
expectations or beliefs concerning various future events, may contain words such
as “may,” “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” or other words of similar meaning in connection with any discussion
of the timing and value of future results or future performance. These
forward-looking statements are based on the current plans and expectations of
our management and are subject to certain risks, uncertainties (some of which
are beyond our control) and assumptions that could cause actual results to
differ materially from historical results or those anticipated. These risks
include, but are not limited to:
  ·
              our
      limited relevant operating history;
  ·
              our
      ability to manage growth or integrate recent or future
      acquisitions;
  ·
              our ability to
      execute our business plan and to become cash flow
  positive;
  ·
              competition
      from alternative wireless technologies and other technology
      companies;
  ·
              our
      ability to develop and commercialize mobile broadband products and
      technologies;
  ·
              the
      ability of vendors to manufacture commercial WiMAX equipment and
      devices;
  ·
              consumer acceptance of fourth
      generation wireless technologies, such as
  WiMAX;
  ·
              consumer acceptance of mobile TV
      and mobile broadcast
services;
  ·
              changes
      in government regulations;
  ·
              any
      loss of our key executive officers;
and
  ·
              other
      risks described under “Risk Factors” and elsewhere in the information
      contained or incorporated into this offering
  circular.
  There may
also be other factors that cause our actual results to differ materially from
the forward looking statements.
  Because
of these factors, we caution you that you should not place any undue reliance on
any of our forward-looking statements. These forward-looking statements speak
only as of the date of this annual report and you should understand that those
statements are not guarantees of future performance or results. New risks and
uncertainties arise from time to time, and it is impossible for us to predict
those events or how they may affect us. Except as required by law, we have no
duty to, and do not intend to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
 
 1
 
 PART
I.
 
 Item 1.Business
 
 In
this Annual Report on Form 10-K, the words “NextWave”, the “Company”, “we”,
“our”, “ours”, and “us” refer to NextWave Wireless Inc. and, except as otherwise
specified herein, to our subsidiaries. Our fiscal year ended on December 29,
2007.
 
 Our
Company
  Weare a mobile broadband and multimedia
technology company thatdevelops, produces, and markets mobilemultimedia andwirelessbroadband products,including fourth generation
(“4G”) wireless broadband semiconductors, device-embedded software for mobile
handsets, mobile TV systems, and mobile broadband network equipment. Our products and technologies are
designed topower wireless networks and devices that enable cutting-edge
mobile multimedia andwireless
broadbandservices.At
present, our customers include many of the largest mobile handset and wireless
service providers in the world includingOrange,Motorola, Nokia, NTT DoCoMo,Panasonic,Sony Ericsson,T- Mobile,andVerizon Wireless.
 
 We believe that mobile multimedia
applications such as Mobile TV, video-on-demand, and streaming audio will be the
driving force behind global adoption of next-generation network technologies and
end-user devices.  Our business activities are focused on developing
the technologies and products that enable mobile operators and device
manufacturers to deliver these types of advanced mobile multimedia services to
customers.
  To help
drive sales of our mobile multimedia and wireless broadband products, we intend
to make our significant spectrum holdings available, consistent with regulatory
requirements, to network operators who build and operate wireless systems that
utilize our technologies. Our spectrum holdings,
 
 Our
mobile multimedia and wireless broadband products and technologies are developed
and marketed through our NextWave Network Products and NextWave Mobile Products
operating units.  During the fourth quarter of 2007, we reorganized
our businesses into four reportable business segments on the basis of products,
services and strategic initiatives.  The four business segments are:
Semiconductor, Multimedia, Networks, and Strategic Initiatives.  The
financial results of NextWave Network Products and NextWave Mobile Products are
reported in the Semiconductor, Multimedia, and Networks business
segments.
  We
believe the breadth of products, technologies, spectrum assets and professional
services we offer represents a unique platform to provide advanced mobile
multimedia and wireless broadband solutions to the market.
  NextWave Network
Products
  NextWave
Network Products (“NNP”) includes the operations of IPWireless, which was
acquired in May 2007, and GO Networks, which was acquired in February 2007. NNP
markets mobile broadband network equipment and mobile TV and multimedia
multicast systems, based on the global Universal Mobile Telecommunications
System (“UMTS”) and Institute of Electrical and Electronics Engineers (“IEEE”)
802.11 standards, to mobile operators around the world.  In addition,
NNP provides mobile operator customers with a comprehensive suite of
professional and value added services.  The financial results of NNP
are reported under our Network business segment.
  Mobile Broadband Network
Equipment. NNP mobile broadband network equipment, based on the UMTS
TD-CDMA standard,  has been commercially deployed by mobile operators
in more than a dozen countries, including the Czech Republic, Germany, New
Zealand, South Africa, Sweden, United Kingdom and the United States. In 2006,
NNP’s UMTS TD-CDMA mobile broadband technology was selected by New York City’s
Department of Information Technology and Telecommunications as part of a
five-year contract awarded to Northrop Grumman for the deployment of a citywide,
public safety, mobile wireless network. To provide customers with an evolution
path to emerging Fourth Generation (“4G”) network technologies, in February 2008
NNP announced its next-generation base station platform that will be field
upgradeable to support Worldwide Interoperability for Worldwide Access
(“WiMAX”)  and release 8 of the UMTS standard, also known as Long Term
Evolution (“LTE”).
  2
 Mobile TV and Multimedia
Multicast Systems. We believe that our Mobile TV and multimedia multicast
solutions will provide mobile operators an opportunity to generate substantial
incremental service and advertising revenues and significantly improve the
return on investment on their spectrum and network infrastructure
investments.  Our advanced Mobile TV systems are compatible with both
UMTS and WiMAX networks and are designed to allow mobile operators to offer
Mobile TV services using their existing spectrum and existing radio access
network (“RAN”) infrastructure.
  NNP’sTDtvTM mobile
broadcast system, based on the Third Generation Partnership Project (“3GPP”)
Multimedia Broadcast Multicast Service (“MBMS”) standard, provides UMTS
operators with the ability to deliver multi-channel mobile TV and other
multimedia services using an underutilized portion of their existing third
generation (“3G”) spectrum.   Designed for easy integration into
existing Wideband Code Division Multiple Access (“WCMDA”) networks and
next-generation WCMDA handsets, TDtv is being offered in combination with
PacketVideo’s MediaFusion advertising platform
  NNP’s MXtvTM mobile
broadband system, announced in March 2008, is based on the 802.16e WiMAX
standard.  We believe that MXtv will provide WiMAX operators the
ability to deliver a broad range of rich and personalized multimedia services
including mobile TV, interactive services, and digital audio without having to
invest in new spectrum or additional network infrastructure.  Similar
to TDtv, MXtv will provide mobile operators the ability to use PacketVideo’s
MediaFusion platform to generate revenues via the delivery of user-specific
advertising.  NNP has executed joint development agreements with
Huawei Technologies USA and Alcatel-Lucent under which these two global network
infrastructure providers will integrate MXtv technology into their
end-to-end WiMAX network solutions.
  Carrier-Grade Mobile Wi-Fi
Systems.  NNP’s family of carrier-class micro, pico and femto
mobile Wi-Fi base stations have been deployed by numerous mobile operators,
Internet Service Providers, and municipalities around the world.  All
of NNP’s Wi-Fi platforms utilize advanced xRFTM
adaptive-beamforming, smart-antenna technology and a cellular-mesh Wi-Fi
architecture to deliver wide-area Wi-Fi network solutions with the performance
and economics required by service providers.  In February 2008, NNP
has announced its integration, and availability of its WiMAX and LTE
capabilities into its line of micro and pico base stations including hybrid
Wi-Fi/WiMAX and Wi-Fi/LTE network solutions.
  Value-Added and Professional
Services. To support sales of its mobile broadband and multimedia
systems, NNP provides its customers with a full array of professional and
value-added services, including RF and core network design services, network
implementation and management services, and back-office service solutions,
Voice-over-Internet-Protocol (“VoIP”) implementation and wireless backhaul
solutions  To demonstrate the capabilities of its products and
services, NNP has implemented a comprehensive test network in Las Vegas,
Nevada.
  NextWave Mobile Products.
  NextWave
Mobile Products (“NMP”) includes the operations of our PacketVideo subsidiary,
the world’s largest independent supplier of mobile multimedia software
solutions, and our Semiconductor business segment, which is developing advanced
wireless semiconductors including OFDM-based WiMAX and LTE
chipsets.
  Multimedia
Software.Our PacketVideo (“PV”)
subsidiary supplies device-embedded multimedia software to many of the world's
largest wireless carriers and wireless handset manufacturers, who use it to
transform a mobile phone into a feature-rich multimedia device that provides
people with the ability to stream, download and play video and music, receive
live TV broadcasts, and engage in two-way video telephony. PV has been
contracted by some of the world's largest carriers, such as Orange NTT DoCoMo,
T-Mobile, Verizon Wireless and Vodafone to design and implement the embedded
multimedia software capabilities contained in their handsets. In addition, PV is
a founding member of the Open Handset Alliance (“OHA”), led by Google, and
will be supplying the multimedia software subsystem for the OHA’s mobile device
AndroidTM
platform. We believe that by joining the OHA, PV will be uniquely positioned to
market its full suite of enhanced software applications to Android application
developers. PacketVideo’s software is compatible with virtually all network
technologies including CDMA, GSM, WiMAX, LTE, and WCDMA.  To date,
over 200 million PV-powered handsets have been shipped by PV’s service provider
and device manufacturer customers. The financial results of our multimedia
software business are reported under our Multimedia business
segment.
  3
 To
further enhance its market position, PV has invested in the development and
acquisition of a wide range of technologies and capabilities to provide its
customers with software solutions to enable home/office digital media
convergence using communication protocols standardized by the Digital Living
Network AllianceTM(“DLNATM”). An
example is PacketVideo's PVConnectTMplatform that provides for content search, discovery, organization and
content delivery/sharing between mobile devices and consumer electronics
products connected to an Internet Protocol (“IP”)-based network. This innovative
platform is designed to provide an enhanced user experience by intelligently
responding to user preferences based on content type, day-part, and content
storage location. In addition, PV’s patented Digital Rights Management (“DRM”)
solutions, already in use by many wireless carriers globally, represent a key
enabler of digital media convergence by preventing the unauthorized access or
duplication of multimedia content used or shared by PacketVideo-enabled
devices.
 
 We
believe that the continued growth in global shipments of high-end handsets with
multimedia capabilities, increasing demand for home/office digital media
convergence solutions, and the acceleration of global deployments of mobile
broadband networks optimized to support mobile multimedia applications will
substantially expand the opportunity for PacketVideo to license its suite of
multimedia software solutions to service providers and to handset and consumer
electronic device manufacturers.
 
 Multimedia Devices.
To help drive market adoption of mobile TV technology and related PV products,
PV recently introduced its Mobile Broadcast Receiver, a matchbox-size hardware
device that enables virtually any mobile Wi-Fi device to play mobile broadcast
TV. The mobile receiver decodes a digital TV signal, repurposes it for use on a
mobile device, and then sends the mobile TV content over Wi-Fi to the handset.
The PV receiver uses patented protocols to ensure optimum rendering of the TV
signal on the playback device and provides secure access to premium
channels.  This allows mobile subscribers to upgrade to advanced
mobile TV services without a requirement to change their handsets.  PV
intends to manufacture several versions of the Mobile Broadcast Receiver to
support TDtv, MXtv, Digital Video Broadcasting – Handheld (“DVB-H”), and
MediaFLO mobile TV systems. The financial results of our multimedia device
business are reported under our Multimedia business segment.
  Semiconductors.  Over 596
engineers at NMP are developing a family of mobile broadband semiconductor
products based on OFDM technologies such as WiMAX and LTE. NMP’s initial focus
is to market multi-band RF chips and high-performance, digital baseband WiMAX
chips to wireless device and network equipment manufacturers who require an
advanced platform to develop next-generation WiMAX mobile terminal and
infrastructure products optimized for mobile multimedia applications such as
mobile TV. Samples of our first-generation NW1000 chipset family, which includes
a WiMAX baseband system-on-a-chip (“SOC”) and matched multi-band Radio Frequency Integrated
Circuits (“RFIC”), became available in the third quarter of 2007. Initial
availability of our second-generation NW2000 chipset family, which will contain
our MXtv mobile multicast technology, is planned for the first half of
2008. The NW2000 chipset family will be NMP’s first chipset family designed for
high-volume commercial production. In addition, NMP is developing a family of
handset and media player reference designs to highlight the features of its
subscriber station semiconductor products. Furthermore, in advance of
prospective commercial deployments by network operators of NNP’s TDtv mobile
broadcast system, NNP is preparing for high-volume, commercial production of a
TDtv Device Integration Pack (“DIP”).  The TDtv DIP which includes a
low-power TDtv System in Package (SiP), a complete MBMS software stack, and PV
MediaFusionTM
multimedia client software, is designed to provide device vendors an easy,
low-cost way to integrate TDtv technology into their handset
products.  The financial results of our semiconductor business are
reported under our Semiconductor business segment.
  The
primary design objectives of NMP’s current and future semiconductor products and
technologies, which are intended to be sold or licensed to network
infrastructure vendors, device manufacturers and service providers worldwide,
are to:
  ·
              Improve
      the performance, service quality, and economics of mobile broadband
      networks and enhance their ability to cost-effectively handle the large
      volume of network traffic associated with bandwidth-intensive and/or
      Quality of Service (“QoS”), applications such as mobile TV,
      video-on-demand (“VOD”), streaming audio, two-way video telephony, VoIP
      telephony, and real-time interactive
gaming;
  4
  ·
              Improve
      the performance, power consumption and cost characteristics of WiMAX and
      LTE subscriber terminals;
  ·
              Improve
      the degree of interoperability and integration between Wi-Fi and WiMAX/LTE
      systems for both Local Area Networks (“LANs”) and Wide Area Networks
      (“WANs”); and
  ·
              Improve
      service provider economics and roaming capabilities by enabling WiMAX and
      LTE enabled devices to seamlessly operate across multiple frequency bands
      including certain unlicensed bands.
  Strategic
Initiatives
  To help
drive sales of our products and technologies, we have acquired licensed spectrum
in the United States, Canada, Argentina, Germany, Switzerland, Austria, Slovakia
and Croatia.  We believe that our spectrum assets will provide
for additional opportunities for selling products and services to the service
providers, that require our spectrum assets for the provision of wireless
broadband services, on a significantly larger scale than the typical
opportunities being served. The financial results of our spectrum
acquisition activities, both domestically and internationally, are reported
under our Strategic Initiatives business segment.
  To date,
we have acquired licensed spectrum and entered into long-term leases that
provide us with exclusive leasehold access to licensed spectrum throughout the
United States.  Our spectrum portfolio covers approximately 248.9
million POPs across the United States, of which licenses covering 136.4 million
POPs are covered by 20 MHz or more of spectrum, and licenses covering an
additional 98.7 million POPs are covered by at least 10 MHz of spectrum. In
addition, a number of markets, including much of the New York metropolitan
region, are covered by 30 MHz or more of spectrum. While we believe that all of
our spectrum assets can support commercially viable wireless broadband services,
we expect that those licenses which have over 20 MHz of spectrum will provide
operators with improved capacity and network performance. We believe that this
spectrum footprint, which includes 15 of the top 20 Cellular Market Areas
(“CMAs”) and eight of the top ten CMAs in the United States, will be attractive
to service providers who wish to deploy wireless networks that utilize our
advanced products and technologies. Our domestic spectrum resides in the 2.3 GHz
Wireless Communication Services (“WCS”), 2.5 GHz Broadband Radio Service
(“BRS”)/Educational Broadband Service (“EBS”), and 1.7/2.1 GHz Advanced Wireless
Services (“AWS”) bands and offers propagation and other characteristics suitable
to support high-capacity, mobile broadband services.
    We
believe that market demand for mobile multimedia and wireless broadband services
will transform the global wireless communications industry from one driven
primarily by circuit-switched voice to one driven by IP-based mobile broadband
connectivity. In addition, we believe that mobile broadband will do for the
Internet what cellular technology has done for wireline
telephony — extend high-speed connectivity outside the home or office and
enable people to remain connected to the information and multimedia content they
need, wherever they go.
  While the
mobile multimedia transformation of the wireless communications market is still
in an early stage of development, we believe that it is already having a
profound effect on service providers, network infrastructure manufacturers,
device manufacturers and content distributors, which will need to adapt their
businesses to an industry model largely based on delivering multimedia content
and wireless broadband services. Such adaptations will require major investments
by network operators in new wireless broadband network infrastructure equipment
and technologies, the introduction of new classes of mobile broadband handsets,
and the development of next-generation device-embedded multimedia software, and
new wireless communication technologies to maximize the use of available
spectrum. We intend to focus our business activities to capitalize on these
market trends.
  We
believe that several factors are already beginning to drive global market demand
for next-generation mobile multimedia and broadband services:
  ·
              Increasing
      global demand for easy and affordable access to the Internet and on-line
      multimedia content on a fully mobile
basis;
  ·
              A
      growing awareness of the limitations of existing 3G wireless networks to
      support the transmission of bandwidth-intensive multimedia content such as
      streaming video and mobile TV;
  ·
              Growing
      interest by major multimedia content owners and aggregators to utilize
      wireless networks as a means to distribute their proprietary video,
      television, and music content;
  5
  ·
              The
      ability of wireless technologies such as WiMAX, LTE, and UMTS TD-CDMA
      to cost-effectivly deliver broadband services to millions of
      homes in the United States and hundreds of millions of homes and people
      abroad with no or limited (e.g., dial-up) Internet connectivity;
      and
  ·
              Increasing
      market demand for fully integrated wireless LAN and WAN solutions that
      utilize both Wi-Fi and wide-area wireless technologies for converged
      devices, appliances and consumer
electronics.
  Competitive
Strengths
  Well established
industry position. We believe that our PV
subsidiary, reported in our Multimedia business segment, is the largest
independent supplier of device-embedded multimedia software in the industry.
PV’s customers include many of the world’s largest handset manufacturers such
as, Motorola, Nokia, and Sony-Ericsson, as well as some of the world’s largest
network operators including Orange, NTT DoCoMo, T-Mobile and Verizon Wireless.
In addition, NNP has also established strong commercial relationships with
several major network operators including T-Mobile, Vodafone, and
Orange.
  A
unique portfolio of mobile TV/broadcast products and technologies.We expect
mobile TV to soon evolve into one of the industry’s most popular mobile
multimedia applications. According to Visiongain Research, the worldwide mobile
TV market is expected to grow from $50 million in 2007 to over $7.5 billion by
2012. We believe that our TDtv and  MXtv mobile TV technologies, along with
PacketVideo’s content and advertising platforms, will enable wireless operators
to successfully capitalize on the rapid growth of this market.
  A highly
accomplished team of wireless technology professionals. Our technology development
efforts are led by a team of highly accomplished engineering veterans with broad
experience in the development of wireless communications technologies and
solutions. Team members have led major development initiatives at leading
technology companies, such as Cisco, Intel, Lucent, Motorola, Nokia, Nortel,
QUALCOMM, Sony and Texas Instruments. Together they have been instrumental
in developing some of today’s dominant wireless technologies. Several members of
our team, including our Chief Executive Officer, Allen Salmasi, played key roles
at QUALCOMM in the development and successful commercialization of the CDMA
wireless technology which has become the de facto 3G standard used worldwide
today. Additional support for our technology development efforts is provided by
the NextWave Technical Development Steering Committee which is comprised of some
of the most accomplished individuals in the wireless industry, including Dr.
Andrew Viterbi who co-founded QUALCOMM.
  Attractive
wireless spectrum portfolio; well-suited to support mobile multimedia and
wireless broadband services. To date, we have acquired
licensed spectrum and entered into long-term leases that provide us with
exclusive leasehold access to licensed spectrum throughout the United States.
Our spectrum portfolio covers approximately 248.9 million POPs across the United
States, of which licenses covering 136.4 million POPs are covered by 20 MHz or
more of spectrum, and licenses covering an additional 98.7 million POPs are
covered by at least 10 MHz of spectrum. In addition, a number of markets,
including much of the New York metropolitan region, are covered by 30 MHz or
more of spectrum. While we believe that all of our spectrum assets can support
commercially viable wireless broadband services, we expect that those licenses
which have over 20 MHz of spectrum will provide operators with improved capacity
and network performance. We believe that this spectrum footprint, which includes
15 of the top 20 Cellular Market Areas (“CMAs”) and eight of the top ten CMAs in
the United States, will be attractive to service providers who wish to deploy
wireless networks that utilize our advanced products and technologies. Our
domestic spectrum resides in the 2.3GHz Wireless Communication Services (“WCS”),
2.5GHz Broadband Radio Service (“BRS”)/Educational Broadband Service (“EBS”),
and 1.7/2.1 GHz Advanced Wireless Services (“AWS”) bands and offers propagation
and other characteristics suitable to support high-capacity, mobile broadband
services. Our international spectrum portfolio, which will also be made
available, consistent with regulatory requirements, to operators who deploy
networks utilizing our products and technologies, includes nationwide spectrum
assets in Austria, Croatia, Germany, Norway, Slovakia and Switzerland as well as
significant spectrum assets in Canada.
  Expertise
and experience in developing OFDM technologies. Consistent with industry trends, we
believe that“beyond 3G”
and4G wireless standards
are primarily based on OFDM technologies. Our expertise in developing end-to-end
WiMAX systems, which is expected to be the industry’s first widely deployed OFDM
technology, combined with our experience in developing TD-CDMA technology
and implementation of Release 7 of 36PP standards which has
technical attributes very similar to LTE, provide us with an ability to quickly
develop and deliver OFDM basedwirelesstechnologies such as LTE to mobile
device and network equipment manufacturers.
  6
 Unique
combination of silicon, software, systems, and spectrum. We have assembled a unique
combination of assets, including innovative mobile TV technologies,
industry-leading mobile multimedia software, a family of advanced
semiconductors, proven mobile broadband network system solutions, and an
attractive portfolio of licensed spectrum in the United States and abroad. We
believe that the combination of these assets offers us an advantageous position
to develop and deliver our mobile multimedia and wireless broadband products and
technologies to customers.
  An
ability to support multiple wireless standards. Unlike competitors focused
on developing solutions based on a single wireless standard, our product
development strategy is to support the dominant 3G and 4G wireless
standards including WiMAX and LTE.  Similarly, our mobile TV solutions
are designed for both WiMAX and 3GPP UMTS network operators.  We
believe that our multi-standard strategy significantly increases the addressable
market for our products and provides us an advantage when marketing our
solutions to customers interested in products and services based on multiple
industry standards.
  Business
Strategy
  Our
strategy is to deliver technologically advanced mobile multimedia and wireless
broadband products and technologies to mobile subscriber terminal and wireless
network equipment manufacturers, mobile network operators, wireless broadband
service providers, and consumer electronics product companies. Our focus
includes:
  Develop our
mobile TV offerings by leveraging the strengths of our NextWave Network Products
and NextWave Mobile Products businesses.We intend to leverage the
unique capabilities of our TDtv and MXtv mobile broadcast solutions to
accelerate the deployment of mobile broadcast TV systems by network operators
worldwide. According to Visiongain Research, the global market for mobile TV
will grow to over $7.5 billion as operators deploy the additional network
infrastructure required to deliver this advanced multimedia service. We expect
that a successful commercial pilot of our TDtv solution in London by T-Mobile
and Orange will lead to widescale deployments of TDtv in other parts
of Europe. Similarly, we expect that our agreements with Alcatel-Lucent and
Huawei, under which these companies will integrate MXtv technology into their
WiMAX network solutions, will also result in deployments of MXtv-enabled
networks by mobile operators.
  Expand our
NextWave Wireless Network business.At present, our UMTS
TD-CDMA network equipment is being utilized by commercial network operators such
as T-Mobile to deliver advanced mobile and fixed broadband services to consumers
and businesses and by system integrators such as Northrop Grumman to provide
mobile broadband and fixed services to the government and municipality customers
for public safety applications. We intend to leverage the success of our UMTS
based network equipment business to supply mobile operators with both WiMAX and
LTE based network solutions.  We expect our recently announced,
multi-standard V5 base station platform line and our next-generation WiMAX/Wi-Fi
micro and pento base station products will provide network operators the
opportunity to deploy cost-effective mobile broadband networks that can also
seamlessly utilize multiple and diverse spectrum frequency bands.
  Grow and extend
the NextWave Multimedia business. We believe that the number
of multimedia enabled smartphones as a percentage of global handsets shipped
annually will rise significantly over the next several years. We will seek to
maintain PacketVideo’s strong position in this growing market through the growth
and extension of its existing multimedia software business and by leveraging its
new multimedia convergence products and technologies. At present, the primary
competitors for PacketVideo’s multimedia software products are the internal
multimedia software design teams at the OEM handset manufacturers to whom
PacketVideo markets its products and services. Furthermore, we believe that the
deployment of mobile broadband networks will spawn the development of new
categories of software applications that capitalize on the distinctive mobility
features inherent in mobile broadband systems. While the competition from the
OEM's internal multimedia design teams and other independent multimedia software
may increase in the next few years, we believe that PacketVideo will be able to
leverage its MediaFusion platform and its family of PVConnect applications to
fortify its position in the mobile multimedia and converged media software
business.
  Grow our
NextWave Semiconductor business. We believe that our NW2000 WiMAX chipset
family, which will be available in the first half of 2008, will offer WiMAX
device manufacturers a powerful platform to develop next-generation WiMAX mobile
terminals to support mobile multimedia applications such as mobile
TV.  As illustrated by our partnership with Elektrobit to develop a
full-featured WiMAX handset reference design, we intend to work closely with
leading device manufacturers to demonstrate how the low-power, multi-band, and
MXtv multicast capabilities of our Wi-Fi/WiMAX and RFIC chipset can deliver the
performance they require.   In addition, we intend to provide
handset manufacturers interested in capitalizing on the TDtv market with our
TDtv Device Integration Pack which includes our low-power TDtv baseband chip and
matched RFIC.
  7
 Use the resources
of Strategic Initiatives to form strategic relationships with service
providers who want to offer next generation, rich, wireless broadband
services. We
intend to make our spectrum available, consistent with regulatory requirements,
to service providers looking to deploy next-generation wireless broadband
networks that utilize our advanced products and technologies. Potential service
providers include wireless service providers, cable operators, multimedia
content distributors, applications service providers and Internet service
providers. We believe that arrangements under which service providers can
utilize our spectrum to offer advanced wireless broadband services will help
accelerate sales of our mobile broadband products and technologies.
  Partner with
leading device and infrastructure vendors.  We intend to enter
into strategic development partnerships with leading handset and network
infrastructure vendors in order to drive adoption of our various products and
technologies.  To date, we have entered into several such partnerships
with industry-leading companies such as Alcatel-Lucent, Huawei, and Elektrobit
who have agreed to integrate NextWave technologies into their mobile devices
and/or network infrastructure products.
  Products
and Technologies
  Semiconductors
  Our semiconductor products,manybased on OFDM technologies such as WiMAX
and LTE, are designed to enhance theperformanceand economics of fixed and mobile
wireless broadband networksand provide advanced mobile multicast capabilities. Our low-power, high-performance
semiconductor products are intended to enable fixed and mobile wireless
broadband networks to more efficiently handle bandwidth-intensive and
quality-of-service dependent applications such as mobile TV, VoIP telephony,
streaming audio and video, video conferencing and real-time gaming. While these
semiconductor products will include special features to allow them to fully
utilize NextWave’s licensed spectrum (BRS/EBS, WCS, AWS), they are also being
designed to operate on frequency bands most often allocated for mobile broadband
use on a global basis.In addition, our TDtv
baseband chips, which are being offered as part of our TDtv Device Integration
Pack, are designed to enable mobile device manufacturers to easily integrate the
TDtv capabilities into their future handset and mobile device
products.
  Digital
Baseband ASICs: An ASIC is
an integrated circuit or chip customized for a specific purpose. Our family of
WiMAX/Wi-Fi based digital baseband ASICs represents the core of our WiMAX system
architecture. Our first baseband WiMAX ASIC, the NW1100, became available in the
third quarter of 2007. This ASIC includes many of the enhancements that have
been developed by our engineers and is designed to showcase and validate these
innovations.In
collaboration with Elektrobit, we have develop a complete mobile handset
reference design based on our NW1000 WiMAX System-on-a-Chip (“SoC”) to stimulate
adoption of a wider range of mobile devices based on our WiMAX
semiconductors.
  Our NW2000 family of WiMAX ASICs,
expected to be commercially available in 2008, will be our first ASICs designed
for high-production, commercial use.By employing advanced 65 nanometer CMOS
process technology to minimize size and reduce power consumption, these WiMAX Forum
Wave 2 compliant SoC’sincorporate our MXtv mobile
multicast technology and include features to supportbandwidth intensive mobile-multimedia
applications such streaming video, and video conferencing, and
Quality-of-Service (QoS) sensitive applications such as VoIP.
  In addition to our WiMAX ASICs, in
February 2008, we announced the availability of our UMTS-based TDtv baseband
ASIC which will be offered to handset manufacturers as part of our TDtv Device
Integration Pack.  This low-power SoC is designed to provide device
manufacturers the ability to easily integrate TDtv capabilities into their
current and future mobile handset products.
  Radio
Frequency Integrated Circuits: An RFIC is part of the front-end of a
radio system that receives a radio frequency signal, converts it to a lower
frequency and modifies it for further processing. Designed to utilize multiple
spectral bands to improve performance and flexibility, our RFICs are part of an
advanced radio frequency subsystem that is matched to our family of baseband
ASICs and is expected to enable a mobile device to operate over a wide range of
operational frequencies without sacrificing overall performance. We believe that
enabling WiMAX or LTE to operate over multiple frequency bands will
significantly improve the economics of WiMAX/LTE network deployments for the
following reasons:
  8
  ·
              Network operators will have the
      ability to assemble sufficient licensed spectrum using multiple frequency
      bands as opposed to having to acquire scarce spectrum in a single
      frequency band;
  ·
              Carriers will have the ability to
      address network coverage and capacity issues via the acquisition of
      low-cost spectrum as opposed to costly cell
    splitting;
  ·
              The ability of frequency-agile
      devices to roam between multiple networks will be facilitated;
      and
  ·
              A single chipset family capable of
      addressing markets worldwide will permit economies of scale and result in
      lower device costs.
  Our initial multi-band RFIC, the NW1200,
is now available and operates in the 2.3-2.8 GHz and 3.3-3.8 GHz frequency bands
and is designed for TDD operation. The NW 2200 RFIC,expected to be commercially available in
the first half of 2008,willoperate in the same frequency bands as
the NW 1200, butadditionally, willsupport the AWS band (1.7-2.1 GHz) andwilloperate inboth time division duplex (“TDD”) andfrequency division duplex
(“FDD”) modes. Both RFICs are designed to operate
withour current and future
line ofWiMAXand LTEbaseband ASICS.
  Multimedia
Software
  Our
multimedia software products are developed and marketed through our PV
subsidiary. Based in San Diego, CA, PV has approximately 637 employees and
full-time equivalent contractors and is a global provider of embedded multimedia
software products for mobile devices.  PV’s software, which it
licenses to the world’s leading mobile device manufacturers and wireless
carriers, transforms a mobile phone or other mobile device into a feature-rich
multimedia device that allows people to stream, download, and play video and
music, receive live TV, or engage in two way video telephony. PV’s innovations
and engineering leadership have led to breakthroughs in content encoding,
content delivery systems, and advanced multimedia-enabled handset development
around the world.
  For
mobile device manufacturers, shorter product cycles and increasing demand for
advanced technologies are driving collaboration with third party solution
providers, such as PV, to aid their product development. We believe that PV’s
technical capabilities and depth of knowledge are key reasons why PV has been
chosen by the world’s largest device manufacturers and wireless carriers to help
them quickly develop and introduce new multimedia enabled handsets and
multimedia services to the market. Over 200 million handsets containing PV
software have been shipped worldwide by device manufacturers including LGE,
Sony-Ericsson, Motorola, Nokia and Samsung. In addition, PV provides multimedia
software solutions to some of the world’s largest wireless carriers including
Orange NTT DoCoMo, T-Mobile and Verizon Wireless. According to IDC, high-end
mobile phones and converged mobile devices experienced a 42 percent increase in
shipments in 2006, pushing past the 80 million mark for the year. (IDC Worldwide
Quarterly Mobile Phone Tracker, Feb. 2007) We believe that this trend will
enable PV to maintain its strong market share position.
  PV’s
current suite of device-embedded software solutions are based on a modular
architecture to enable rapid integration with the industry’s leading hardware
platforms and operating systems.
  CORETM Multimedia
Framework. PV’s CORE software product powers the playback of video and
music in millions of mobile phone handsets worldwide. The PV multimedia
framework is an embedded client with modular options to enable the downloading,
streaming, and playback of content files based on all major media formats. CORE
codec modules include: WMA 9/10/Pro, WMV 9, AAC, HE-AAC, HE-AAC V2, AVC/H.264,
MPEG-4, Real Audio, Real Video, MP3, MP3 PRO, AMR and WB-AMR.
  OpenCORETM
Open-sourced Multimedia Sub-system. PV is a founding member of the Open Handset
Alliance, an initiative led by Google to create a new mobile handset platform
called Android. PV has open-sourced part of its code to provide the multimedia
sub-system for Android, allowing developers to create basic audio and video
applications for Android. Should device vendors, who have adopted the Android
platform wish to create more sophisticated multimedia services in the future,
they can migrate to CORE and its capabilities.
  PVConnectTM. PVConnect
is a family of customizable software products that auto-detect and link popular
devices through the home, allowing end-users to share and enjoy various forms of
mobile-multimedia content on the devices of their choice. The PVConnect server
is certified by the Digital Living Network Alliance (DLNA), a consortium of more
than 300 consumer electronics and technology companies. The software is
interoperable with hundreds of other DLNA-compatible home electronic and mobile
devices as well as select non-compatible devices including Microsoft’s Xbox 360
and Sony’s PlayStation Portable.
  9
 PV Mobile TV
Solutions. PV’s mobile TV solutions enable mobile broadcast TV. Features
include live streaming TV, VOD, high-performance multimedia codecs,
picture-in-picture, personal video recorder, fast channel changing, and support
for PV’s own or third-party electronic service guides.
  PV Multimedia
Communications. PV’s two-way video telephony software solution is
324M-compliant real-time video telephony—for two-way voice and video
conversations and video conferencing.
  PV  Imaging
Solutions. PV’s advanced imaging engine renders photos, organizes albums
and edits pictures, all on the handset. PV’s imaging technology significantly
improves the user experience with rapid access to images created by the mobile
device’s camera, with the additional benefit of highly optimized memory. In
addition, the software enables users to record their own audio, video and
digital photos directly on the handset.
  PV Digital Rights Management
(DRM) Solutions. A mobile implementation of content protection and
business rules for commercial media consumption. DRM types supported include:
Windows Media DRM, OMA 1.0 and 2.0,  and DTCP-IP. In addition, PV
owns, and is further developing a flexible Java DRM solution called Secure
Digital Container or SDC which has been adopted by several major
operators.
  MediaFusion Server-Client
Solution. MediaFusion is a platform that unites disparate media services
on the back end and present a unified user interface on the device, adding value
to a mobile operator’s existing content delivery services by managing and
serving data about media content, rather than the media payload, and enabling a
personalized music entertainment experience for users based on their
demonstrated preferences.
  The
introduction of affordable, high-speed Internet service via DSL and cable
broadband provided software developers with a unique opportunity to develop
entire new categories of software applications. Many of these applications
focused on the capture, manipulation, and transmission of multimedia content
such as music, images, and video. Several, such as iTunes, Windows Media Player,
Google Video, and peer-to-peer applications such as BitTorrent have achieved
extremely high levels of popularity. We believe that a similar opportunity to
develop innovative software applications, optimized for the mobile environment,
exists with the wide scale introduction of affordable mobile broadband
services.
  The
emergence of mobile broadband will necessitate the development of new categories
of software applications optimized to take full advantage of the distinctive
mobility features inherent in mobile broadband systems. To be successful,
developers of these new software applications must accommodate the complexities
such as variable connection rates and unique capabilities such as mobile
positioning associated with wireless broadband and will need to overcome mobile
device design restrictions such as limited memory, power limitation and on-board
processing capabilities. In addition, mobile application software developers
will need to fully understand underlying 4G wireless broadband network
technologies such as WiMAX to ensure optimal performance of their multimedia
software applications in a challenging wireless environment. We expect that
global deployments of mobile broadband networks will create a unique opportunity
for software developers such as PV to create innovative multimedia software
applications and server platforms optimized for the mobile and converged media
environment.
  We
believe that PV is well positioned to help develop these types of
next-generation, mobile broadband software applications for the following
reasons:
  ·
              PV
      is already a global provider of device-embedded, mobile multimedia
      software and has broad experience in developing software for memory- and
      processor-limited mobile devices.
  ·
              As
      part of NextWave, PV will have full access to our extensive mobile
      broadband technology development activities and will be able to develop
      new multimedia software applications that capitalize on the unique
      capabilities we are designing into our products and
      technologies.
   10
  ·
              Unlike
      the PC software environment, there are no dominant mobile device operating
      systems and, in fact, over two dozen such operating systems are currently
      in use by mobile handset manufacturers worldwide. PV works with virtually
      all of the most popular mobile device operating systems in use today. By
      maintaining this flexible approach, we believe that PV’s next generation
      of mobile broadband software will be well-positioned to enjoy continued
      wide scale industry adoption.
  Network
Products
  We offer mobile multimedia and wireless
broadband systems based on both UMTS and IEEEmobile broadband standardsdesigned to provide superior economics
and network performance to network operators who utilize either licensed or
certain unlicensed spectrum.
  MobileBroadband
Systems. Our end-to-end,
UMTS TD-CDMA mobile broadband system has been deployed by network operators such
as T-Mobile and utilizes advanced, performance-enhancement technologies which
cancel out interference from neighboring cell sectors to significantly increase
cell-edge performance and overall network capacity.  The system also
provides a robustquality-of-service mechanism that allows operators
to prioritize traffic based on both type and user class.
  Our end-to-endmobile broadbandsolution includes the following network
elements:
  ·
              V5
      Base Station (“BTS”):A high performance,
      base station supporting the 3GPP TD-CDMA standard with upgrade capability
      to WiMAX and 3GPP LTE. The V5 BTS platform is designed for wide-area
      cellular coverage and supports 3-sector deployment with one digital shelf
      and up to three radio shelves or remote RF radio heads.·
              Integrated
      Network Controller (“INC”):A high performance
      broadband wireless network controller supporting the international 3GPP
      TD-CDMA standard. The INC integrates the GGSN, SGSN and RNC functions in a
      compact rack mount hardware greatly reducing the cost of deploying a
      broadband wireless network. The INC aggregates Radio Access Network data
      and management traffic from several Node Bs towards a standard IP core
      Network.·
              Network
      Management Software ("NMS"):NMSis an advanced NPM v3-based element management
      system.
   Carrier-GradeMobileWi-Fi
Systems.Our carrier-grade
Wi-Fi system, designed for wide-area deployment by commercial and municipal
operators, combines our proprietary xRF smart-antenna technology with a
cellular-mesh Wi-Fi architecture to deliver a cost-effectivemobile broadband networksolutionusing unlicensed spectrum.Our xRF adaptive smart-antenna
technology is based on a patent-pending implementation of adaptive beamforming
and smart-antenna signal processing algorithms and is one of the industry’s only
smart-antenna implementations designed for cellular-mesh Wi-Fi
solutions.  Itis also one of the
industry’s only smart antenna technologiesthat operate in a multi-channel access
solution and supports both sectored and omni-directional base stations.
  Our Wi-Fiproduct lineiscurrentlycomprised of the
following:
  ·
              Series2000Micro
      Cellular-Mesh Wi-Fi Sector Base Station: The WLS 2100 is a 120 degree
      multi-radio sector panel designed for easy installation on building sides,
      rooftops, towers and utility poles. The WLS 2100 is equipped with two
      xRF-enabled 802.11 b/g access radios and a separate 802.11a channel for
      beamformed user access and high-performance mesh
      backhaul.
  ·
              Series1000Pico
      Cellular-Mesh Wi-Fi- Base Station: The WLP 1100 is an
      omni-directional multi-radio weather-proof unit intended for street-level
      pole/utility pole Wi-Fi applications. The WLP 1100 is equipped with one
      xRF-powered 802.11 b/g access radio and a separate 802.11a channel for
      beamformed user access and high-performance mesh networking and
      backhaul.
  ·
              Series500FemtoCellular-Mesh Wi-Fi- Base Station:The MBW 510 is an ultra-compact,omni-directionalunitintended for street-level
      light/utility pole femto cell Wi-Fi applications. The MBW 510 is equipped
      with one 802.11b/g radio for subscriber access and a separate 802.11a
      channel for high-performance mesh
  networking.
  11
  ·
              MBWEMS/NMS
      Platform: The MBW
      EMS/NMS platform offers a sophisticated set of management tools for
      element management as well as network-wide performance monitoring and
      management. From the MBW EMS/NMS console, operators can proactively
      monitor network and RF performance and dynamically reconfigure their Wi-Fi
      infrastructure, at the access point level or network-wide, to meet varying
      RF environments, network conditions, traffic and user
      loads.
  ·
              Series
      3000Cellular-MeshWi-Fi-
      Base Station: Announced
      in February 2008, the Series 3000 will provide both Wi-Fi, WiMAX and/or
      LTE connectivity. Expected to be commercially available in late 2008, the
      Series 3000 is expected to utilize our Series 2000, 1000, and 500
      platforms. Optimized to provide low-cost gap-filler and hot-spot coverage,
      the Series 3000 base stations, in combination with NextWave’s
      WiMAX-based or LTE-enabled V5 macro base station platform, are designed to
      significantly reduce the upfront network deployment and ongoing
      operational costs.
  Mobile TV
and Broadcast Systems:Our TDtv mobile broadcast
system, based on 3GPP MBMS, provides UMTS operators the ability to deliver
mobile TV, digital radio, and other multimedia services. TDtv operates in the
universal unpaired (TDD) 3G spectrum bands that are available across Europe and
Asia at 1900 MHz and 2010 MHz. It enables UMTS operators to utilize their
existing TDD spectrum to offer subscribers attractive mobile TV and multimedia
packages without impacting their 3G voice and data services which use universal
paired (FDD) 3G spectrum. In addition, the technology supports spectrum pooling
and network sharing to further reduce deployment and operational costs. A six
month commercial pilot of TDtv technology in London by Orange and T-Mobile is
planned for 2008.
 
 TDtv
supports key consumer requirements including fast channel change times,
operation at high travel speeds, and seamless integration into small profile
handsets.
  Our TDtv system is comprised of the
following network elements:
  ·
              TDtv base station: The TDtv base station has a
      modular architecture consisting of a digital shelf and a separate radio
      shelf. The digital shelf consists of one control card and one sector card.
      The sector card controls 3 sectors. A single radio shelf is capable of
      supporting 3 sectors of two 5MHz carriers. The radio shelf can be located
      close to the antenna, up to 500 m from the digital shelf using a CPRI
      fiber interface, eliminating the RF cable loss. Sector cards and radio
      shelves are field replaceable.
  ·
              TDtv
      INC:  TDtv INC is responsible for processing the TDtv
      streams and supplying them to the TDtv transmitters for transmission over
      the air. Up to 28 300Kbps TV channels can be configured in two 5MHz
      channels. Broadcast channels are user definable to accommodate different
      throughput requirements from radio channels to high quality TV at
      512Kbps.
 
  In March
2008, NextWave Network Products announced its MXtv mobile broadband system based
on the 802.16e WiMAX standard. MXtv technology provides WiMAX operators the
ability to deliver a broad range of rich and personalized multimedia services
including mobile TV, interactive services, and digital audio without having to
invest in new spectrum or additional network infrastructure.  Similar
to TDtv, MXtv will provide mobile operators the ability to use NextWave’s
MediaFusion platform to generate additional revenue through the delivery of
user-specific targeted advertising.  NextWave has executed joint
development agreements with Huawei Technologies USA and Alcatel-Lucent under
which these two global network infrastructure providers will integrate
NextWave’s MXtv MBS technology into their end-to-end WiMAX network
solutions.
  We
believe MXtv technology will be adopted by WiMAX mobile network operators and
achieve  commercial success for the following reasons:
  ·
              MXtv
      requires no additional spectrum, no additional radio access network
      equipment, and no additional radios in end-user terminals which reduces
      CAPEX and OPEX for mobile
operators;
  ·
              It
      enables mobile operators to dynamically allocate portions of their
      spectrum for use by their two-way services (e.g., voice) or for use by
      their multi-channel broadcast service.  This enables operators
      to easily modulate the amount of their spectrum that is dedicated to being
      used for broadcast services based on content availability, time of day,
      location, and the popularity of live events such as news, sports,
      concerts, emergency broadcasts and reality
  shows;
  12
  ·
              Utilizing
      macro diversity technology, MXtv very efficiently supports up to 45
      live 300 kbps channels using only 10 MHz of spectrum;
  and
  ·
              Allows
      operators to unicast and broadcast multimedia content on the same
      spectrum.
  Devices
  In
February, 2008, our PV subsidiary introduced its Mobile Broadcast Receiver, a
matchbox-size hardware device that enables virtually any mobile Wi-Fi device to
play mobile broadcast TV. The mobile receiver decodes a digital TV signal,
repurposes it for use on a mobile device, and then sends the mobile TV content
over Wi-Fi to the handset. The PV receiver uses patented protocols to ensure
optimum rendering of the TV signal on the playback device and provides secure
access to premium channels.  This allows mobile subscribers to upgrade
to advanced mobile TV services without a requirement to change their
handsets.  PV intends to manufacture versions of the Mobile Broadcast
Receiver to support TDtv. MXtv, Digital Video Broadcasting – Handheld (“DVB-H”),
and MediaFLO mobile TV systems.
  In
connection with sales of our UMTS TC-CDMA network equipment, we also market a
family of TD-CDMA end-user devices to network operators including desktop modems
and PCMCIA cards. These low-power, plug-and-play devices support multi-megabit
downlink speeds, and are equipped with SIM card readers to support secure
provisioning, authentication, and roaming.
  Las VegasTest Site
  To demonstrate the features and
capabilities of ourvarioustechnologies, we have implemented a
mobile test network inLas
Vegas,Nevadathat utilizes our licensed
spectrum.  We intend to use this test network to demonstrate the
performance of ourNextWave
Network Productstechnologies and our advanced IP core and back-office systems. We plan to
further develop this test site with vendor partners and service providers and
believe that the test network will be an important step towards successful
commercialization of our products and technologies. The financial results of our
Las Vegas test site is recorded under our Network business
segment.
  NextWave
Strategic Initiatives Spectrum Portfolio
  Domestic
Spectrum Summary
  To date,
we have acquired spectrum and entered into long-term leases that provide us with
exclusive leasehold access to licensed spectrum throughout the United States. We
have compiled a spectrum portfolio covering approximately 248.9 million POPs
across the country.  We have 20 MHz or more of spectrum covering 136.4
million POPs, and 10MHz of spectrum covering an additional 98.7 million POPs. In
a number of markets, including much of the New York metropolitan area, we have
30 MHz or more of spectrum. We have mostly focused on acquiring authorizations
to use licensed spectrum in the top 100 U.S. markets, which have population
densities and demographics most suitable to drive adoption of wireless
broadband. We also have acquired licenses to use spectrum in smaller markets
mostly as a result of the coverage area defined by spectrum license
terms.
  To date,
we have focused our efforts on obtaining licenses or other rights to use 2.3 GHz
WCS spectrum, 2.5 GHz BRS and 2.5 GHz EBS spectrum. We also acquired 154
licenses in the 1.7GHz/2.1GHz band, known as the AWS spectrum. We believe these
spectrum bands are suitable for the deployment of mobile WiMAX networks and we
are engineering our products and technologies to take advantage of the acquired
licenses.
  Summary
information about our current spectrum holdings in the United States is set
forth below.
  13
  Type
      of SpectrumMEA
              
              MEA
      Name
              POPs
                  (mm)
              
              BRS/
                  EBS
              WCS
              AWS
              Top
      Covered CMAs within MEA (POP Rank)1
              
              Boston
              9.5
              
              
              x
              x
              Boston
      (9), Providence (50)2
              
              New
      York City
              31.9
              
              x
              x
              x
              New
      York (2), Hartford (40)3
              
              Buffalo
              1.5
              
              
              x
              
              Buffalo
      (42), Chautauqua (113)4
              
              Philadelphia
              8.8
              
              x
              x
              x
              Philadelphia
      (5), Wilmington (75)5
              
              Washington
              0.8
              
              
              
              x
              Virginia
      10 - Frederick (218)6
              
              Richmond
              1.4
              
              
              
              x
              Highland
      (261), Roanoke (267)7
              
              Charlotte-Greensboro-Greenville-Raleigh
              7.0
              
              
              
              x
              Greenville
      (68), Columbia SC (89)8
              
              Atlanta
              4.6
              
              
              
              x
              Chattanooga
      (107), Augusta (115)9
              
              Jacksonville
              2.8
              
              
              x
              x
              Jacksonville
      (39), Tallahassee (184)10
              
              Tampa-St.
      Petersburg-Orlando
              2.1
              
              
              
              x
              Florida
      4 - Citrus (85), Sarasota (159)11
              
              Miami
              1.2
              
              
              
              x
              Fort
      Myers (99), Florida 1 - Collier (168)12
              
              Pittsburgh
              2.8
              
              
              
              x
              Pittsburgh
      (22), Johnstown (283)13
              
              Cincinnati-Dayton
              1.2
              
              
              
              x
              Huntington
      (188), Charleston (255)14
              
              Columbus
              0.7
              
              
              
              x
              Ohio
      6 - Morrow (106), Ohio 9 -Ross (259)15
              
              Cleveland
              5.2
              
              
              x
              x
              Cleveland
      (25), Akron (73)16
              
              Detroit
              11.0
              
              
              x
              
              Detroit
      (7), Grand Rapids (60)17
              
              Milwaukee
              5.2
              
              
              x
              
              Milwaukee
      (33), Madison (117)18
              
              Chicago
              14.2
              
              x
              x
              x
              Chicago
      (3), Gary (80)19
              
              Indianapolis
              2.7
              
              
              
              x
              Indianapolis
      (31), Indiana 6 - Randolph (302)20
              
              Minneapolis-St.
      Paul
              7.0
              
              
              x
              
              Minneapolis
      - St. Paul (14), Hubbard (202)21
              
              Des
      Moines-Quad Cities
              2.9
              
              
              x
              
              Des
      Moines (108), Davenport (161)22
              
              Knoxville
              1.4
              
              
              
              x
              Knoxville
      (86), Jonson City (110)23
              
              Louisville-Lexington-Evansville
              2.0
              
              
              
              x
              Louisville
      (51), Kentucky 3 - Meade (167)24
              
              Birmingham
              0.9
              
              
              
              x
              Montgomery
      (166), Butler (2388)25
              
              Nashville
              1.0
              
              
              
              x
              Tennessee
      3 - Macon (144), Clarksville (311)26
              
              Memphis-Jackson
              1.6
              
              
              
              x
              Tennessee
      5 - Fayette (143), Tenn. 1 - Lake (181)27
              
              New
      Orleans-Baton Rouge
              2.0
              
              x
              
              x
              New
      Orleans (41), Mobile (91)28
              
              Little
      Rock
              2.8
              
              
              
              x
              Little
      Rock (84), Fayetteville (158)29
              
              Kansas
      City
              3.3
              
              
              x
              
              Kansas
      City (26), Topeka (317)30
              
              St.
      Louis
              5.0
              
              
              x
              x
              St.
      Louis (18), Illinois 8 - Washington (173)31
              
              Houston
              7.3
              
              
              x
              x
              Houston
      (6), Louisiana 5 - Beauregard (137)32
              
              Dallas-Fort
      Worth
              12.8
              
              x
              x
              x
              Dallas-Fort
      Worth (4), Austin (36)33
              
              Denver
              5.4
              
              
              x
              
              Denver
      - Boulder (17), Colorado Springs (87)34
              
              Omaha
              1.8
              
              
              x
              
              Omaha
      (72), Lincoln (228)35
              
              Wichita
              1.2
              
              
              x
              x
              Wichita
      (94), Kansas 14 - Reno (387)36
              
              Tulsa
              1.4
              
              
              x
              x
              Tulsa
      (58), Oklahoma 4 - Nowata (309)37
              
              Oklahoma
      City
              1.9
              
              
              x
              x
              Oklahoma
      City (46), Oklahoma 6 - Seminole (289)38
              
              San
      Antonio
              4.1
              
              
              x
              
              San
      Antonio (27), McAllen (77)39
              
              El
      Paso-Albuquerque
              2.7
              
              x
              x
              x
              EL
      Paso (71), Albuquerque (74)40
              
              Phoenix
              5.6
              
              
              x
              
              Phoenix
      (13), Tucson (53)41
              
              Spokane-Billings
              2.1
              
              
              x
              x
              Spokane
      (120), Idaho 1 - Boundary (212)42
              
              Salt
      Lake City
              3.5
              
              
              x
              x
              Salt
      Lake City (34), Provo (128)43
              
              San
      Francisco-Oakland-San Jose
              15.0
              
              x
              x
              x
              San
      Francisco (12), Sacramento (24)44
              
              Los
      Angeles-San Diego
              24.9
              
              x
              x
              x
              Los
      Angeles (1), San Diego (15)45
              
              Portland
              4.0
              
              
              x
              x
              Portland
      (23), Salem (147)46
              
              Seattle
              5.1
              
              
              x
              
              Seattle
      (20), Tacoma (69)47
              
              Alaska
              0.6
              
              
              
              x
              Anchorage
      (215), Alaska 2 - Bethel (377)48
              
              Hawaii
              1.3
              
              
              x
              
              Honolulu
      (55), Hawaii 3 - Hawaii (415)49
              
              Puerto
      Rico and U.S. Virgin Islands
              3.8
              
              
              
              x
              San
      Juan (21), Puerto Rico 2 - Adjuntas (209)Total (excluding
      overlaps)
              248.9
      (approx)
              
              x
              x
              x
 
  (1)
              
              WCS,
      AWS, BRS and EBS licenses are assigned by the FCC for geographic service
      areas of varying sizes and shapes.  WCS licenses are assigned by
      the FCC according to Major Economic Areas or Regional Economic Area
      Groupings (see further explanation below in “Business—WCS Spectrum”). AWS
      licenses are assigned by the FCC according to REAGs, EAs, or CMAs (see
      further explanation below in “Business—AWS Spectrum”). BRS spectrum is
      licensed both according to Geographic Service Areas with a 35-mile radius,
      subject to overlapping Geographic Service Areas of co-channel stations,
      and according to Basic Trading Areas (“BTAs”) of various sizes. Our BRS
      spectrum currently is composed of licenses with 35-mile radius Geographic
      Service Areas, subject to overlapping Geographic Service Areas of
      co-channel stations. EBS spectrum is only licensed according to Geographic
      Service Areas with a 35-mile radius, subject to overlapping Geographic
      Service Areas of co-channel stations (see further explanation below in
      “Business—BRS and EBS Spectrum”).
  14
  (2)
              
              This
      data in this table is presented in terms of MEAs. MEAs are named for the
      largest metropolitan area contained within the licensed geographic service
      area, but are significantly larger than the metropolitan area for which
      they are named.
  (3)
              
              The
      source for our POP figure is derived from 2006 composite data contained in
      databases managed by Applied Geographic Solutions Inc. of Newbury Park,
      California, except for Puerto Rico which is derived from 2000 census
      figures.
  (4)
              
              Our
      AWS, WCS and BRS spectrum is held directly through FCC licenses. Our EBS
      spectrum has been leased on a long-term basis from current license
      holders.
  (5)
              
              We
      lease EBS spectrum from multiple parties in the greater New York, New York
      metropolitan area, including geographic areas in New York, New Jersey and
      Connecticut. These leases give us access to different amounts of spectrum
      in specific parts of the market area. The terms of these leases range from
      20 to up to 60 years when their renewal options are
    included.
  (6)
              
              We
      lease EBS spectrum from The Orange Catholic Foundation in the Los Angeles,
      California (Orange County) area. This lease has an initial 10 year term
      and contains five renewal options for 10 years each to extend the term of
      the lease.
  (7)
              
              We
      lease EBS spectrum from The University of California in the San Francisco,
      California area. The lease has an initial 10 year term and contains 2
      renewal options for 10 years each to extend the term of the
      lease.
  (8)
              
              We
      lease EBS spectrum from Bradley University in the Peoria, Illinois area.
      This lease has an initial 10 year term and contains two renewal options
      for 10 years each to extend the term of the
  lease.
  (9)
              
              We
      sublease EBS spectrum from the North American Catholic Educational
      Programming Foundation in the Mobile, Alabama area. This sublease has an
      initial 29 year term and no renewal options to extend the term of the
      sublease.
  WCS
Spectrum
  We have
acquired WCS spectrum from third parties pursuant to privately negotiated
purchase agreements. The 2.3 GHz WCS band is divided into four frequency blocks,
A through D. Blocks A and B have 10MHz of spectrum each and blocks C and D have
5 MHz each. We have acquired WCS licenses in the A, B, C and D frequency blocks.
The WCS A and B blocks are licensed in 52 individual geographic regions covering
the United States, including the Gulf of Mexico, and are called Major Economic
Areas (“MEA”). The WCS C and D blocks are licensed in six larger geographic
regions, also covering the United States and are called Regional Economic Area
Groupings (“REAGs”). Both MEAs and REAGs are of various sizes in terms of
population and geographic coverage.
  WCS
licenses are allocated by the FCC for “flexible use.” This means that the
spectrum can be used to provide any type of fixed, portable, mobile (except
aeronautical mobile) or radiolocation services to individuals and businesses,
including the wireless broadband services we intend to offer. Any such offerings
are subject to compliance with technical rules in Part 27, Title 47 of the Code
of Federal Regulations, as well as any applicable border treaties or agreements
governing operations near the Canadian and Mexican borders.
  15
 BRS
and EBS Spectrum
  We have
acquired BRS spectrum licenses from third parties pursuant to privately
negotiated purchase agreements. Rights to lease and use EBS spectrum are
acquired by commercial interests like us from educational entities through
privately negotiated lease agreements. On April 27, 2006, the FCC released new
rules governing EBS lease terms. EBS licensees are now permitted to enter into
lease agreements with a maximum term of 30 years; lease agreements with terms
longer than 15 years must contain a “right of review” by the EBS licensee every
five years beginning in year 15. Because some of our long-term leases were
executed prior to the effective date of these new leasing requirements, our
long-term leases afford us exclusive leasehold access to the leased EBS spectrum
for a total period of time ranging from 20 years up to 60 years when all renewal
options are included.
  Under
current regulations, after giving effect to an FCC-mandated transition of the
spectrum to a new band configuration, which must be complete by October 19, 2010
(barring disputes in the transition process), the total spectrum bandwidth
licensed by the FCC for BRS and EBS spectrum is 194 MHz. Approximately 75% of
this spectrum is licensed for the EBS and 25% is licensed for the BRS. Under FCC
rules, regulations and policies (“FCC rules”), up to 95% of the spectrum
dedicated to each EBS license can be leased for commercial purposes subject to
compliance with FCC rules. After transitioning the BRS and EBS spectrum to the
new band plan, individual channels and channel groups of BRS and EBS spectrum
will range from 5.5 MHz to 23.5 MHz of spectrum. Most, but not all, BRS and EBS
channel “groups” contain four channels and 23.5 MHz of spectrum.
  Until
1996, BRS spectrum was licensed according to Geographic Service Areas with a
35-mile radius. These “incumbent” licenses continue to exist today, but are
subject to overlapping Geographic Service Areas of co-channel stations. In 1996,
the FCC conducted an auction and assigned licenses for available BRS spectrum
according to BTAs of various sizes. These BTA licenses were granted subject to
the prior rights of the incumbent BRS license holders. We have acquired licenses
from incumbent BRS licensees, licensed for 35-mile Geographic Service Areas,
subject to overlapping Geographic Service Areas of co-channel stations. We may
in the future acquire BRS spectrum licensed for BTAs.
  EBS
spectrum is licensed only for Geographic Service Areas with a 35-mile radius,
subject to overlapping Geographic Service Areas of co-channel stations. In the
future, vacant EBS spectrum may be assigned by BTAs, or some other licensing
construct chosen by the FCC. EBS spectrum is licensed exclusively to accredited
educational institutions, governmental organizations engaged in the formal
education of enrolled students (e.g., school districts), and nonprofit
organizations whose purposes are educational.
  The FCC’s
rules for BRS and EBS spectrum were substantially revised in 2004 to provide
more flexibility in how the spectrum is licensed and used; proceedings to revise
the rules continue today. Use of the spectrum has evolved to include fixed and
mobile, digital, two-way systems capable of providing high-speed, high-capacity
broadband service, including two-way Internet access service via low-power,
cellularized communication systems and single-cell high-power systems. On April
27, 2006, the FCC released an additional order to reform FCC rules related to
BRS and EBS spectrum. Although these new, amended rules became effective on July
19, 2006, they are subject to petitions for reconsideration, which seek to
modify some of these amendments. For a more detailed description of these new
rules, see “Government Regulation - BRS/EBS License Conditions.”
  16
 AWS
Spectrum
  We
acquired 154 AWS licenses in FCC Auction No. 66. The FCC granted AWS spectrum
pursuant to Economic Area (“EA”) licenses, REAG licenses and CMA licenses. The
AWS auction involved a total of 1,122 licenses: 36 REAG licenses, 352 EA
licenses, and 734 CMA licenses. EA, REAG and CMA licenses vary widely in terms
of population and geographic coverage.
  In terms
of spectral size, the AWS spectrum is divided into six spectrum blocks, A
through F. There are three 10 MHz blocks, each consisting of paired 5 MHz
channels, and three 20 MHz blocks, each consisting of paired 10 MHz channels. We
have acquired both 20 MHz and 10 MHz licenses.
  AWS
licenses are allocated by the FCC for flexible use. This means that the spectrum
can be used to provide any type of fixed, portable or mobile services to
individuals and businesses, including the wireless broadband services we intend
to offer. Any such offerings are subject to compliance with technical rules in
Part 27, Title 47 of the Code of Federal Regulations as well as any applicable
border treaties or agreement governing operations near the Canadian and Mexican
borders.
  International
Spectrum
  On
December 15, 2006, our Inquam Broadband GmbH subsidiary acquired 3.5
GHz Broadband Wireless Access (“BWA”) spectrum in Germany. The acquisition
includes 42MHz of spectrum in all service areas. The licenses vary widely in
terms of population and geographic coverage, but include major cities, such as
Koln/Dusseldorf, Stuttgart/Karlbsruhe, Berlin/Brandenburg, Munster and
Rhein/Main.
  On March
2, 2007, we acquired WCS spectrum in Canada. The acquisition includes 30MHz of
spectrum in all service areas for which licenses were acquired. The licenses
vary widely in terms of population and geographic coverage, but include major
cities, such as Montreal, Ottawa, Edmonton, Quebec and Winnipeg. NextWave’s
Canadian WCS licenses are held by our Canadian subsidiary, 4253311 Canada
Inc. The licenses carry a 10-year license term with renewal expectancy of
subsequent 10-year terms absent breach of license conditions. Because the
licenses were issued by Industry Canada through two separate auctions, 63
licenses have an expiration date of November of 2014, while 25 licenses have an
expiration date of April of 2015. The licenses are “radiocommunication user”
licenses and cannot be used to provide service for compensation before the
licenses are converted to either “radiocommunication service provider” licenses
or “radiocommunication carrier” licenses. Conversion of the licenses will
require compliance with Canadian ownership and control restrictions. In
addition, each Canadian WCS license is subject to a 5 year usage implementation
requirement, demonstrating that the spectrum is being used at a level that is
acceptable to Industry Canada. Again, because the licenses were issued at two
different times, there are two different implementation deadlines, November 2009
for 63 licenses, and April 2010 for the other 25 licenses.
  On May 2,
2007, our Inquam Broadband GmbH subsidiary acquired 3.5 GHz spectrum in
Switzerland. This acquisition includes 42 MHz of spectrum covering the country’s
entire population of 7.5 million people.
  Through
our acquisition of WiMAX Telecom AG on July 3, 2007, we acquired 3.5 GHz
spectrum in Austria, Slovakia and Croatia. These acquisitions include 49 MHz of
spectrum covering Austria’s entire population of 8.3 million people, 56 MHz of
spectrum covering Slovakia’s entire population of 5.5 million people and 39 MHz
of spectrum covering 3 million people representing 68% of the Croatia’s
population.
  In
October 2007, we acquired Websky Argentina SA, an Argentine
corporation.  Websky is a developer and operator of wireless broadband
services over licensed frequencies in Argentina and has obtained spectrum
licenses for an aggregate of 42 MHz spectrum in the 2.5 GHz band covering the
Buenos Aires metro region and 180 kilometers surrounding the
city.  Transfer of control of the spectrum licenses held by Websky
Argentina SA remains subject to regulatory approval.
  International
Investments
  Hughes
Systique
  In
October 2005, we acquired a 33% equity interest in Hughes Systique Corporation
(“HSC”) for $4.5 million. The remaining equity is owned by Hughes
Communications, Inc., the parent company of Hughes Network Systems, and the
employees of HSC. Formed in 2005, HSC is an offshore software development
company that specializes in providing software development services to the
telecommunications industry using engineers and software developers in India.
The President and CEO of HSC, Pradeep Kaul, has more than 33 years of experience
in the wireless industry, including as an executive at Hughes Network Systems,
and previously formed a successful offshore development company that was sold to
Flextronics International. We entered into the relationship with HSC to
facilitate and expedite the development of software modules and applications
required in connection with our broadband development activities. In
October 2005, we also entered into a 24-month service agreement with HSC
pursuant to which we have agreed to contract for a minimum level of programmers
during the term of the agreement. This agreement was amended in December 2006,
extending the term through June 2009.
  17
 In
February 2008, we executed a loan agreement with HSC for 6% senior secured
convertible notes, whereby we committed to make available up to $1.5 million in
additional funding.
  Sales
and Marketing
  We intend to promote industry awareness
of our products and technologies via the deployment of our Las Vegas
  NextWave
Network Products and NextWave Semiconductor
  We intend
to market our
  NextWave Mobile Products
    Geographic Breakdown of
Revenues
  During the year ended
December 29, 2007, we generated $31.8 million of revenues (54%) in the United
States, $10.2 million (17%) in Asia-Pacific, $16.8 million (29%) in Europe and
$0.3 million in other regions of the world.
    Competition
  NextWave
Network Products
  Our
mobile broadband network systems based on UMTS and WiMAX standards will compete
with alternative solutions available from well-established, international
companies including Alcatel-
  In the
Mobile TV market, we face competition from a set of technologies that are being
backed by some of the largest players in
  18
 NextWave
Mobile Products
  Our WiMAX
semiconductor products will be competing with numerous companies that are
developing or marketing WiMAX chipsets including Beceem, Fujitsu, Intel,
Motorola, Nortel, RunCom, Samsung, Sequans and WaveSat. Some of these companies
have significantly greater financial, technical development, marketing and other
resources than we do, are already marketing commercial WiMAX semiconductor
products, and have established a significant time-to-market advantage
  At
present, the primary competitors for our multimedia software products are the
internal multimedia design teams at the OEM handset manufacturers to whom
PacketVideo markets its products and services. Importantly, these OEMs represent
some of PacketVideo’s largest customers. In addition several companies,
including Flextronics/Emuzed, Hantro, Nextreaming, Philips Software, Sasken and
Thin Multimedia also currently provide software products and services that
directly or indirectly compete with PacketVideo. As the market for embedded
multimedia software evolves, we anticipate that additional competitors may
emerge including Apple Computer, Real Networks and OpenWave.
  Intellectual
Property
  In order
to protect our proprietary rights in our products and technologies, we rely
primarily upon a combination of patent, trademark, trade secret and copyright
law as well as confidentiality, non-disclosure and assignment of inventions
agreements. We have six U.S. patents, one of which is the subject of extensive
foreign filing.  As part of our product and technology development
process, we identify potential patent claims and file patent applications when
appropriate in order to seek protection for our intellectual property
assets.  We have numerous patent applications pending in the United
States and in foreign jurisdictions.  Our registered PacketVideo
trademark is the only trademark that is currently material to our business. We
have additional trademarks and trademark applications that may become
significant to our business based on the development and success of our product
lines.
  In
addition, we have typically entered into nondisclosure, confidentiality and
assignment of inventions agreements with our employees, consultants and with
some of our suppliers and customers who have access to sensitive information. We
cannot assure you that the steps taken by us to protect our proprietary rights
will be adequate to prevent misappropriation of our technology or independent
development and/or the sale by others of products with features based upon, or
otherwise similar to, those of our products.
  Given the
rapid pace of technological development in the communications industry, we also
cannot assure you that our products do not or will not infringe on existing or
future proprietary rights of others. Specifically, more than 30 companies have
submitted letters of assurance related to IEEE Standard 802.16 and amendments
stating that they may hold or control patents or patent applications, the use of
which would be unavoidable to create a compliant implementation of either
mandatory or optional portions of the standard. In such letters, the patent
holder typically asserts that it is prepared to grant a license to its essential
IP to an unrestricted number of applicants on a worldwide, non-discriminatory or
“demonstrably free of unfair discrimination” basis and on reasonable terms and
conditions. If any companies asserting that they hold or control patents or
patent applications necessary to implement mobile WiMAX do not submit letters of
assurance, or state in such letters that they do not expect to grant licenses,
this could have an adverse effect on the implementation of mobile WiMAX networks
and the sale of our mobile WiMAX products and technologies. In addition, we can
not be certain of the validity of the patents or patent applications asserted in
the letters of assurance submitted to date, or the terms of any licenses which
may be demanded by the holders of such patents or patent applications. If we are
required to pay substantial license fees to any company (s) not participating in
the process defined by 802.16 intellectual property committee for any “finished”
mobile WiMAX products, this could adversely affect the profitability of these
products.
  Although
we believe that our technology has been independently developed and that none of
our intellectual property infringes on the rights of others, we cannot assure
you that third parties will not assert infringement claims against us or seek an
injunction on the sale of any of our products in the future. If an infringement
were found to exist, we may attempt to acquire the requisite licenses or rights
to use such technology or intellectual property. However, we cannot assure you
that such licenses or rights could be obtained on terms that would not have a
material adverse effect on us, if at all.
  We
license and will continue to seek licenses to certain technologies from others
for use in connection with some of our products and technologies. While none of
our current license agreements are material at the time of this offering
circular, the inability to obtain such licenses or loss of these licenses could
impair our ability to develop and market finished products to end-users. If we
are unable to obtain or maintain the licenses that we need, we may be unable to
develop and market our products or processes, or we may need to obtain
substitute technologies of lower quality or performance characteristics or at
greater cost.
  19
 Participation
in the WiMAX Standardization Process
  The
standardization of a wireless broadband technology such as WiMAX is driven by
professional associations consisting of experts employed by companies who have
an interest in developing the relevant technology. We believe that our
participation in these associations is important in order to influence the
development of standards and in order to keep up to date with the latest
technological developments in our industry.
  The most
important technological standards in our industry are developed by the IEEE.
WiMAX is based on the IEEE standard 802.16e for broadband wireless access
(“BWA”). The 802.16e mobile WiMAX standard is the latest generation of the IEEE
802.16 Air Interface standard, which is the state-of-the-art standard for
wireless multimedia distribution. It was initially designed for multimedia
distribution for outdoor fixed BWA markets where it addresses the “Last Mile”
problem for the extension of fiber, cable and DSL networks. It takes the best
features from earlier proprietary wireless access systems and combines them to
provide a flexible wireless network solution capable of meeting the most
stringent requirements for reliable multimedia communications.
  NextWave
has actively participated in the development of the IEEE 802.16 standard. Ken
Stanwood, Executive Vice President of Technical and Standards Development, has
participated in IEEE 802.16 from the very start, and is responsible for much of
the core Media Access Control (“MAC”) layer technology in the standard. He
recently finished a three year term as vice chair of IEEE 802.16. In addition,
Dr. Roger Marks, Senior Vice President - Industry Relations at NextWave Network
Products, currently serves as chairman of IEEE 802.16. Many additional NextWave
personnel support the process as task group officers and
participants.
  Even with
the development of the IEEE 802.16 standard, the interoperability of wireless
broadband devices and networks is not guaranteed. For example, two vendors could
pick the same profile but implement it differently. Acknowledging that risk, the
companies involved in the development of IEEE 802.16 decided to create another
voluntary industry organization, known as the WiMAX Forum that would certify
devices and technologies that meet a uniform standard. In April 2001, the WiMAX
Forum was established, with Mr. Stanwood as one of the founders. The WiMAX Forum
creates and monitors the test specifications for wireless broadband systems and
components based on the IEEE 802.16 standard.
  The WiMAX
Forum now has hundreds of industry participants as members, including AT&T,
Cisco, Intel, Motorola, Nokia, Nortel and Samsung. The WiMAX Forum is in the
process of certifying fixed WirelessMAN-OFDM systems through independent
laboratory conformance testing and plug-fests. Plug-fests are events at which
participating companies have the opportunity to test and demonstrate the
interoperability of their products based on a set of standards. The WiMAX Forum
is embarking on test specifications and plug-fests for WirelessMAN-OFDMA
scalable OFDMA mobile systems, commonly referred to as 802.16e
systems.
  In
parallel with efforts by the IEEE and the WiMAX Forum, the Telecommunications
Technology Association (“TTA”) in Korea developed WiBro, an 802.16-based
standard, which emphasizes support for mobility based on the 802.16e amendment.
Efforts supported by TTA and IEEE 802.16 to harmonize the WiBro standard with
the IEEE 802.16e standard were successful. WiBro was converted from a wireless
standard to a service requiring WiMAX certified equipment in the 2.3 GHz
band.
  Government
Regulation
  Overview
  Communications
industry regulation changes rapidly, and such changes could adversely impact us.
The following discussion describes some of the major communications-related
regulations that affect us, but numerous other substantive areas of regulation
not discussed here also may influence our business.
  20
 Communications
services are regulated to varying degrees at the federal level by the FCC and at
the state level by public utilities commissions. Our suite of wireless broadband
products and services is subject to federal regulation in a number of areas,
including the licensing, leasing and use of spectrum, and the technical
parameters, certification, marketing, operation and disposition of wireless
devices. Applicable consumer protection regulations also are enforced at the
federal and state levels.
  The
following summary of applicable regulations does not describe all present and
proposed federal, state and local legislation and regulations affecting the
communications industry. Some legislation and regulations are the subject of
ongoing judicial proceedings, proposed legislation and administrative
proceedings that could change the manner in which our industry is regulated and
the manner in which we operate. We cannot predict the outcome of any of these
matters or their potential impact on our business. See “Risks Relating to
Government Regulation.”
  Licensing
and Use of Wireless Spectrum
  The FCC
regulates the licensing, construction, use, renewal, revocation, acquisition,
lease and sale of our domestic licensed wireless spectrum holdings. Our wireless
spectrum holdings currently include licensed spectrum in the WCS, AWS and BRS
bands, and leased spectrum in the EBS band. We intend to make this spectrum
available, consistent with regulatory requirements, to service providers who
want to deploy and operate next-generation wireless broadband networks that
utilize our advanced technologies and spectrum.
  Certain
general regulatory requirements apply to all licensed wireless spectrum. For
example, certain build-out or “substantial service” requirements apply to our
licensed wireless spectrum, which generally must be satisfied as a condition of
license renewal. The Communications Act and FCC rules also require FCC prior
approval for the acquisition, assignment or transfer of control of FCC licenses.
In addition, FCC rules permit spectrum leasing arrangements for a range of
wireless licenses after FCC notification or prior approval depending upon the
type of spectrum lease. Approval from the Federal Trade Commission and the
Department of Justice, as well as state or local regulatory authorities, also
may be required if we sell or acquire spectrum. The FCC sets rules, regulations
and policies to, among other things:
  ·
              grant
      licenses in the WCS, AWS, BRS and EBS
bands;
  ·
              regulate
      the technical parameters and standards governing wireless services, the
      certification, operation and marketing of radiofrequency devices and the
      placement of certain transmitting
facilities;
  ·
              impose
      build-out or performance requirements as a condition to license
      renewals;
  ·
              approve
      applications for license renewals;
  ·
              approve
      assignments and transfers of control of FCC
  licenses;
  ·
              approve
      leases covering use of FCC licenses held by other persons and
      organizations;
  ·
              resolve
      harmful radiofrequency interference between users of various spectrum
      bands;
  ·
              impose
      fines, forfeitures and license revocations for violations of FCC rules;
      and
  ·
              impose
      other obligations that it determines to be in the public
      interest.
  Additional,
more specific regulatory requirements that apply to WCS, AWS, BRS and EBS
spectrum are described below. Compliance with all of the foregoing regulatory
requirements, and those listed below, increases our cost of doing business. For
a description of an interference issue which may impact use of WCS, BRS and EBS
spectrum, see “Risks Relating to Government Regulation-Wireless Devices
utilizing WCS, BRS and EBS spectrum may be susceptible to interference from
Satellite Digital Audio Radio Services (“SDARS”).”
  21
 WCS
License Conditions
  WCS
licensees must comply with all applicable legal and technical rules imposed by
the FCC, including those found in Part 27 of Title 47 of the Code of Federal
Regulations (“CFR”). WCS licenses are granted for ten-year license terms, and
licensees are required under applicable Part 27 rules to demonstrate that they
are providing “substantial service” in their license area within the initial
license term. Substantial service is defined as “service which is sound,
favorable, and substantially above a level of mediocre service which just might
minimally warrant renewal.” For WCS licensees, the FCC recently extended the
substantial service build-out deadline until July 21, 2010. Failure to make the
substantial service demonstration by that date, without seeking and obtaining an
extension from the FCC, would result in license forfeiture. Extensions of time
to meet substantial service demonstrations are not routinely granted by the
FCC.
  BRS/EBS
License Conditions
  Like WCS
licenses, BRS and EBS licenses are granted for ten-year license terms, and
licensees must comply with all applicable legal and technical rules imposed by
the FCC, including those found in Part 27 of Title 47 of the CFR. Unlike WCS
licenses, BRS and EBS licenses were granted at different times and, therefore,
do not have a uniform expiration date. BRS and EBS licensees must also
demonstrate that they are providing “substantial service” in their license areas
by May 1, 2011.
  From 2004
to 2006, the FCC adopted a number of rule changes which create more flexible
BRS/EBS spectrum rules to facilitate the growth of new and innovative wireless
technologies and services, including fixed and mobile wireless broadband
services. Although the proceedings to reform BRS/EBS rules have largely been
completed, they remain subject to legal challenges and petitions for
reconsideration and, thus, are subject to additional revisions. The FCC ordered
the 2.5 GHz band to be reconfigured into three segments: upper- and lower-band
segments for low-power operations, and a middle-band segment for high-power
operations. The new BRS/EBS band configuration eliminates the use of interleaved
channels by licensees in favor of contiguous channel blocks. By creating
contiguous channel blocks, and grouping high- and low-power users into separate
portions of the BRS/EBS band, the new band plan reduces the likelihood of
interference caused by incompatible uses and creates incentives for the
development of low-power, cellularized broadband operations, which were
inhibited by the prior band plan. The new BRS/EBS band plan will allow licensees
to use the 2496-2690 MHz spectrum in a more economical and efficient manner and
will support the introduction of next-generation wireless technologies. The new
rules preserve the operations of existing licensees, including educational
institutions currently offering instructional TV programming, but require that
licensees transition to the new band plan by October 19, 2010 (barring disputes
in the transition process), which includes relocating licensees from their
current channel assignments to new spectrum designations in the
band.
  For each
BRS and EBS licensee, the deadline for filing initial plans with the FCC - the
first step in launching the transition process in a given market - is January
19, 2009. After the initial plan is filed with the FCC, licensees have a 90-day
transition planning period, followed by an additional eighteen months to
complete the transition. We and other parties intend to transition the 2.5 GHz
band to the new configuration on a market-by-market basis. The process may
require several years to complete nationally. When the transition is complete,
which should occur by October 19, 2010, we believe that the 2.5 GHz band will be
more suitable for providing NextWave’s suite of wireless broadband products and
services. See, “Risks Relating to Government Regulation-We may not have complete
control over our transition of BRS and EBS spectrum, which could impact
compliance with FCC rules.”
  AWS
License Conditions
  AWS
licensees must comply with all applicable legal and technical rules imposed by
the FCC, including those found in Part 27 of Title 47 of the CFR.  All
of our AWS licenses are granted for a 15-year license term, with a renewal term
of ten-years.  AWS licensees are required to demonstrate that they are
providing “substantial service” in their license area within the initial 15-year
license term. For our AWS licenses, the renewal deadline and the substantial
service build-out deadline is December 18, 2021. Failure to make the substantial
service demonstration, without seeking and obtaining an extension from the FCC,
would result in license forfeiture. Extensions of time to meet substantial
service demonstrations are not routinely granted by the FCC.
  The AWS
spectrum includes a large number of incumbent federal government and
non-government operations that must be relocated to other spectrum. AWS
licensees are required to coordinate their operations to avoid interfering with
these incumbent stations until relocation is complete. A small number of these
incumbent stations must be protected indefinitely. In certain cases, the AWS
licensee must pay for the relocation of incumbent stations within the AWS
licensee’s license area. AWS licensees are effectively prohibited from deploying
TDD systems in the AWS spectrum.
  22
 Point-to-Point
Microwave License Conditions
  We hold a
number of 18 GHz and 23 GHz point-to-point microwave licenses in Las Vegas that
we intend to use as part of our network to transmit or “backhaul” wireless
broadband communications traffic to our cell sites and network trial operations
center. These licenses are granted based upon applications that demonstrate that
the applicant is legally and technically qualified and that the proposed station
will not cause impermissible interference to other stations or proposed stations
that are entitled to interference protection. These licenses also have license
terms of ten years, and are subject to satisfying construction deadlines that
occur 18 months after the licenses are granted. Point-to-point microwave
licensees must also comply with certain technical rules contained in Part 101 of
Title 47 of the CFR.
  New
Spectrum Opportunities and Spectrum Auctions
  Ongoing
FCC proceedings and initiatives may affect the availability of spectrum for
commercial wireless services. These proceedings may make more wireless spectrum
available to us and other new wireless competitors. We believe that additional
spectrum bands may also be attractive for the deployment of mobile WiMAX
networks, and in the future we may obtain spectrum in those bands through
secondary markets acquisitions and leases and whatever mechanisms the FCC may
establish including participation in FCC auctions.
  Other
FCC Requirements
  Internet
Access Services
  Internet
access services are generally not considered to be “telecommunications
services,” and are therefore not automatically subject to the broad range of
common carrier regulations that apply to telecommunications service providers
under Title II of the Communications Act of 1934 (as amended). Such services,
however, are nonetheless subject to certain regulatory requirements generally
associated with common carriage under the FCC’s ancillary jurisdiction. For
example, providers of facilities-based broadband Internet access services, and
providers of interconnected VoIP services, as defined by the FCC, are required
to comply with the Communications Assistance for Law Enforcement Act (“CALEA”).
Providers of interconnected VoIP services also are required to comply with:
Enhanced 911 (“E911”) regulations, which require routing of 911 calls to
geographically appropriate public safety answering points based on the caller’s
location; certain Universal Service Fund (“USF”) contribution, reporting and
registration obligations; Customer Proprietary Network Information (“CPNI”)
requirements, which are intended to protect the confidentiality of customer
calling information and services purchased; disability access and Telecommunications Relay Services
(“TRS”) obligations, which include making contributions to the FCC’s TRS
fund and providing “711” abbreviated dialing to connect to TRS services; and
Local Number Portability (“LNP”) rules. Certain consumer protection regulations
also may apply at the state and federal levels. The regulatory treatment of
other IP-enabled services is presently under consideration by the
FCC.
  Voice
over Internet Protocol (“VoIP”)
  The FCC
has and continues to consider the regulatory status of various forms of VoIP
services. In 2004, the FCC issued decisions in which it found that: (i) a
computer-to-computer VoIP service for which no charge is assessed and
conventional telephone numbers are not used, is an unregulated “information
service,” rather than a “telecommunications service”; and (ii) long distance
offerings in which calls originate from and terminate to the ordinary public
switched telephone network, using regular telephones, but are transmitted in
part through the use of IP, are “telecommunications services,” thereby rendering
such services subject to the payment of access charges. The FCC also preempted
states from exercising entry and related economic regulation of VoIP services
that require the use of specialized end-user equipment to send/receive calls
over a broadband connection to the Internet, and use North American Numbering
Plan (“NANP”) numbers as the identification mechanism for the user’s IP address.
This ruling did not address specifically whether this form of VoIP is an
“information service” or a “telecommunications service,” or what regulatory
obligations, such as intercarrier compensation, should apply. In 2005, as noted
above and detailed below, the FCC subjected interconnected VoIP service
providers to E911 and CALEA obligations. In 2006 the FCC subjected
interconnected VoIP service providers to certain USF contribution, reporting,
registration and contribution obligations (discussed below). In 2007, the FCC
subjected “interconnected VoIP” service providers to CPNI, disability access and
TRS, and LNP requirements (discussed below). Providers of interconnected VoIP
service also are required to pay annual regulatory fees based on their
international and interstate revenues reported to the FCC. Issues surrounding
whether or how VoIP offerings should be regulated, including whether they should
pay access charges, and whether interconnected VoIP services are
“telecommunications services” or “information services,” as those terms are
defined in the Communications Act, along with the regulatory treatment of other
IP-enabled services, is presently under consideration by the FCC.
  23
 Enhanced
911 (“E911”)  Services
  The FCC
adopted E911 obligations for broadband service providers that offer
interconnected VoIP service to end-users. E911 systems route 911 calls to a
geographically appropriate public safety answering point based on the caller’s
location. Unlike basic 911, which merely connects the caller with public safety
entities, E911 provides public safety entities with the caller’s call back
number and in many cases location information. The FCC order establishing this
obligation was not clear as to whether the obligation, which has been effective
since November 28, 2005, applies to both wholesale and retail providers of
interconnected VoIP service. The obligation can be met through contracting with
third parties or purchasing tariffed E911 services from local exchange carriers.
The FCC also is examining whether to apply a range of additional E911
requirements to interconnected VoIP providers.
  Communications
Assistance for Law Enforcement Act
(“CALEA”)  Requirements
  Providers
of interconnected VoIP and facilities-based broadband Internet access providers
are subject to the requirements set forth in CALEA. CALEA requires that our
equipment, facilities and services allow for lawfully authorized electronic
surveillance by law enforcement agencies based on either industry or FCC
standards. In September 2005, the FCC extended CALEA obligations to
facilities-based broadband Internet access providers and to interconnected VoIP
providers, whether wireline or wireless. These entities must be compliant with
CALEA’s obligations by May 14, 2007, unless a waiver or extension has been
obtained from the FCC.
  Universal
Service Fund (“USF”)
  In 2006,
the FCC established USF contribution, reporting and registration obligations for
providers of interconnected VoIP. The USF contribution obligation is based upon
the portion of revenues derived from “telecommunications” service and the
end-user telecommunications revenues derived from interstate and international
traffic. The FCC rules provide various mechanisms for determining the
contribution figure. Some aspects of these contribution rules, as applied to
providers of interconnected VoIP service, are the subject of a pending challenge
in federal court. Interconnected VoIP service providers also will be subject to
the same USF reporting procedures that apply to all other providers of
interstate and international telecommunications. These reporting procedures
involve quarterly reporting of the gross projected billed and collected end-user
interstate and international revenues as well as annual reporting of actual,
gross, billed and collected end-user interstate and international revenues.
Under the FCC rules, providers of interstate and international
telecommunications whose annual USF contribution are expected to be less than
$10,000 are not required to contribute to the USF, or file quarterly or annual
USF reports. All interconnected VoIP providers that have not already registered
with the FCC and designated an agent for service of process must complete
certain registration requirements.
  Customer
Proprietary Network Information (“CPNI”)
  In April
2007, the FCC adopted an order which subjects providers of interconnected VoIP
service to the FCC’s CPNI rules. CPNI includes customer calling information,
such as the phone numbers called, and the frequency, duration, and timing of
such calls, and any services purchased, such as call waiting. Entities subject
to the CPNI rules are required to protect the confidentiality of CPNI. The CPNI
rules permit such entities to use, disclose, or permit access to customers’ CPNI
only: (i) when customer approval is obtained; (ii) in the course of providing
the telecommunications service from which such information is derived, or
services necessary to or used in the provision of such telecommunications
service, or (iii) as required by law. Entities subject to the CPNI rules also
are required to establish safeguards to protect against unauthorized use or
disclosure of CPNI. The FCC also adopted a number of new CPNI requirements
designed to prevent pretexting, and currently is considering expanding these
rules even further.
  Disability
Access and Telecomunications Relay Service (“TRS”)
  In May
2007, the FCC applied the disability access requirements that currently apply to
telecommunications service providers and equipment manufacturers to providers of
interconnected VoIP services and to manufacturers of specially designed
equipment used to provide those services. These rules require manufacturers of
telecommunications equipment and customer premises equipment ("CPE") to ensure
that their equipment is designed and fabricated so that the telecommunications
functions of the equipment are accessible to and usable by individuals with
disabilities, or compatible with peripherals or specialized CPE commonly used by
individuals with disabilities to achieve access, where readily achievable.
Network features, functions, and capabilities also must comply with these
standards. The FCC also subjected providers of interconnected VoIP service to
its TRS requirements. Specifically, providers of interconnected VoIP service
will be required to: (i) provide TRS so that persons with hearing or speech
disabilities will have equal access to the telecommunications network to
communicate with voice telephone users; (ii) comply with 711 abbreviated dialing
requirements, which ensure that TRS users can initiate a TRS call for access to
relay services from any telephone, anywhere in the United States, and that such
calls will be properly routed to the appropriate relay center by simply dialing
“711”; and (iii) contribute to the TRS Fund.
  24
 Local
Number Portability (“LNP”)
  In
November 2007, the FCC extended its LNP obligations to interconnected VoIP
providers to ensure that customers of such VoIP providers may port their NANP
telephone numbers when changing their underlying telephone providers or VoIP
providers. The FCC also extended to interconnected VoIP providers the obligation
to contribute to shared numbering administration costs. The FCC also is
considering additional requirements related to the LNP porting process, and
whether to require interconnected VoIP providers to comply with N11 code
assignments (special, abbreviated dialing numbers which allow access to special
services) or other numbering requirements.
  Consumer-Related
Regulations
  The FCC
is considering whether Internet access services, regardless of the technology
used, should be subject to FCC consumer protection regulations. Various states
may also exercise authority over terms and conditions of Internet access
services, such as billing practices and other consumer-related matters.
Compliance with additional consumer-related obligations will result in
significant additional costs for us.
  Equipment
Certification
  Our
equipment must conform to a variety of federal regulations that require
compliance with administrative and technical requirements as a condition to
marketing devices that emit radiofrequency energy.
  Tower
Siting
  Wireless
systems must comply with various federal, state and local regulations that
govern the siting, marking, lighting and construction of transmitter towers and
antennas, including regulations promulgated by the FCC and Federal Aviation
Administration (“FAA”). FCC rules subject certain tower locations to
environmental and historic preservation statutory requirements. To the extent
governmental agencies impose additional requirements on the tower siting
process, the time and cost to construct and deploy towers could be negatively
impacted. The FAA has proposed modifications to its rules that would impose
certain notification requirements upon entities seeking to (i) construct or
modify any tower or transmitting structure located within certain proximity
parameters of any airport or heliport, and/or (ii) construct or modify
transmission facilities using the 2500-2700 MHz radiofrequency band, which
encompasses virtually all of the BRS/EBS frequency band. If adopted, these
requirements could impose new administrative burdens upon users of BRS/EBS
spectrum.
  Electronic
Waste (“E-waste”) Legislation
  Electronics
waste laws, also known as “E-waste” laws, went into effect July 1, 2006 in
California, China, Japan and the European Union and require electronics
developers, manufacturers and distributors to eliminate hazardous substances,
such as lead and mercury, in their products and to participate in, and finance,
the recycling of E-waste. Congress is considering national legislation that
would override state E-waste laws and provide for more consistent application of
E-waste standards.
  Employees
  As of
December 29, 2007, we had 1,105 employees, including 408 in NextWave Network
Products, 493 in NextWave Mobile Products, 65 in Strategic Initiatives, and 139
in corporate operations and administration. In addition, we had 259 full-time
equivalent contractors, including  79 in NextWave Network Products,
144 in NextWave Mobile Products, 4 in Strategic Initiatives and and 32 in
corporate operations and administration. We are not subject to any collective
bargaining agreements and believe that our relationship with our employees is
good.
  25
 Our
History
  NextWave
Telecom and the PCS Business
  Old
NextWave Wireless was formed in 1996 as a wholly owned operating subsidiary of
NTI. NTI sought to develop a nationwide CDMA-based PCS network. In 1998,
NextWave Telecom group, filed for protection under Chapter 11 of the United
States Bankruptcy Code. During the seven-year pendency of the Chapter 11 case,
Old NextWave Wireless continued its involvement in the build-out of NTI’s PCS
network. Substantially all of the related assets, except the PCS licenses, were
abandoned when NTI was sold to Verizon Wireless as part of the plan of
reorganization of the NextWave Telecom group described below.
  Wireless
Broadband Development
  Although
a commercial wireless broadband business was not developed during the pendency
of the Chapter 11 case, the vision for our company was created at that time.
Beginning in 2003, NTI began to explore opportunities to create the technology
for a broadband wireless network utilizing BRS spectrum in the 2.5 GHz frequency
range. In late 2003, NTI received authority from the Bankruptcy Court to
construct and test a wireless broadband network in the Las Vegas, Nevada
metropolitan area. Old NextWave Wireless acquired the rights to 24 MHz of BRS
spectrum in Las Vegas and began work on the test network. In 2004, Old NextWave
Wireless acquired preferred stock representing a 50% equity interest in CYGNUS
Communications, Inc., a company engaged in the development of wireless
communications hardware. Among other reasons, to separate the new prospective
BRS spectrum wireless technology business from the PCS business of the rest of
the NextWave Telecom group, NTI formed a new subsidiary, NextWave Broadband, to
be the operating company for the BRS business. The capitalization of a new
wireless technology company was discussed with the stakeholders of the NextWave
Telecom group and was made part of the plan of reorganization described
below.
  Plan
of Reorganization and Verizon Wireless Transaction
  On March
1, 2005, the Bankruptcy Court confirmed the plan of reorganization of the
NextWave Telecom group, including Old NextWave Wireless. In December 2004, Old
NextWave Wireless was converted from a corporation to a limited liability
company. The plan of reorganization was funded with the proceeds from the sale
of NextWave Telecom and its subsidiaries (other than Old NextWave Wireless) to
Verizon Wireless for $3.0 billion, in addition to previous PCS spectrum sales to
Cingular Wireless, Verizon Wireless and MetroPCS. The plan of reorganization
provided for the payment in full of all the creditors of the NextWave Telecom
group and the funding of Old NextWave Wireless as a new wireless broadband
technology company to be distributed to equityholders, together with an
aggregate distribution of $2.6 billion in cash and $149 million principal amount
of our Non-Recourse Secured Notes. Prior to the consummation of the plan of
reorganization, NTI and its subsidiaries entered into a global settlement
agreement with the FCC resolving all outstanding claims of the FCC.
  In
connection with the sale of NextWave Telecom and its subsidiaries to Verizon
Wireless, we agreed to indemnify NextWave Telecom and its subsidiaries against
all pre-closing liabilities of NextWave Telecom and its subsidiaries and against
any violation of the Bankruptcy Court injunction against persons having claims
against NextWave Telecom and its subsidiaries, with no limit on the amount of
such indemnity. A total of $165.0 million was held in escrow (the “Escrow
Amount”) in order to secure such indemnity, and to satisfy any amounts due to
Verizon Wireless in the event that the consolidated net loss of the NextWave
Telecom group for the taxable year commencing on January 1, 2005, and ending on
April 13, 2005 was, subject to certain adjustments, less than $1.362 billion. On
December 6, 2006, Verizon and AirTouch Cellular, the assignee of Verizon,
entered into an agreement (i) to settle the amounts payable under the Escrow
Account and (ii) to release the Escrow Amount plus accrued interest. As a
result, we received approximately $153.9 million of the proceeds from the Escrow
Account, including accrued interest. In addition, the FCC received approximately
$16.1 million of funds held in escrow, including approximately $0.8
million held under a separate escrow, pursuant to a December 2004
stipulation entered into between NextWave and the FCC. We are not currently
aware of any other indemnifiable losses that remain following the effective date
of the sale to Verizon, and Verizon has not made any related claims
therefor.
  26
 As part
of the plan of reorganization, we issued $148.5 million of Non-Recourse Secured
Notes to the former equityholders of NextWave Telecom. The notes were
non-recourse to our assets and we were required to redeem the notes using the
proceeds of any escrow release, net of payments due to the FCC. Accordingly, the
full amount of the escrow released to us, $153.9 million, or approximately
103.5% of the face amount of the notes, was paid directly into an escrow account
to fund the redemption of the notes. The notes were redeemed as of December 21,
2006.
  Inception
of a Wireless Technology Company
  The
following steps were taken to organize Old NextWave Wireless as a new wireless
technology company as part of the plan of reorganization:
  ·
              The
      NextWave Telecom group abandoned substantially all of its PCS networks,
      technology and fixed assets, except the PCS spectrum licenses to be
      acquired by Verizon Wireless.
  ·
              NTI
      and its subsidiaries transferred all of their remaining non-PCS assets to
      NextWave Broadband, except cash and the PCS spectrum licenses to be
      acquired by Verizon Wireless. The assets contributed primarily consisted
      of property and equipment not desired by Verizon Wireless, having a fair
      market value of less than $10
million.
  ·
              NextWave
      Broadband was transferred to Old NextWave
  Wireless.
  ·
              Old
      NextWave Wireless retained its investment in CYGNUS preferred stock and
      convertible notes, as well as wireless licenses useful for its new
      technology broadband business with a value of approximately $33.6
      million.
  ·
              NTI
      and its subsidiaries, including Old NextWave Wireless, obtained an order
      providing a release of claims pursuant to Section 1141 of the Bankruptcy
      Code. To the extent that such release did not eliminate all liabilities of
      the NextWave Telecom group, NextWave Wireless assumed and agreed to
      indemnify Verizon Wireless against such
  liabilities.
  ·
              NTI
      and its subsidiaries (other than Old NextWave Wireless) were sold to
      Verizon Wireless for $3.0 billion.
  ·
              Membership
      units of NextWave were distributed to the former stockholders of NTI,
      which distribution was exempt from registration under the Securities Act
      pursuant to Section 1145 of the Bankruptcy Code. Upon this distribution,
      on April 13, 2005, Old NextWave Wireless emerged as NextWave
      Wireless.
  ·
              Simultaneously
      with the distribution, NextWave was capitalized with $550 million of cash
      proceeds from the sale to Verizon Wireless and prior PCS spectrum license
      sales.
  Pursuant
to the plan, the NTI stockholders received the undivided interests in the
underlying assets of Old NextWave Wireless as part of their consideration for
the redemption of their NTI shares, which was followed by the deemed
contribution of these undivided interests to NextWave in return for membership
interests in NextWave.
  Our
Recent Acquisitions
  Since our
emergence as a new wireless technology company, we have made several strategic
investments and acquisitions, including most significantly:
 
 ·
              In
      March 2008, weentered into an agreement to acquire 100% of the
      fully-diluted equity of Southarn Chile S.A. and CBC Ltda., holders of 2.5
      GHz Spectrum in seven major cities in Chile for $7.8 million, consisting
      of the assumption of $3.3 million in debt payable during 2012-2015 and
      $4.5 million in cash at closing.
  ·
              In
      October 2007, we acquired Websky Argentina SA, an Argentine corporation,
      for $12.6 million. Websky is a developer and operator of wireless
      broadband services over licensed frequencies in Argentina and has obtained
      spectrum licenses for an aggregate of 42 MHz spectrum in the 2.5 GHz band
      covering the Buenos Aires metro region and 180 kilometers surrounding the
      city.  Government approval for the change in control of the
      licenses is pending.
   27
 ·
              In
      September 2007, PacketVideo acquired Digital World Services AG, a Swiss
      corporation, for $5.8 million, including debt assumed and paid at closing
      of $0.3 million.  Digital World Services is a provider of
      software solutions and services for secure digital content
      delivery.
  ·
              In
      July 2007, through our subsidiary Inquam Broadband GmbH, we acquired a
      65.38% controlling interest in WiMax Telecom AG, a privately-held company
      domiciled in Zurich, Switzerland, for $19.5 million, including debt
      assumed and paid at close of $5.8 million. WiMax Telecom AG, through its
      subsidiaries, has obtained nationwide wireless broadband spectrum
      concessions in Austria and Slovakia, and a major spectrum concession in
      Croatia and currently operates WiMAX networks in Austria and Slovakia. Our
      Inquam Broadband GmbH subsidiary exercised its option to acquire the
      remaining minority interest in WiMax Telecom AG in December 2007 for $5.1
      million.
  ·
              In
      May 2007, we acquired all of the equity interests in IPWireless, Inc., a
      privately-held company that supplies TD-CDMA network equipment and
      subscriber terminals. The IPWireless TDtv solution, based on 3GPP
      Multimedia Broadcast Multicast Service (MBMS), is being designed to allow
      UMTS Operators to deliver mobile TV and other multimedia services using
      their existing 3G spectrum and networks, without impacting their current
      voice and data services. The merger consideration
      consisted of approximately $100 million paid at closing, with $25 million
      paid in cash and $75 million paid in shares of our common
      stock.  As specified in the Merger Agreement, additional
      consideration of up to $135 million may be earned upon the achievement of
      certain revenue milestones relating to IPWireless's public safety business
      and TDtv business during the 2007 to 2009 timeframe, with potential
      payment of up to $50 million in late 2007 or 2008 and up to $7.5 million
      in 2008, up to $24.2 million in 2009, and up to $53.3 million in 2010. Of
      the $51.6 million in additional purchase consideration $21.0 million will
      be deposited into an escrow account to settle any potential contingencies
      existing at acquisition.
  ·
              In
      March 2007, we acquired all of the outstanding shares of common stock of
      4253311 Canada Inc., a Canadian company. The total cost of the acquisition
      was approximately $26.0 million in cash. The assets of the company are
      comprised almost entirely of wireless spectrum covering Canadian
      markets.
  ·
              In February 2007, NextWave
      acquired all of the outstanding common stock and warrants of GO Networks,
      Inc., for $16.9 million. Additional purchase consideration of up to $25.7
      million may be paid in shares of NextWave common stock, subject to the
      achievement of certain operational milestones in the 18-month period
      subsequent to the closing of the acquisition. NextWave also adopted the GO
      Networks Employee Stock Bonus Plan, whereby certain employees may receive
      up to an aggregate of $5.0 million in shares of NextWave common stock upon
      the achievement of the operational milestones referred to
      above.
  ·
              In
      January 2007, PacketVideo acquired all of the shares of SDC Secure
      Digital Container AG for cash of $19.0
million.
  ·
              In
      December 2006, we were awarded 154 spectrum licenses for an aggregate bid
      of $115.6 million in the AWS auction. These licenses significantly
      increased our domestic spectrum portfolio to cover approximately 249
      million persons.
  ·
              Since
      our emergence as a wireless technology company, we have consummated
      transactions to acquire licensed spectrum rights, including subsequent
      lease obligations, for amounts totaling approximately $497 million,
      including our acquisition of WCS Wireless Inc., which holds spectrum
      covering 188.8 million persons, or POPs, in the Central, Western, and
      Northeastern United States, for $160.5
million.
  ·
              In
      July 2005, we acquired all of the outstanding shares of PacketVideo
      Corporation for $46.7 million in
cash.
  Corporate
Conversion Merger
  To enable
our listing on The Nasdaq Global Market, NextWave Wireless LLC’s Board of
Managers and a majority in interest of NextWave Wireless LLC’s members approved
the conversion of the Company from a Delaware limited liability company to a
Delaware corporation. The corporate conversion was effected on November 13, 2006
through the merger of a wholly owned subsidiary of ours with and into NextWave
Wireless LLC.  In the merger, NextWave Wireless LLC’s equity holders
received one share of our common stock for every six membership interests that
they held. No fractional shares of our common stock were issued in connection
with the corporate conversion merger. Instead, holders of LLC interests who
would otherwise have been entitled to a fraction of a share of common stock were
paid cash equal to $1.00 per LLC interest not exchanged for a whole share of our
common stock. Each holder of NextWave Wireless LLC’s limited liability interests
own the same percentage of the outstanding equity of the Company before and
immediately after the corporate conversion merger. In addition, we assumed
NextWave Wireless LLC’s obligations under all stock option plans of the Company
and its subsidiaries.
  28
 Available
Information
 
 We are a
public company and are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly,
we file periodic reports, proxy statements and other information with the
Securities and Exchange Commission (the “SEC”). Such reports, proxy statements
and other information may be obtained by visiting the Public Reference Room of
the SEC at 100 F Street NE, Room 1580, Washington, D.C. 20549 or by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains a website ( http://www.sec.gov ) that
contains reports, proxy and information statements and other information
regarding us and other issuers that file electronically.
 
 Our
website address is http://www.nextwave.com.
We make available, free of charge
through our website, our Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, and any amendments to these reports
as soon as reasonably practicable after we electronically file such material
with, or furnish such material to, the Securities and Exchange
Commission.Our Code of Business Conduct and Ethics is
available free of charge on our website.
 
 The
certifications of our Chief Executive Officer and Chief Financial Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, about the
disclosure contained in this Report are attached hereto.
 
 29
 
 Item 1A.Risk
Factors
 
 We
have limited relevant operating history and a history of losses.
  We
emerged from our reorganization in April 2005 with a new business plan and have
made several significant acquisitions and investments. As a result, we are at an
early stage of our development and have had a limited relevant operating history
and, consequently, limited historical financial information. Other than through
our PacketVideo subsidiary, which we acquired in July 2005, and our IPWireless
subsidiary, which we acquired in May 2007, we have never generated any material
revenues and have limited commercial operations. While certain of our businesses
are currently generating revenues, the revenues are not yet adequate to cover
our operating expenses. In particular,
  If we are
not able to successfully implement all key aspects of our business plan,
including selling and/or licensing high volumes of our products to network
operators and to device and network equipment manufacturers, we may not be able
to develop a customer base sufficient to generate adequate revenues. If we are
unable to successfully implement our business plan and grow our business, either
as a result of the risks identified in this section or for any other reason, we
may never achieve profitability, in which event our business would
fail.
  If
we fail to effectively manage growth in our business, our ability to develop and
commercialize our products will be adversely affected.
  Our
business and operations have expanded rapidly since the completion of our
reorganization in April 2005. For example, from April 13, 2005 through December
29, 2007, the number of our employees increased from 50 to 1,105 as a result of
organic growth and acquisitions. In addition to various immaterial acquisitions
in 2007 and 2006, we acquired WiMax Telecom AG in December 2007 (following our
purchase of a majority-owned share in July 2007), Websky Argentina S.A. in
October 2007, IPWireless, Inc. in May 2007, GO Networks, Inc. in February 2007,
SDC Secure Digital Container AG (“SDC”) in January 2007, CYGNUS Communications,
Inc. in February 2006 and PacketVideo Corporation in July 2005.
  To
support our expanded research and development activities and the anticipated
growth in our NextWave Network Products and NextWave Mobile Products businesses,
we must continue to successfully hire, train, motivate and retain our employees.
We expect that further expansion of our operations and employee base will be
necessary. Our recent acquisitions have also expanded the geographic reach of
our operations to countries including Argentina, Austria, Croatia, Denmark,
Finland Germany, Israel, Slovakia, South Korea, Switzerland and the United
Kingdom. In order to manage the increased complexity of our expanded operations,
we will need to continue to expand our management, operational and financial
controls and strengthen our reporting systems and procedures. All of these
measures will require significant expenditures and will demand the attention of
management. Failure to fulfill any of the foregoing requirements could result in
our failure to successfully manage our intended growth and development, and
successfully integrate our acquired businesses, which would adversely affect our
ability to develop and commercialize our products and achieve
profitability.
  We have recently acquired
private companies that were not subject to Sarbanes-Oxley regulations and,
therefore, they may lack the internal controls of
a public company, which could ultimately affect our ability to ensure compliance
with the requirements of Section 404 of the Sarbanes-Oxley Act.
 
 We have
recently acquired private companies that were not previously subject to Sarbanes
Oxley regulations and accordingly were not required to establish and maintain an
internal control infrastructure meeting the standards promulgated under the
Sarbanes-Oxley Act of 2002.  Our assessment of and conclusion on the
effectiveness of the Company’s internal control over financial reporting as of
December 29, 2007 did not include the internal controls of the recent
acquisitions of SDC Secure Digital Container AG, acquired in January 2007, GO
Networks, Inc., acquired in February 2007, IPWireless, Inc., acquired in May
2007, WiMax Telecom AG, acquired in July 2007, Digital World Services AG,
acquired in September 2007, and Websky Argentina SA, acquired in October 2007,
which are included inour 2007 consolidated financial statements
 and constituted $64.3 million and $97.9 million of total assets and total
liabilities, respectively, as of December 29, 2007 and $24.7 million and $94.1
million of total revenues and operating loss, respectively, for the fiscal year
then ended. Management did not assess the effectiveness of internal control over
financial reporting at the entities listed above because we did not have the
ability to assess those controls due to the timing of the
acquisitions.
 
 30
 We continue to evaluate and integrate
these acquired entities into our existing internal control
structure.  In connection with our financial statement close process
for the fiscal year ended December 29, 2007 and our acquisition integration
efforts, we identified several control deficiencies at a company we acquired in
2007 whose operations are primarily foreign. Specifically, there were
deficiencies in information technology general controls and the availability of
a sufficiently trained workforce in the accounting organization. Ernst &
Young LLP, in connection with their audit for the year ended December 29, 2007,
also identified control deficiencies in the revenue recognition and financial
statement close processes at this same acquired company.  These
deficiencies could rise to the level of one or more material weaknesses once the
evaluation of these controls has been completed. We are in the process of
implementing a number of measures to remedy these deficiencies including the
implementation of our accounting and enterprise resource planning system. We
believe the new controls and procedures will address the deficiencies
identified. The evaluation of these controls is expected to be included in our
report on internal control over financial reporting for the year ending December
27, 2008. We plan to continue to monitor the effectiveness of the acquired
company’s controls, including the operating effectiveness of the newly
implemented measures and plan to take further action, as
appropriate.
 
 Although
our management will continue to review and evaluate the effectiveness of our
internal controls in light of these acquisitions, we can give you no assurance
that there will be no material weaknesses in our internal control over financial
reporting.   Any significant deficiencies or material weaknesses
in the internal control structure of our acquired businesses may cause
significant deficiencies or material weaknesses in our internal control over
financial reporting, which could have a material adverse effect on our business
and our ability to comply with Section 404 of the Sarbanes-Oxley
Act.
  Wemay need to secure significant additional capital in the future to
implement our business plan and to continue to fund our research and development
activities and our operating losses until we become cash flow positive and
generate earnings.
  We
  Based on
the operating plan for the year ended December 27, 2008 approved by our board of
directors, management believes our existing cash, cash equivalent and marketable
securities, the release of the $75 million of restricted cash based on the First
Amendment to the Purchase Agreement for our 7% Senior Notes and cash forecasted
to be generated by operations will be sufficient to meet the our estimated
working capital and capital expenditures requirements through at least March
2009.
    31
 To
augment our existing working capital resources in order to satisfy our cash
requirements, we may seek to sell debt baskets and securities or additional
equity securities or to obtain a credit facility. Our Senior Secured Notes and
our Series A Preferred Stock prohibit our incurrence of additional indebtedness,
subject to certain exceptions. The sale of equity securities or convertible debt
securities could result in additional dilution to our stockholders. The
incurrence of additional indebtedness would also result in additional debt
service obligations and the requirement that we comply with operating and
financial covenants that would restrict our operations. In addition, there can
be no assurance that any additional financing will be available on acceptable
terms, if at all.
  We
operate in an extremely competitive environment which could materially adversely
affect our ability to win market acceptance of our products and achieve
profitability.
  We operate in an extremely competitive
market and we expect such competition to increase in the future. Our
NextWaveNetwork Products
and NextWaveSemiconductor
businesses are developing and selling products and technologies based on WiMAX, Wi-Fi
and UMTS standards and will be competing with well established, international
companies that are engaged in the development, manufacture and sale of products
and technologies that support the same technologies, aswell as alternative wireless standards
such as High Speed Downlink Packet Access (“HSDPA”) and Ultra Mobile Broadband
(“UMB”). Companies that support these
alternative wireless technologies include well established industry leaders such
as Alcatel, Ericsson,
Lucent, Motorola, Nokia, Nortel, QUALCOMM, Samsung and
Siemens.
  Our mobile TV products, such as TDtv and
MXtv, compete with alternative mobile broadcast technologies such as DVB-H and
MediaFlo. These alternative technologies have already been commercially
deployed by network
operators in theUnited
Statesand internationally
and are supported by well-established industry leaders such as Alcatel,
Ericsson, Nokia and QUALCOMM, all of which have significantly greater financial,
technological development, marketingand other resources than we
do.
  We also will be competing with numerous
companies that are currently developing or marketing WiMAX products and
technologies including Airspan, Beceem, Fujitsu, Intel, Motorola, Nortel,
RunCom, Samsung, Sequans and WaveSat.Some of these companies have
significantly greater financial, technical development, and marketing resources
than we do, are already marketing fully-commercial WiMAX semiconductor products,
and have established a significant time to market advantage. Someof these companies are also our
potential customers and partners and may not be available to us if they develop
competing products.
  OurNextWave Multimedia businessproducts compete primarily with the
internal multimedia design teams at the OEM handset manufacturers to whomwemarketourproducts and services. Importantly,
these OEMs represent some ofourlargest customers. In addition several
companies, including Flextronics/Emuzed, Hantro, Nextreaming, Philips Software,
Sasken and Thin Multimedia also currently provide software products and
services that directly or indirectly compete with our PacketVideo products and
our TDtv solution. As the market for embedded multimedia software evolves, we
anticipate that additional competitors may emerge includingApple Computer, Real Networks and
OpenWave.
  Our ability to generate earnings will
depend, in part, upon our ability to effectively compete with these
competitors.
  The
success of our businesses depends on the adoption of developing wireless
broadband 4G technologies, including WiMAX and TD-CDMA.
  The success of our semiconductor
business depends on the deployment and market acceptance of 4G wireless
broadband technologies, including WiMAX and LTE. The market for 4G networks and
compatible products and technologies, as well as the technologies
themselves, are in an early stage of development and are continuing to evolve.
In particular, there are currently no mobile WiMAX or LTE networks in commercial
operation and there can be no assurance that commercial mobileWiMAX or LTE networks will prove to be
commercially viable. In order for 4G technologies to gain significant market
acceptance among customers, network operators and telecommunications service
providers will need to deploy 4G networks. However, many of the largest wireless telecommunications
providers have made significant expenditures in incumbent technologies and may
choose to develop these technologies rather than utilize 4G technologies.
Certification standards for 4G technologies are controlled by industry groups. Accordingly, standard
setting for 4G technologies is beyond our control. If standards for 4G
technologies such as WiMAX, LTE, and TD-CDMA, for example, change, the
commercial viability of these technologies may be delayed or impaired and
ourdevelopment efforts may also be delayed
or impaired or become more costly. If our 4G technologies and products do not
receive industry certification, we may not be able to successfully market,
license or sell our products or technologies. The developmentof 4G networks is also dependent on the
availability of spectrum. Access to spectrum suitable for 4G networks is highly
competitive. Future 4G networks may utilize multiple frequencies and this
multi-spectrum approach is technologically challenging and willrequire the development of new
software, integrated circuits and equipment, which will be time consuming and
expensive and may not be successful. In order for our business to continue to
grow and to become profitable, 4G technology and related services must gain acceptance among consumers, who
tend to be less technically knowledgeable and more resistant to new technology
or unfamiliar services. If consumers choose not to adopt 4G technologies, we
will not be successful in selling 4G products and technologies and our ability to grow our business
will be limited.
  32
 Many
of our products and technologies are in the early stages of development and will
require a substantial investment before they may become commercially
viable.
  Many of our wireless broadband
products and technologies
are in the early stages of development and will require a substantial investment
before they may become commercially viable. While we have announced the initial
availability of our first generation WiMAX baseband system-on-a-chip andmatched multiband RFIC, these products
are not expected to generate significant revenue. We currently anticipate that
our second generation WiMAX chipset, designed for high volume commercial
production, will initially be available in the firsthalfof 2008.In addition, we anticipate that our
TDtv products will also become fully commercially available in 2008. However, we
may not able to meet these timeframes and therefore the commercial deployment of
these products could be delayed, which could adversely affect our competitive position as well as
our future profitability. In addition, unexpected expenses and delays in
development could adversely affect our liquidity. Some of our other planned
wireless broadband products and technologies have not been tested,even on a pre-commercial basis. Even if
our new products and technologies function when tested, they may not produce
sufficient performance and economic benefits to justify full commercial
development efforts, or to ultimately attract customers. Failureto achieve high volume sales of our
semiconductors and other wireless broadband products and technologies would
adversely affect our ability to achieve profitability.
  Our
customer agreements do not contain minimum purchase requirements and can be
cancelled on terms that are not beneficial to us.
  Our
customer agreements with network providers and mobile phone and device
manufacturers are not exclusive and many contain no minimum purchase
requirements or flexible pricing terms. Accordingly, mobile phone and device
manufacturers may effectively terminate these agreements by no longer purchasing
our products or reducing the economic benefits of those arrangements. In many
circumstances, we have indemnified these customers from certain claims that our
products and technologies infringes third-party intellectual property rights.
Our customer agreements are generally not exclusive and have a limited term of
one to five years, in some cases with evergreen, or automatic renewal,
provisions upon expiration of the initial term. These agreements set out the
terms of our distribution relationships with the customers but generally do not
obligate the customers to market or distribute any of our products or
applications. In addition, in some cases customers can terminate these
agreements early or at any time, without cause.
  We
may experience difficulties in the introduction of new or enhanced products,
which could result in reduced sales, unexpected expenses or delays in the launch
of new or enhanced products and in certain cases, penalties under customer
agreements.
  The
development of new or enhanced wireless products and technologies is a complex
and uncertain process. We may experience design, manufacturing, marketing and
other difficulties that could delay or prevent our development, introduction,
commercialization or marketing of new products or product enhancements. The
difficulties could result in reduced sales, unexpected expenses or delays in the
launch of new or enhanced products, which may adversely affect our results or
operations. In addition, in some cases we are required to provide liquidated
damages and other penalty clauses in our customer contracts (for, e.g., late
delivered product, failure to comply with service level agreements or defective
products). If we are unable to perform in a timely manner under such customer
agreements, we would face financial penalties.
  33
 We
do not have any manufacturing capabilities and depend on third-party
manufacturers and suppliers to manufacture, assemble and package our
products.
  We are
currently designing and developing semiconductor products including digital
baseband ASICs and multi-band RFICs. If we are successful in our design and
development activities and a market for these products develops, these products
will need to be manufactured. Due to the expense and complexity associated with
the manufacturer of digital baseband ASICs and multi-band RFICs, we intend to
depend on third-party manufacturers to manufacture these products. In addition,
we have engaged third-party manufacturers to develop and manufacture its
products and technologies including infrastructure equipment and end-user
devices. The dependence on third-parties to manufacture, assemble and package
these products involves a number of risks, including:
  ·       a
potential lack of capacity to meet demand;
  ·       reduced
control over quality and delivery schedules;
  ·       risks
of inadequate manufacturing yield or excessive costs;
  ·       difficulties
in selecting and integrating subcontractors;
  ·       limited
warranties in products supplied to us;
  ·       price
increases; and
  ·       potential
misappropriation of our intellectual property.
  We may
not be able to establish manufacturing relationships on reasonable terms or at
all. The failure to establish these relationships on a timely basis and on
attractive terms could delay our ability to launch these products or reduce our
revenues and profitability.
  Defects
or errors in our products and services or in products made by our suppliers
could harm our relations with our customers and expose us to liability. Similar
problems related to the products of our customers or licensees could harm our
business.
  Our
mobile broadband products and technologies are inherently complex and may
contain defects and errors that are detected only when the products are in use.
Further, because our products and technologies serve as critical functions in
our customers’ products and/or networks, such defects or errors could have a
serious impact on our customers, which could damage our reputation, harm our
customer relationships and expose us to liability. Defects in our products and
technologies or those used by our customers or licensees, equipment failures or
other difficulties could adversely affect our ability and that of our customers
and licensees to ship products on a timely basis as well as customer or licensee
demand for our products. Any such shipment delays or declines in demand could
reduce our revenues and harm our ability to achieve or sustain desired levels of
profitability. We and our customers or licensees may also experience component
or software failures or defects which could require significant product recalls,
reworks and/or repairs which are not covered by warranty reserves and which
could consume a substantial portion of the capacity of our third-party
manufacturers or those of our customers or licensees. Resolving any defect or
failure related issues could consume financial and/or engineering resources that
could affect future product release schedules. Additionally, a defect or failure
in our products and technologies or the products of our customers or licensees
could harm our reputation and/or adversely affect the growth of the market for
mobile WiMAX, Wi-Fi, TD-CDMA, and other mobile broadband
technologies.
  We
may be unable to protect our own intellectual property and could become subject
to claims of infringement, which could adversely affect the value of our
products and technologies and harm our reputation.
  As a
technology company, we expect to incur expenditures to create and protect our
intellectual property and, possibly, to assert infringement by others of our
intellectual property. Other companies or entities also may commence actions or
respond to an infringement action that we initiate by seeking to establish the
invalidity or unenforceability of one or more of our patents or to dispute the
patentability of one or more of our pending patent applications. In the event
that one or more of our patents or applications are challenged, a court may
invalidate the patent or determine that the patent is not enforceable or deny
issuance of the application, which could harm our competitive position. If any
of our patent claims are invalidated or deemed unenforceable, or if the scope of
the claims in any of these patents is limited by court decision, we could be
prevented from licensing such patent claims. Even if such a patent challenge is
not successful, it could be expensive and time consuming to address, divert
management attention from our business and harm our reputation. Effective
intellectual property protection may be unavailable or limited in certain
foreign jurisdictions.
  34
 We also
expect to incur expenditures to defend against claims by other persons asserting
that the technology that is used and sold by us infringes upon the right of such
other persons. From time to time, we have received, and expect to continue to
receive, notices from our competitors and others claiming that their proprietary
technology is essential to our products and seeking the payment of a license
fee. Any claims, with or without merit, could be time consuming to address,
result in costly litigation and/or the payment of license fees, divert the
efforts of our technical and management personnel or cause product release or
shipment delays, any of which could have a material adverse effect upon our
ability to commercially launch our products and technologies and on our ability
to achieve profitability. If any of our products were found to infringe on
another company’s intellectual property rights or if we were found to have
misappropriated technology, we could be required to redesign our products or
license such rights and/or pay damages or other compensation to such other
company. If we were unable to redesign our products or license such intellectual
property rights used in our products, we could be prohibited from making and
selling such products. In any potential dispute involving other companies’
patents or other intellectual property, our customers and partners could also
become the targets of litigation. Any such litigation could severely disrupt the
business of our customers and partners, which in turn could hurt our relations
with them and cause our revenues to decrease.
  Because
mobile WiMAX and 3GPP based technologies such as LTE are emerging wireless
technologies that are not fully developed, there is a risk that still unknown
persons or companies may assert proprietary
rights to the various technology components that will be necessary to operate a
WiMAX or LTE -based wireless broadband network.
  Because mobile technologies such as
WiMAX andLTE are emerging
wireless technologies that are not fully developed, there may be a greater risk
that persons or entities unknown to us will assert proprietary rights to
technology components that are necessary to operate WiMAX or LTE-based wireless
broadband networks or products. Numerous
companies have submitted letters of assurance related to IEEE 802.16 and
amendments or various UMTS based technologies, including TD-CDMA, stating that
they may hold or control patents or patent applications, the use ofwhich would be unavoidable to create a
compliant implementation of either mandatory or optional portions of the
standard. In such letters, the patent holder typically asserts that it is
prepared to grant a license to its essential IP to an unrestricted
number of applicants on a worldwide,
non-discriminatory basis and on reasonable terms and conditions. If any
companies asserting that they hold or control patents or patent applications
necessary to implement the relevant technologies do not submit letters
ofassurance, or state in such letters that
they do not expect to grant licenses, this could have an adverse effect on the
implementation of mobile broadband networks utilizing such technologies as well
as the sale of our mobile WiMAX or future LTE based products and technologies. In addition, we
can not be certain of the validity of the patents or patent applications
asserted in the letters of assurance submitted to date, or the terms of any
licenses which may be demanded by the holders of such patents or patent applications. If we were required to
pay substantial license fees to implement our mobile WiMAX or LTE-based products
and technologies, this could adversely affect the profitability of these
products and technologies.
  We anticipate that we will
developa patent portfolio
related to our WiMAX and LTE based products and technologies. However, there is
no assurance that we will be able to obtain patents covering WiMAX or LTE based
products. Litigation may be required to enforce or protect our
intellectualproperty rights. As a result of any such
litigation, we could lose our proprietary rights or incur substantial unexpected
operating costs. Any action we take to license, protect or enforce our
intellectual property rights could be costly and could absorbsignificant management time and
attention, which, in turn, could negatively impact our operating results. In
addition, failure to protect our trademark rights could impair our brand
identity.
  We
are subject to risks associated with our international operations.
  We
operate or hold spectrum through various subsidiaries and joint ventures in
Argentina, Austria, Canada, Croatia, Germany, Norway, Slovakia and Switzerland
and have additional operations located in Brazil, Denmark, Finland, Germany,
Israel, South Korea, Switzerland and the United Kingdom. We expect to continue
to expand our international operations and potentially enter new international
markets through acquisitions, joint ventures and strategic alliances. For
example, we recently commenced business operations in Latin America, where a new
business unit headquartered in Sao Paulo, Brazil will deliver our mobile
broadband and wireless technology solutions to customers throughout the Latin
American region. Our activities outside the United States operate in different
competitive and regulatory environments than we face in the United States, with
many of our competitors having a dominant incumbent market position and/or
greater operating experience in the specific geographic market. In addition, in
some international markets, foreign governmental authorities may own or control
the incumbent telecommunications companies operating under their jurisdiction.
Established relationships between government-owned or government-controlled
telecommunications companies and their traditional local telecommunications
providers often limit access of third parties to these markets. In addition,
owning and operating wireless spectrum in overseas jurisdictions may be subject
to a changing regulatory environment. In particular, our ownership of wireless
broadband spectrum in Argentina remains subject to obtaining governmental
approval. We can not assure you that changes in foreign regulatory guidelines
for the issuance or use of wireless licenses, foreign ownership of spectrum
licenses, the adoption of wireless standards or the enforcement and licensing of
intellectual property rights will not adversely impact our operating results.
Due to these competitive and regulatory challenges, our activities outside the
United States may require a disproportionate amount of our management and
financial resources, which could disrupt our operations and adversely affect our
business.
  35
 Our
businesses which currently generate revenue are dependent on a limited number of
customers.
  OurNextWaveNetwork Productsand NextWave Mobile Productsbusinesses currently generate revenue
but are dependent on a limited number of customers. For theyearendedDecember29, 2007, revenues fromthree
customers accounted for 39%, 18% and 11% of our consolidated revenues,
respectively.  We expect
that ourNextWaveMultimedia businesswill continue to generate a significant
portion of its revenues through a limited number of mobile phone and device
manufacturers and wireless carriers for the foreseeable future, although these amounts may vary from
period-to-period. If any of these customers terminate their relationships with
us, our revenues and results of operations could be materially adversely
affected.
  We
are dependent on a small number of individuals, and if we lose key personnel
upon whom we are dependent, our business will be adversely
affected.
  Our future success depends largely upon
the continued service of our board members, executive officers and other key
management and technical personnel, particularly Allen Salmasi, our Chairman and
ChiefExecutive Officer, William Jones, Chief
Executive Officer of our NNP operating unit, and James Brailean, Chief Executive
Officer of ourNMP
operating unit.
  Mr.
Salmasi has been a prominent executive and investor in the technology industry
for over 20 years, and the Company has benefited from his industry relationships
in attracting key personnel and in implementing acquisitions and strategic
plans. In addition, in order to develop and achieve commercial deployment of our
mobile broadband products and technologies in competition with well-established
companies such as Intel, QUALCOMM and others, we must rely on highly specialized
engineering and other talent. Our key employees represent a significant asset,
and the competition for these employees is intense in the wireless
communications industry. We continue to anticipate significant increases in
human resources, particularly in engineering resources, through 2008. If we are
unable to attract and retain the qualified employees that we need, our business
may be harmed.
  As a
company without a significant operating history, we may have particular
difficulty attracting and retaining key personnel in periods of poor operating
performance given the significant use of incentive compensation by
well-established competitors. We do not maintain key person life insurance on
any of our personnel. We also have no covenants against competition or
nonsolicitation agreements with certain of our key employees. The loss of one or
more of our key employees or our inability to attract, retain and motivate
qualified personnel could negatively impact our ability to design, develop and
commercialize our products and technology.
  To
augment our existing working capital resources in order to satisfy our cash
requirements, we may seek to sell debt securities or additional equity
securities or to obtain a credit facility. Our Senior Secured Notes and our
Series A Preferred Stock prohibit our incurrence of additional indebtedness,
subject to certain exceptions. The sale of equity securities or convertible debt
securities could result in additional dilution to our stockholders. The
incurrence of additional indebtedness would also result in additional debt
service obligations and the requirement that we comply with operating and
financial covenants that would restrict our operations. In addition, there can
be no assurance that any additional financing will be available on acceptable
terms, if at all.
  Covenants
in the indenture governing our Senior Secured Notes and the terms of our Series
A Preferred Stock impose operating and financial restrictions on
us.
  Covenants
in the indenture governing our Senior Secured Notes and the terms of our Series
A Preferred Stock impose operating and financial restrictions on us. These
restrictions prohibit or limit our ability, and the ability of our subsidiaries,
to, among other things:
  ·       pay
dividends to our stockholders;
  36
 ·       incur,
or cause certain of our subsidiaries to incur, additional
indebtedness;
  ·       permit
liens on or conduct sales of any assets pledged as collateral;
  ·       sell
significant amounts of our assets or consolidate or merge with or into other
companies;
  ·       issue
shares of our common stock at less than fair market value;
  ·       repay
existing indebtedness; and
  ·       engage
in transactions with affiliates.
  A breach
of any covenants contained in the indenture could result in a default under our
Senior Secured Notes. If we are unable to repay or refinance those amounts, the
holders of our Senior Secured Notes could proceed against the assets pledged to
secure these obligations, which include a substantial portion of our spectrum
assets and substantially all of our other assets.
  These
restrictions may limit our ability to obtain additional financing, withstand
downturns in our business and take advantage of business opportunities.
Moreover, we may seek additional debt financing on terms that include more
restrictive covenants, may require repayment on an accelerated schedule or may
impose other obligations that limit our ability to grow our business, acquire
needed assets, or take other actions we might otherwise consider appropriate or
desirable.
  As of
December 29, 2007, $102.2 million of our marketable securities were invested in
auction rate securities (“ARS”).  None of the auctions involving our
ARS holdings had failed as of December 29, 2007. Through March 10, 2008,
auctions for eight ARS, including certain municipalities and education auction
rate securities, with principal amounts aggregating $29.5 million, were not
successful due to recent weakness in the auction markets.  The
unsuccessful securities are District of Columbia Savrs freedom forum-A (insured
by MBIA), Houston Tex Util Sys Rev Adj-Rfdg-Comb (insured by AMBAC), Education
Loan Trust (insured by FFELP), Utah State Board of Rgts (insured by FFELP),
Indiana Transportation Finance Authority (insured by CIFG), Indiana Secondary
Market Education loans (insured by FFELP), Illinois Student Assist Comm (backed
by student loan), and Kentucky Higher Education (insured by FFELP). The interest
rates on these securities at the date of the failed auction range from 2.2% to
18.0%, with a weighted average rate of 6.0%.
  As a
result, we continue to hold these securities and the issuers are required pay
interest on the securities at the maximum contractual rates.  We
reduced our total ARS investments principally by investing in other short-term
marketable securities, as individual ARS reset periods came
due.  Unsuccessful auctions have caused us to hold these securities
beyond their scheduled auction reset dates, limiting the short-term liquidity of
these investments. Such developments may result in the classification of some or
all of these securities as long-term in our consolidated balance sheets in 2008
or future periods. In addition, if the issuers are unable to successfully close
future auctions and their credit ratings deteriorate, we may, in the future, be
required to adjust the carrying value of these investments which would result in
a charge to our consolidated statement of operations.
  Based on
current market conditions, there is no assurance that auctions on the remaining
ARS in our investment portfolio will be successful. Unsuccessful auctions will
cause us to hold securities beyond their next scheduled auction reset dates and
limit the short-term liquidity of these investments. While these failures in the
auction process have affected our ability to access these funds in the near
term, we do not believe that the underlying securities or collateral have been
affected. We believe that the higher reset rates on failed auctions provide
sufficient incentive for the security issuers to address this lack of liquidity.
However, our ability to liquidate and fully recover the carrying value of our
remaining ARS in the near term may be limited. These developments may result in
the classification of some or all of these securities as long-term in our
consolidated financial statements in 2008 or future periods. In addition, if the
issuers are unable to successfully close future auctions and their credit
ratings deteriorate, we may, in the future, be required to adjust the carrying
value of these investments through an impairment charge.
  37
 Risks
Relating to Government Regulation
  Government
regulation could adversely impact our development of wireless broadband products
and services, our offering of products and services to consumers, and our
business prospects.
  The
regulatory environment in which we operate is subject to significant change, the
results and timing of which are uncertain. The FCC has jurisdiction over the
grant, renewal, lease, assignment and sale of our domestic wireless licenses,
the use of wireless spectrum to provide communications services, and the
resolution of interference between users of various spectrum bands. Other
aspects of our business, including construction and operation of our wireless
systems, and the offering of communications services, are regulated by the FCC
and other federal, state and local governmental authorities. States may exercise
authority over such things as billing practices and consumer-related
issues.
  Various
governmental authorities could adopt regulations or take other actions that
would adversely affect the value of our assets, increase our costs of doing
business, and impact our business prospects. Changes in the regulation of our
activities, including changes in how wireless, mobile, and IP-enabled services
are regulated, changes in the allocation of available spectrum by the United
States and/or exclusion or limitation of our technology or products by a
government or standards body, could have a material adverse effect on our
business, operating results, liquidity and financial position.
  Changes
in legislation or regulations may affect our ability to conduct our business or
reduce our profitability.
  Future
legislative, judicial or other regulatory actions could have a negative effect
on our business. Some legislation and regulations applicable to the wireless
broadband business, including how IP-enabled services are regulated, are the
subject of ongoing judicial proceedings, legislative hearings and administrative
proceedings that could change the manner in which our industry is regulated and
the manner in which we operate. We cannot predict the outcome of any of these
proceedings or their potential impact on our business.
  If, as a
result of regulatory changes, we become subject to general common carrier rules
and regulations applicable to telecommunications service providers, commercial
mobile radio service providers offering certain switched services on a common
carrier basis, and/or enhanced service providers, including providers of
interconnected VoIP service, at the federal level or in individual states, we
may incur significant administrative, litigation and compliance costs, or we may
have to restructure our service offerings, exit certain markets or raise the
price of our services, any of which could cause our services to be less
attractive to customers. In addition, future regulatory developments could
increase our cost of doing business and limit our growth.
  We
may not have complete control over our transition of  BRS and
EBS  spectrum, which could impact compliance with FCC
rules.
  The FCC’s
rules require transition of BRS and EBS spectrum to the new band plan on a Basic
Trading Area (“BTA”) basis. See “Government Regulation-BRS-EBS License
Conditions.” We do not hold all of the BRS and EBS spectrum in the BTAs in which
we hold spectrum. Consequently, we will need to coordinate with other BRS and
EBS licensees in order to transition spectrum we hold or lease. Disagreements
with other BRS or EBS licensees about how the spectrum should be transitioned
may delay our efforts to transition spectrum, could result in increased costs to
transition the spectrum, and could impact our efforts to comply with applicable
FCC rules. The FCC rules permit us to self-transition to the reconfigured band
plan if other spectrum holders in our BTAs do not timely transition their
spectrum.
  38
 Our
use of EBS spectrum is subject to privately negotiated lease agreements. Changes
in FCC rules governing such lease agreements, contractual disputes with EBS
licensees, or failures by EBS licensees to comply with FCC rules could impact
our use of the spectrum.
  All
commercial enterprises are restricted from holding licenses for EBS spectrum.
Eligibility for EBS spectrum is limited to accredited educational institutions,
governmental organizations engaged in the formal education of enrolled students
(e.g., school districts), and nonprofit organizations whose purposes are
educational. Access to EBS spectrum can only be gained by commercial enterprises
through privately-negotiated EBS lease agreements. FCC regulation of EBS leases,
private interpretation of EBS lease terms, private contractual disputes, and
failure of an EBS licensee to comply with FCC regulations all could impact our
use of EBS spectrum and the value of our leased EBS spectrum. The FCC rules
permit EBS licensees to enter into lease agreements with a maximum term of 30
years; lease agreements with terms longer than 15 years must contain a “right of
review” by the EBS licensee every five years beginning in year 15. The right of
review must afford the EBS licensee with an opportunity to review its
educational use requirements in light of changes in educational needs,
technology, and other relevant factors and to obtain access to such additional
services, capacity, support, and/or equipment as the parties shall agree upon in
the spectrum leasing arrangement to advance the EBS licensee’s educational
mission. A spectrum leasing arrangement may include any mutually agreeable terms
designed to accommodate changes in the EBS licensee’s educational use
requirements and the commercial lessee’s wireless broadband operations. In
addition, the terms of EBS lease agreements are subject to contract
interpretation and disputes could arise with EBS licensees. There can be no
assurance that EBS leases will continue for the full lease term, or be extended
beyond the current term, or be renewed or extended on terms that are
satisfactory to us. Similarly, since we are not eligible to hold EBS licenses,
we must rely on EBS licensees with whom we contract to comply with FCC rules.
The failure of an EBS licensee from whom we lease spectrum to comply with the
terms of their FCC authorization or FCC rules could result in termination,
forfeiture or non-renewal of their authorization, which would negatively impact
the amount of spectrum available for our use.
  If
we do not comply with FCC build-out requirements relating to our spectrum
licenses, such licenses could be subject to forfeiture.
  Certain
build-out or “substantial service” requirements apply to our licensed wireless
spectrum, which generally must be satisfied as a condition of license renewal.
In particular, the renewal deadline and the substantial service build-out
deadline for our WCS spectrum is July 21, 2010; for our BRS and EBS spectrum,
the substantial service build-out deadline is May 1, 2011; and for our AWS
spectrum, the substantial service build-out deadline is December 18, 2021.
Failure to make the substantial service demonstration, without seeking and
obtaining an extension from the FCC, would result in license
forfeiture.
  We
have no guarantee that the licenses we hold or lease will be
renewed.
  The FCC generally grants wireless
licenses for terms of ten or15years, which are subject to renewal and
revocation. FCC rules require all wireless licensees to complywith applicable FCC rules and policies
and the Communications Actin order to retain their licenses. For
example, licensees must meet certain construction requirements, including making
substantial service demonstrations, in order to retain and renew FCClicenses. Failure to comply
with FCC requirements with respect to any license could result in revocation or
non-renewal of a license. In general, most wireless licensees who meet their
construction and/or substantial service requirements are afforded a
“renewal expectancy,”however, all FCC license renewals can
be challenged in various ways, regardless of whether such challenges have any
legal merit.Under FCC rules, licenses continue in effect during the
pendency of timely filed renewal applications. Challenges to license renewals, while
uncommon, may impact the timing of renewal grants and may impose legal costs.
Accordingly, there is no guarantee that licenses we hold or lease will remain in
full force and effect or be renewed.
  We hold30licenses issuedby the FCC for WCS
spectrum.  Renewal applications for all 2.3 GHz WCS licenses,
including those issued to NextWave, were due to be filed with the FCC on July
21, 2007.  We filed our WCS renewal applications on April 23,
2007.  Under FCC rules, licenses continue in effect during the pendency of
timely file renewal applications.  At least three parties about which
we are aware made filings purporting to be “competing applications”in response to the renewal applications
filed by our Company, AT&T and perhapsothers.  The basis on which
the third-party filings were made was the alleged failure of WCS licensees to
deploy service on WCS spectrum and satisfy substantial service requirements by
July 21, 2007.  However, on December 1, 2006, the FCC issued a
waiverorder extending the substantial service
deadline for WCS licensees to July 21, 2010. The FCC’s rules contain no procedures for
processing “competing
applications”filed for WCS
spectrum and it has not made any of the third-party filings available in the
public record or accepted them for filing.
We have no knowledge of the status of these filings and cannot predict how the
FCC may address them or how these filings may impact our renewal
applications.
 
 Interference
could negatively impact our use of wireless spectrum we hold, lease or
use.
  Under
applicable FCC rules, users of wireless spectrum must comply with technical
rules that are intended to eliminate or diminish harmful radiofrequency
interference between wireless users. Licensed spectrum is generally entitled to
interference protection, subject to technical rules applicable to the radio
service, while unlicensed spectrum has no interference protection rights and
must accept interference caused by other users.
  39
 Wireless
devices utilizing WCS, BRS and EBS spectrum may be susceptible to interference
from Satellite Digital Audio Radio Services (“SDARS”).
  Since
1997, the FCC has considered a proposal to permanently authorize terrestrial
repeaters for SDARS operations adjacent to the C and D blocks of the WCS band.
The FCC has permitted a large number of these SDARS terrestrial repeaters to
operate on a special temporary authorization since 2001. Permanently authorizing
SDARS repeaters adjacent to the WCS band could cause interference to WCS, BRS
and EBS receivers. The extent of the interference from SDARS repeaters is
unclear and is subject to the FCC’s final resolution of pending proceedings.
Because WCS C and D block licenses are adjacent to the SDARS spectrum, the
potential for interference to this spectrum is of greatest concern. There is a
lesser magnitude concern regarding interference from SDARS to WCS A and B block
licenses, and BRS and EBS licenses. Central to the FCC’s evaluation of this
proposal has been the technical specifications for the operation of such
repeaters. SDARS licensees are seeking rule changes that would both unfavorably
alter WCS technical operating requirements and permit all existing SDARS
repeaters to continue to operate at their current operating parameters. Through
their representative association, the WCS Coalition, the majority of affected
WCS licensees, including NextWave, also have proposed technical rules for SDARS
terrestrial repeaters and WCS operations to the FCC. Final technical rules will
determine the potential interference conditions and requirements for mitigation.
If SDARS repeaters result in interference to our WCS, BRS or EBS spectrum, our
ability to realize value from this spectrum may be impaired.
  Increasing
regulation of the tower industry may make it difficult to deploy new towers and
antenna facilities.
  The FCC,
together with the FAA, regulates tower marking and lighting. In addition, tower
construction and deployment of antenna facilities is impacted by federal, state
and local statutes addressing zoning, environmental protection and historic
preservation. The FCC adopted significant changes to its rules governing
historic preservation review of new tower projects, which makes it more
difficult and expensive to deploy towers and antenna facilities. The FCC also is
considering changes to its rules regarding when routine environmental
evaluations will be required to determine compliance of antenna facilities with
its radiofrequency radiation exposure limits. If adopted, these regulations
could make it more difficult to deploy facilities. In addition, the FAA has
proposed modifications to its rules that would impose certain notification
requirements upon entities seeking to (i) construct or modify any tower or
transmitting structure located within certain proximity parameters of any
airport or heliport, and/or (ii) construct or modify transmission facilities
using the 2500-2700 MHz radiofrequency band, which encompasses virtually all of
the BRS/EBS frequency band. If adopted, these requirements could impose new
administrative burdens upon use of BRS/EBS spectrum.
  40
  Item 1B.Unresolved Staff
Comments
 
 None.
 
 Item 2.Properties
 
 We are headquartered in San Diego, California. The
headquarters currently occupies leased facilities containing an aggregate of
approximately 76,000 square feet.
  We also
have other leased and owned facilities. The owned facility is in Las Vegas,
Nevada. In total, at December 29, 2007, we occupied the indicated square footage
in the owned or leased facilities described below:
 
 Number
              
              
              
              
              
              Totalof
              
              
              
              
              
              SquareBuildings
              
              Location
              
              Status
              
              Footage
              
              Primary
      Use1
              
              United
      States
              
              Owned
              
              
              30,000
              
              
              Administrative
      and engineering offices.20
              
              United
      States
              
              Leased
              
              
              305,736
              
              
              Administrative,
      finance and legal offices, research and development, and sales and
      marketing.12
              
              Europe
              
              Leased
              
              
              34,561
              
              
              Administrative
      offices, research and development and sales and
  marketing.1
              
              Israel
              
              Leased
              
              
              4,462
              
              
              Administrative offices, research
      and development andmanufacturing.4
              
              Asia
              
              Leased
              
              
              8,063
              
              
              Administrative
      offices, research and development, sales and marketing, service functions
      and network operating centers.2
              
              Latin
      America
              
              Leased
              
              
              656
              
              
              Administrative
      offices, sales and marketing, service functions, manufacturing and network
      operating centers.Total
      square footage
              
              
              
              
              383,478
  We
believe that our properties are adequate for our business as presently
conducted.
 
 
 Item 3.Legal
Proceedings
 
 We are
currently involved in certain legal proceedings. Although there can be no
assurance that unfavorable outcomes in any of these matters would not have a
material adverse effect on our operating results, liquidity or financial
position, we believe the claims are without merit and intend to vigorously
defend the actions. We estimate the range of liability related to pending
litigation where the amount and range of loss can be estimated. We record our
best estimate of a loss when the loss is considered probable. Where a liability
is probable and there is a range of estimated loss with no best estimate in the
range, we record the minimum estimated liability related to the claim. As
additional information becomes available, we assess the potential liability
related to our pending litigation and revise our estimates. We have not recorded
any accrual for contingent liability associated with our current legal
proceedings based on our belief that a liability, while possible, is not
probable. Further, any possible range of loss cannot be estimated at this time.
Revisions in our estimates of the potential liability could materially impact
our results of operations.
  
 Item 4.Submission of Matters to a
Vote of Security Holders
 
 None.
  41
 PART II
 
 Item 5.Market for
Registrant’s Common Equity; Related Stockholder Matters and Issuer
Purchases of Equity Securities
 
 The
principal market for our common stock is the NASDAQ Global Market, on which
it began trading in the first quarter of 2007. During the pendency of our
application to list our common stock on the NASDAQ Global Market, our common
stock was quoted on the Over-the-Counter Bulletin Board for less than a full
quarterly period following our November 2006 Corporate Conversion.
  
 
  42
   Market
Information
  The
following table reflects the high and low sales prices, or high and low bid
prices, as applicable, rounded to the nearest penny, of our common stock as
reported by the NASDAQ Global Market, as applicable, for each quarterly period
in 2007 in which our common stock was listed thereon, beginning with the listing
date. Our common stock traded on the OTC Bulletin Board only for a period
between November 16, 2006 and January 2, 2007. Subsequently, our common stock
was listed on the Nasdaq Global Market, beginning on January 3, 2007 under the “
WAVE ” symbol, where it
continues to trade.
  High
              
              Low2007:First
      Quarter
              
              $
              12.75
              
              $
              9.73Second
      Quarter
              
              
              10.10
              
              
              8.35Third
      Quarter
              
              
              8.20
              
              
              5.72Fourth
      Quarter
              
              
              6.48
              
              
              5.11
 
 Dividend
Policy
  We have
never paid a dividend on our common stock and do not anticipate paying one in
the foreseeable future. Pursuant to the terms of the Purchase Agreement
governing our 7% Senior Secured Notes, we are restricted from paying
dividends and making distributions
  In the
event we are permitted to pay a dividend on our common stock, the payment of any
future dividends will be at the discretion of our Board and will depend upon,
among other things, our financial condition and capital needs, legal or
contractual restrictions on the payment of dividends and other factors deemed
pertinent by our Board.
 
 Holders
of the Series A Preferred Stock are entitled to receive quarterly dividends on
the liquidation preference at a rate of 7.5% per annum. Until March 2011, we can
elect whether to declare dividends in cash or to not declare and pay dividends,
in which case the per share dividend amount will be added to the liquidation
preference. From and after March 2011, we must declare dividends in cash each
quarter, subject to applicable law.  The terms of our 7% Senior
Secured Notes due 2010 currently prevent the payment of cash dividends on the
Series A Preferred Stock. The dividend rate is subject to adjustment to 10% per
annum if we default on our dividend payment obligations or fails to cause our
shelf registration statement filed with the Securities and Exchange Commission
to be declared effective on or prior to November 30, 2007. The dividend rate is
also subject to adjustment to 15% per annum if we fail to comply with the
protective covenants of the Series A Preferred Stock described below and to 18%
per annum if we fail to convert or redeem the Series A Preferred Stock when
required to do so, as described below.
  We
accrued for $20.8 million in undeclared dividends during the year ended December
29, 2007.
  For additional information on payment
of and restrictions on dividends, please also see Item 8. Financial
Statements and the notes thereto.
 
 43
 Repurchases
of Common Stock
 
 We did
not repurchase any of our common stock during the year ended December 29,
2007.
 
 Stock
Performance Graph
  
 
   graphic
   The
information contained in the Performance Graph shall not be deemed “soliciting
material” or to be “filed” with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act or the Exchange Act, except to the extent the Company
specifically incorporates it by reference into such filing.
  Holders
 As of March 10, 2008, there were
approximately 1,080 holders of record of our common stock.
 
 Certain
provisions in our Certificate of Incorporation and Bylaws will have the effect
of delaying, deferring or preventing a change of control of our Company. These
provisions include that our directors serve staggered terms, and, pursuant to
Delaware law, can only be removed for cause; stockholders cannot act by written
consent and can only amend or repeal the bylaws by a supermajority vote of the
issued and outstanding voting shares and our board of directors is authorized to
issue preferred stock without stockholder approval. In addition, vacancies on
our Board of Directors are filled only through a majority vote of the Board, and
directors and officers are indemnified against losses that they may incur in
investigations and legal proceedings resulting from their services to us,
including in connection with takeover defense measures.
    44
  Item 6.Selected Financial
Data
  The
following consolidated statement of operations data for the years ended December
29, 2007, December 30, 2006 and for the period from the date of our inception as
a new wireless technology company pursuant to the plan of reorganization of Old
NextWave Wireless described below (April 13, 2005) to December 31, 2005 and
selected consolidated balance sheet data as of December 29, 2007, December 30,
2006 and December 31, 2005 was derived from our audited consolidated financial
statements and should be read in conjunction with our audited consolidated
financial statements and Management’s Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in this Form 10-K.
Effective January 1, 2006, we changed our fiscal year end and quarterly
reporting periods from quarterly calendar periods ending on December 31 to a
52-53 week fiscal year ending on the Saturday nearest to December 31 of the
current calendar year or the following calendar year. The financial information
presented below includes the results of operations of acquired companies from
the date of the respective acquisitions.
  
 (in
      thousands, except per share data)
                
                Year
      Ended
                    December
      29,
                    2007
                
                
                Year
      Ended
                    December
      30,
                    2006(1)
                
                
                Inception
                    (April
      13, 2005)
                    to
      December 31,
                    2005(2)Consolidated
      Statement of Operations Data:Revenues:Technology
      licensing and service
                
                $
                38,246
                
                
                $
                24,284
                
                
                $
                4,144Hardware
                
                
                20,861
                
                
                
                —
                
                
                
                —Total
      revenues
                
                
                59,107
                
                
                
                24,284
                
                
                
                4,144Operating
      expenses:Cost
      of technology licensing and service revenues
                
                
                22,080
                
                
                
                12,054
                
                
                
                4,573Cost
      of hardware revenues
                
                
                41,017
                
                
                
                —
                
                
                
                —Engineering,
      research and development
                
                
                149,645
                
                
                
                54,304
                
                
                
                17,508Sales
      and marketing
                
                
                29,727
                
                
                
                9,992
                
                
                
                2,960General
      and administrative
                
                
                92,992
                
                
                
                50,043
                
                
                
                15,159Purchased
      in-process research and development
                
                
                12,060
                
                
                
                3,538
                
                
                
                6,600Business
      realignment costs (credits)
                
                
                —
                
                
                
                (7,121
                )
                
                
                13,031Total
      operating expenses
                
                
                347,521
                
                
                
                122,810
                
                
                
                59,831Loss
      from operations
                
                
                (288,414
                )
                
                
                (98,526
                )
                
                
                (55,687
                )Other
      income (expense):Interest
      income
                
                
                16,076
                
                
                
                12,533
                
                
                
                11,051Interest
      expense(3)
                
                
                (46,408
                )
                
                
                (20,647
                )
                
                
                (1,006
                )Other
      expense, net
                
                
                (1,777
                )
                
                
                (23
                )
                
                
                (20
                )Total
      other income (expense), net
                
                
                (32,109
                )
                
                
                (8,137
                )
                
                
                10,025Loss
      before provision for income taxes and minority interest
                
                
                (320,523
                )
                
                
                (106,663
                )
                
                
                (45,662
                )Income
      tax benefit (provision)
                
                
                (635
                )
                
                
                35
                
                
                
                (417
                )Minority
      interest
                
                
                1,048
                
                
                
                1,608
                
                
                
                127Net
      loss
                
                
                (320,110
                )
                
                
                (105,020
                )
                
                
                (45,952
                )Less:
      Preferred stock dividends(4)
                
                
                (20,810
                )
                
                
                —
                
                
                
                —Accretion
      of issuance costs on preferred stock(4)
                
                
                (210
                )
                
                
                —
                
                
                
                —Net
      loss applicable to common shares
                
                $
                (341,130
                )
                
                $
                (105,020
                )
                
                $
                (45,952
                )Basic
      and diluted net loss per share
                
                $
                (3.81
                )
                
                $
                (1.28
                )
                
                
                N/A
                (6)Weighted
      average shares used in per share calculation
                
                
                89,441
                
                
                
                81,841
                
                
                
                N/A
  45
  At
      December 29,
                    2007
                
                
                At
      December 30,
                    2006(1)
                
                
                At
      December 31,
                    2005(1) (2)Consolidated
      Balance Sheet Data:Cash,
      cash equivalents and marketable securities
                
                $
                166,734
                
                
                $
                200,685
                
                
                $
                459,231Restricted
      cash(3)
                
                
                75,000
                
                
                
                75,000
                
                
                
                —Wireless
      spectrum licenses, net
                
                
                633,881
                
                
                
                527,998
                (5)
                
                
                45,467Goodwill
                
                
                171,056
                
                
                
                32,184
                
                
                
                24,782Other
      intangible assets, net
                
                
                82,388
                
                
                
                18,570
                
                
                
                18,100Total
      assets
                
                
                1,258,738
                
                
                
                897,079
                
                
                
                579,774Long-term
      obligations, net of current portion
                
                
                320,782
                
                
                
                298,030
                (3)
                
                
                14,934Redeemable
      Series A Senior Convertible Preferred Stock(4)
                
                
                371,986
                
                
                
                —
                
                
                
                —Total
      stockholders’ equity(1)
                
                
                228,765
                
                
                
                469,178
                
                
                
                —Total
      members’ equity(1)
                
                
                —
                
                
                
                —
                
                
                
                539,364
  
 (1)
                On
      November 13, 2006, we completed a corporate conversion merger, whereby a
      wholly-owned subsidiary of NextWave Wireless Inc. was merged with and into
      NextWave Wireless LLC (“Corporate Conversion Merger”). As a result of the
      merger, NextWave Wireless LLC became a wholly-owned subsidiary of NextWave
      Wireless Inc. Under the terms of the merger agreement, NextWave Wireless
      Inc. issued one share of NextWave Wireless Inc. common stock for each six
      membership units of NextWave Wireless LLC.(2)
                On
      April 13, 2005, pursuant to the plan of reorganization of the NextWave
      Telecom group, our equity securities were distributed to the NextWave
      Telecom, Inc. (“NTI”) equity holders and we were reconstituted as a
      company with a new capitalization and a new wireless technology business
      plan. A summary of the assets and liabilities contributed to us on April
      13, 2005 is provided in the Notes to Consolidated Financial Statements
      included elsewhere in this Form 10-K. For more information on our
      emergence as a new wireless technology company, see “Item 1. Business-Our
      History.”(3)
                On
      July 17, 2006, we issued 7% Senior Secured Notes due 2010 (the “Notes”) in
      the aggregate principal amount of $350.0 million. The Notes were issued at
      a fifteen percent (15%) original issue discount, resulting in gross
      proceeds of $297.5 million. We are required to maintain a minimum balance
      of $75.0 million in cash or cash equivalents from funds other than the
      proceeds of the Notes in a restricted collateral account at all times
      while the Notes remain outstanding.(4)
                On
      March 28, 2007, we issued and sold 355,000 shares of our Series A Senior
      Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of
      $1,000 per share. We received $351.1 million in net proceeds from the sale
      of the Series A Preferred Stock. We will be required to redeem all
      outstanding shares of Series A Preferred Stock, if any, on March 28, 2017,
      at a price equal to the liquidation preference plus unpaid dividends. Each
      share of Series A Preferred Stock is convertible into a number of shares
      of our common stock equal to the liquidation preference then in effect
      divided by $11.05 and is convertible at any time at the option of the
      holder, or at our election after September 28, 2008, subject to the
      trading price of our common stock reaching $22.10 for a specified period
      of time, subject to adjustment. The Series A Preferred Stock is entitled
      to receive quarterly dividends on the liquidation preference at a rate of
      7.5% per annum. Until March 2011, we can elect whether to declare
      dividends in cash or to not declare and pay dividends, in which case the
      per share dividend amount will be added to the liquidation preference. At
      December 29, 2007, the liquidation preference totaled $375.8 million. If
      all shares of Series A Preferred Stock were converted at December 29,
      2007, we would be obligated to issue 34.0 million shares of our common
      stock.(5)
                The
      increase in wireless spectrum licenses, net, during 2006, includes our
      July 2006 acquisition of WCS Wireless, Inc. which resulted in the addition
      of $236.4 million of wireless spectrum licenses. The value assigned to the
      wireless spectrum includes the cash purchase price of $160.5 million,
      legal costs of $0.1 million, and $75.8 million in associated deferred tax
      liabilities. We also acquired other licensed spectrum rights for $245.0
      million in cash and $4.0 million through the assumption of lease
      liabilities. These additions were reduced by amortization during 2006 of
      $2.9 million.(6)
                Loss
      per share information is not presented for the period from inception
      (April 13, 2005) to December 31, 2005 as it would not be meaningful due to
      the Corporate Conversion Merger.
 
 46
  Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
  In
addition to historical information, the following discussion contains
forward-looking statements that are subject to risks and uncertainties. Our
actual results could differ substantially from those anticipated by such
forward-looking information due to a number of factors, including but not
limited to risks described in the section entitled Risk Factors and elsewhere in
this Form 10-K. Additionally, the following discussion and analysis should be
read in conjunction with the consolidated financial statements and the notes
thereto included elsewhere in this Form 10-K.
  OVERVIEW
 
  2007
Highlights
  ·
                Our
      revenues for 2007 totaled $59.1 million compared to $24.3 million for
      2006.·
                During
      2007, we completed the following acquisitions:o
                IPWireless,
      Inc.: IPWireless is a supplier of TD-CDMA network
      equipment and subscriber terminals.  We acquired IPWireless in
      May 2007 for $151.2 million, which includes net cash paid of $25.1
      million, the fair value of common shares issued of $74.5 million and
      additional cash and stock consideration of $51.6 million that was earned
      in 2007 upon the achievement by IPWireless of certain operational
      milestones.  Of the 51.6 million in additional purchase
      consideration, $21.0 million will be deposited into an escrow account to
      settle any potential contingencies existing at acquisition. Additional
      purchase consideration of up to $77.5 million may be paid to the selling
      shareholders of IPWireless in shares of our common stock and cash subject
      to the achievement of specified operational milestones in 2008 and 2009.
      IPWireless is included in our Networks business segmento
                WiMax Telecom
      AG: WiMax Telecom has obtained nationwide wireless broadband
      spectrum concessions in Austria and Slovakia, and a major spectrum
      concession in Croatia and currently operates WiMAX networks in Austria and
      Slovakia. We acquired WiMax Telecom for net cash totaling $19.5 million,
      including debt assumed and paid at closing of $5.8 million. WiMax Telecom
      is included in our Strategic Initiatives business
  segmento
                GO Networks,
      Inc.:  GO Networks is a developer of advanced mobile
      Wi-Fi network solutions for service providers.  We acquired GO
      Networks in February 2007 for net cash totaling $16.7 million, including
      debt assumed and paid at closing of $1.3 million. Additional purchase
      consideration of up to $25.7 million may be paid to the selling
      shareholders of GO Networks in shares of our common stock and cash subject
      to the achievement of specified operational milestones in February and
      August 2008. GO Networks is included in our Networks business
      segmento
                SDC Secure Digital
      Container AG (“SDC”):  SDC is a developer of Java music
      clients for mobile phones.  In January 2007, we acquired SDC for
      net cash totaling $17.8 million. SDC is included in our Multimedia
      business segmento
                Digital World Services
      AG (“DWS”):  DWS is a provider of software solutions and
      services for secure digital content delivery.  In September
      2007, we acquired DWS for net cash totaling $5.8 million, including debt
      assumed and paid at closing of $0.3 million. DWS is included in our
      Multimedia business segmento
                Websky Argentina S.A.
      (“Websky”):  Websky is a developer and operator of
      wireless broadband services over licensed frequencies in
      Argentina.  In October 2007, we acquired Websky for net cash
      paid at acquisition of $13.2 million, plus an additional $1.8 million
      payable in equal monthly installments over the one-year period following
      the acquisition date. Websky is included in our Strategic Initiatives
      business segment·
                In
      March 2007, we issued 355,000 shares of our redeemable Series A Senior
      Convertible Preferred Stock, receiving net cash proceeds of $351.1
      million.·
                During
      2007, we increased our gross wireless spectrum license assets both
      domestically and internationally by an aggregate of $113.8 million, of
      which $46.0 million was acquired through business acquisitions and $40.1
      million was acquired directly for cash of $34.5 million and future lease
      commitments of $5.6 million.  The remaining increase was due to
      non-cash deferred tax liabilities and the effects of foreign currency
      translation.  In November 2007, we also paid deposits totaling
      $20.0 million to lease wireless spectrum located in
      California.
  Our
Business and Operating Segments
  We are a
mobile
  47
 NextWave Network
Products
  NextWave
Network Products (“NNP”) includes the operations of IPWireless, which was
acquired in May 2007, and GO Networks, which was acquired in February 2007. NNP
markets mobile broadband network equipment and mobile TV and multimedia
multicast systems, based on the global Universal Mobile Telecommunications
System (“UMTS”) and Institute of Electrical and Electronics Engineers (“IEEE”)
802.11 standards, to mobile operators around the world.  In addition,
NNP provides mobile operator customers with a comprehensive suite of
professional and value added services.
  Mobile Broadband Network
Equipment.  NNP mobile broadband network equipment, based on
the UMTS TD-CDMA, standard,  has been commercially deployed by mobile
operators in more than a dozen countries, including the Czech Republic, Germany,
New Zealand, South Africa, Sweden, United Kingdom and the United States. In
2006, NNP’s UMTS TD-CDMA mobile broadband technology was selected by New York
City’s Department of Information Technology and Telecommunications as part of a
five-year contract awarded to Northrop Grumman for the deployment of a citywide,
public safety, mobile wireless network. To provide customers with an evolution
path to emerging Fourth Generation (“4G”) network technologies, in February 2008
NNP announced its next-generation base station platform that will be field
upgradeable to support  Worldwide Interoperability for Worldwide
Access (“WiMAX”)  and release 8 of the UMTS standard, also known as
Long Term Evolution (“LTE”).
  Mobile TV and Multimedia Multicast
Systems. NNP’s TDtvTM mobile
broadcast system, based on the Third Generation Partnership Project (“3GPP”)
Multimedia Broadcast Multicast Service (“MBMS”) standard, provides UMTS
operators the ability to deliver multi-channel mobile TV and other multimedia
services using an underutilized portion of their existing third generation
(“3G”) spectrum.   Designed for easy integration into existing
Wideband Code Division Multiple Access (“WCMDA”) networks and next-generation
WCMDA handsets, TDtv is being offered in combination with PacketVideo’s
MediaFusion advertising platform which will provide operators the ability to
generate targeted advertising revenues from TDtv subscribers.  On
February 12, 2008, Orange and T-Mobile announced that they will conduct a six
month commercial pilot of TDtv in London.  We believe that this
commercial pilot along with the rapid growth of the mobile TV market will
provide us with expanded opportunities to market our TDtv multicast solution to
UMTS network operators and device manufacturers around the world.
  NNP’s
MXtvTM mobile
broadband system, announced in March 2008, is based on the 802.16e WiMAX
standard  and provides WiMAX operators the ability to deliver a broad
range of rich and personalized multimedia services including mobile TV,
interactive services, and digital audio without having to invest in new spectrum
or additional network infrastructure.  Similar to TDtv, NextWave MXtv
will provide mobile operators the ability to use PacketVideo’s MediaFusion
platform to generate revenues via the delivery of user-specific
advertising.  NNP has executed joint development agreements with
Huawei Technologies USA and Alcatel-Lucent under which these two global network
infrastructure providers will integrate MXtv technology into their end-to-end
WiMAX network solutions.
  Carrier-Grade Mobile Wi-Fi
Systems.  NNP’s family of carrier-class micro, pico and femto
mobile Wi-Fi base stations have been deployed by numerous mobile operators,
Internet Service Providers, and municipalities around the world.  All
of NNP’s Wi-Fi platforms utilize advanced xRFTM
adaptive-beamforming, smart-antenna technology and a cellular-mesh Wi-Fi
architecture to deliver wide-area Wi-Fi network solutions with the performance
and economics required by service providers.  NNP has announced its
roadmap to integration and availability of it WiMAX LTE capabilities
into its line of micro and pico base stations including hybrid
Wi-Fi/LTE network solutions.
  48
  Value-Added and Professional Services.
To support sales of its mobile broadband and multimedia systems, NNP provides
its customers with a full array of professional and value-added services,
including RF and core network design services, network implementation and
management services, and back-office service solutions,
Voice-over-Internet-Protocol (“VoIP”) implementation, and wireless backhaul
solutions  To demonstrate the capabilities of its products and
services, NNP had implementing a comprehensive test network in Las Vegas,
Nevada.
  NextWave Mobile Products.
  NextWave
Mobile Products (“NMP”) includes the operations of our Multimedia business
segment, which solely consists of our PacketVideo subsidiary, the world’s
largest independent supplier of mobile multimedia software solutions, and our
Semiconductor business segment, which is developing advanced wireless
semiconductors including OFDM-based WiMAX and LTE chipsets.
  Multimedia
Software.Our
PacketVideo subsidiary supplies device-embedded multimedia software to many of
the world's largest wireless carriers and wireless handset manufacturers, who
use it to transform a mobile phone into a feature-rich multimedia device that
provides people with the ability to stream, download and play video and music,
receive live TV broadcasts, and engage in two-way video telephony. PacketVideo
has been contracted by some of the world's largest carriers, such as Orange, NTT
DoCoMo, T-Mobile, Verizon Wireless and Vodafone to design and implement the
embedded multimedia software capabilities contained in their handsets. In
addition, PacketVideo is a founding member of the Open Handset Alliance (“OHA”),
led by Google, and will be supplying the multimedia software subsystem for the
OHA’s mobile device AndroidTM
platform. We believe that by joining the OHA, PacketVideo will be uniquely
positioned to market its full suite of enhanced software applications to Android
application developers. PacketVideo’s software is compatible with virtually all
network technologies including CDMA, GSM, WiMAX, LTE, and WCDMA.  To
date, over 200 million PV-powered handsets have been shipped by PacketVideo’s
service provider and device manufacturer  customers.
  To
further enhance its market position, PacketVideo has invested in the development
and acquisition of a wide range of technologies and capabilities to provide its
customers with software solutions to enable home/office digital media
convergence using communication protocols standardized by the Digital Living
Network AllianceTM(“DLNATM”). An
example is PacketVideo's PVConnectTMplatform that provides for content search, discovery, organization and
content delivery/sharing between mobile devices and consumer electronics
products connected to an Internet Protocol (“IP”)-based network. This innovative
platform is designed to provide an enhanced user experience by intelligently
responding to user preferences based on content type, day-part, and content
storage location. In addition, PacketVideo’s patented Digital Rights Management
(“DRM”) solutions, already in use by many wireless carriers globally, represent
a key enabler of digital media convergence by preventing the unauthorized access
or duplication of multimedia content used or shared by PacketVideo-enabled
devices.
 
 We
believe that the continued growth in global shipments of high-end handsets with
multimedia capabilities, increasing demand for home/office digital media
convergence solutions, and the acceleration of global deployments of mobile
broadband networks optimized to support mobile multimedia applications will
substantially expand the opportunity for PacketVideo to license its suite of
multimedia software solutions to service providers and to handset and consumer
electronic device manufacturers.
 
 Multimedia Devices. To help drive
market adoption of mobile TV technology and related PacketVideo products,
PacketVideo recently introduced its Mobile Broadcast Receiver, a matchbox-size
hardware device that enables virtually any mobile Wi-Fi device to play mobile
broadcast TV. The mobile receiver decodes a digital TV signal, repurposes it for
use on a mobile device, and then sends the mobile TV content over Wi-Fi to the
handset. The PacketVideo receiver uses patented protocols to ensure optimum
rendering of the TV signal on the playback device and provides secure access to
premium channels.  This allows mobile subscribers to upgrade to
advanced mobile TV services without a requirement to change their
handsets.  PacketVideo intends to manufacture several versions of the
Mobile Broadcast Receiver to support TDtv, MXtv, Digital Video Broadcasting –
Handheld (“DVB-H”), and MediaFLO mobile TV systems.
  Semiconductors.  Over 596
engineers at NMP are developing a family of mobile broadband semiconductor
products based on OFDM technologies such as WiMAX and LTE. NMP’s initial focus
is to market multi-band RF chips and high-performance, digital baseband WiMAX
chips to wireless device and network equipment manufacturers who require an
advanced platform to develop next-generation WiMAX mobile terminal and
infrastructure products optimized for mobile multimedia applications such as
mobile TV. Samples of our first-generation NW1000 chipset family, which includes
a WiMAX baseband system-on-a-chip (“SOC”) and matched multi-band Radio Frequency
Integrated Circuits (“RFIC”), became available in the third quarter of 2007.
Initial availability of our second-generation NW2000 chipset family, which will
be contain our MXtv mobile multicast technology, is planned for the first half
of 2008. The NW2000 chipset family will be NMP’s first chipset family designed
for high-volume commercial production. In addition, NMP is developing a family
of handset and media player reference designs to highlight the features of its
subscriber station semiconductor products. Furthermore, in advance of
prospective commercial deployments by network operators of NMP’s TDtv mobile
broadcast system, NMP is preparing for high-volume, commercial production of a
TDtv Device Integration Pack (“DIP”).  The TDtv DIP which includes a
low-power TDtv System in Package (SiP), a complete MBMS software stack, and PV
MediaFusionTM
multimedia client software, is designed to provide device vendors an easy,
low-cost way to integrate TDtv technology into their handset
products.
  49
  The
primary design objectives of NMP’s current and future semiconductor products and
technologies, which are intended to be sold or licensed to network
infrastructure vendors, device manufacturers and service providers worldwide,
are to:
  ·
                Improve
      the performance, service quality, and economics of mobile broadband
      networks and enhance their ability to cost-effectively handle the large
      volume of network traffic associated with bandwidth-intensive and/or
      Quality of Service (“QoS”), applications such as mobile TV,
      video-on-demand (“VOD”), streaming audio, two-way video telephony, VoIP
      telephony, and real-time interactive gaming;·
                Improve
      the performance, power consumption and cost characteristics of WiMAX and
      LTE subscriber terminals;·
                Improve
      the degree of interoperability and integration between Wi-Fi and WiMAX/LTE
      systems for both Local Area Networks (“LANs”) and Wide Area Networks
      (“WANs”); and·
                Improve
      service provider economics and roaming capabilities by enabling WiMAX and
      LTE enabled devices to seamlessly operate across multiple frequency bands
      including certain unlicensed bands.
  Strategic Initiatives
  To help
drive sales of our products and technologies, we have acquired licensed spectrum
in the United States, Canada, Argentina, Germany, Switzerland, Austria, Slovakia
and Croatia.  We believe that our spectrum assets will provide
for additional opportunities for selling products and services to the service
providers, that require our spectrum assets for the provision of wireless
broadband services, on a significantly larger scale than the typical
opportunities being served. The financial results of our spectrum
acquisition activities, both domestically and internationally, are reported
under our Strategic Initiatives business segment.
  To date,
we have acquired licensed spectrum and entered into long-term leases that
provide us with exclusive leasehold access to licensed spectrum throughout the
United States. Our spectrum portfolio covers approximately 248.9 million POPs
across the United States, of which licenses covering 136.4 million POPs are
covered by 20 MHz or more of spectrum, and licenses covering an additional 98.7
million POPs are covered by at least 10 MHz of spectrum. In addition, a number
of markets, including much of the New York metropolitan region, are covered by
30 MHz or more of spectrum. While we believe that all of our spectrum assets can
support commercially viable wireless broadband services, we expect that those
licenses which have over 20 MHz of spectrum will provide operators with improved
capacity and network performance. We believe that this spectrum footprint, which
includes 15 of the top 20 Cellular Market Areas (“CMAs”) and eight of the top
ten CMAs in the United States, will be attractive to service providers who wish
to deploy wireless networks that utilize our advanced products and technologies.
Our domestic spectrum resides in the 2.3 GHz Wireless Communication Services
(“WCS”), 2.5 GHz Broadband Radio Service (“BRS”)/Educational Broadband Service
(“EBS”), and 1.7/2.1 GHz Advanced Wireless Services (“AWS”) bands and offers
propagation and other characteristics suitable to support high-capacity, mobile
broadband services.
  The
financial results of our spectrum acquisition activities, both domestically and
internationally, are reported under our Strategic Initiatives business
segment.
  50
  Results
of Operations
  Our
results of operations include the results of operations of acquired companies
from the date of the respective acquisitions.
  Comparison
of Our Fiscal Year Ended December 29, 2007 to Our Fiscal Year Ended December 30,
2006
  Revenues
  Total
revenues for 2007 were $59.1 million, as compared to $24.3 million for 2006, an
increase of $34.8 million.  Total revenues for 2006 consisted entirely
of revenues generated by our PacketVideo subsidiary.  The $34.8
million increase in revenues in 2007 was attributable to the
following:
  ·
                $20.9
      million of hardware revenues recognized in 2007 from sales of wireless
      broadband and mobile broadcast network products and services by our
      Networks business segment, including our IPWireless and GO Networks
      subsidiaries, acquired in 2007;·
                $12.0
      million increase in technology licensing and service revenues in the
      Multimedia segment from unit sales growth and market penetration of mobile
      subscriber services by PacketVideo's customer base, which includes
      wireless operators and device manufacturers; and·
                $1.9
      million of technology licensing and service revenues recognized in 2007
      primarily from customer subscriptions for the WiMAX network operated by
      our WiMax Telecom subsidiary, acquired in 2007, which is included in our
      Strategic Initiatives segment.
  Sales to
three customers accounted for 39%, 18% and 11% of our consolidated revenues
during 2007.
  In
general, the financial consideration received from wireless carriers and mobile
phone and wireless device manufacturers is primarily derived from a combination
of technology development contracts, royalties, software support and maintenance
and wireless broadband products.
  Since our
inception in April 2005 through December 29, 2006, all of our revenues were
generated by our PacketVideo subsidiary.  In 2007, we also generated
revenues through our newly acquired subsidiaries, IPWireless and GO Networks. We
believe that PacketVideo, IPWireless and GO Networks will continue to account
for a substantial portion of our revenues in 2008. Following the development and
expected commercialization of our mobile broadband semiconductors, network
components, and technologies by our Semiconductor segment, we believe that the
sale or licensing of our proprietary chipsets, network components and device
technologies will become an additional source of recurring revenue.
  We expect
that future revenues will be affected by, among other things, new product and
service introductions, competitive conditions, customer marketing budgets for
introduction of new subscriber products, the rate of expansion of our customer
base, the build out rate of networks that utilize our Wi-Fi and WiMAX
technologies, services and products, price increases, subscriber device life
cycles, demand for wireless data services and acquisitions or dispositions of
businesses or product lines.
  Operating
Expenses
  Year
      Ended(in
      millions)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                IncreaseCost
      of technology, licensing and service revenues
                
                $
                22.1
                
                
                $
                12.1
                
                
                $
                10.0Cost
      of hardware revenues
                
                
                41.0
                
                
                
                —
                
                
                
                41.0Engineering,
      research and development
                
                
                149.6
                
                
                
                54.3
                
                
                
                95.3Sales
      and marketing
                
                
                29.7
                
                
                
                10.0
                
                
                
                19.7General
      and administrative
                
                
                93.0
                
                
                
                50.0
                
                
                
                43.0Purchased
      in-process research and development costs
                
                
                12.1
                
                
                
                3.5
                
                
                
                8.6Business
      realignment costs (credits)
                
                
                —
                
                
                
                (7.1
                )
                
                
                7.1Total
      operating expenses
                
                $
                347.5
                
                
                $
                122.8
                
                
                $
                224.7
  Cost
of Revenues
  Of the
increase in cost of revenues in 2007, $41.0 million was attributable to hardware
cost of revenues associated with sales of wireless broadband and mobile
broadcast network products and services by our Networks business segment, which
includes our IPWireless and GO Networks subsidiaries acquired in
2007.  The Networks segment outsources its product manufacturing to
third-party subcontractors and these costs make up the substantial majority of
cost of revenues for the Networks business segment. Included in hardware cost of
revenues is approximately $1.4 million related to the step-up in the basis of
inventory acquired from IPWireless that was sold in 2007.
  51
  The
increase in technology licensing and services cost of revenues in 2007 is
partially due to a $5.1 million increase in cost of revenues in our Multimedia
segment, resulting from higher purchased intangible asset amortization expense
of $1.0 million from certain business acquisitions in 2007 and 2006. Technology
licensing and services cost of revenues for the Multimedia segment primarily
includes direct engineering labor expenses, allocated overhead costs, costs
associated with offshore contract labor costs, other direct costs related to the
execution of technology development contracts as well as amortization of
acquired software and other costs. The remaining $4.9 million increase in
technology licensing and services cost of revenues in 2007 primarily relates to
costs to operate and maintain the WiMAX network being operated by our WiMax
Telecom subsidiary, acquired in July 2007, which is included in our Strategic
Initiatives segment.
  Included
in cost of revenues in 2007 and 2006 is $13.5 million and $1.5 million,
respectively, of purchased intangibles amortization expense primarily resulting
from our acquisitions of Packet Video in 2005, and IPWireless, GO Networks and
WiMax Telecom in 2007.  Also included in cost of revenues in 2007 and
2006 is $0.4 million and $17,000, respectively, of share-based compensation
expense.
  We
believe that cost of revenues as a percentage of revenue for future periods will
be affected by, among other things, the integration of acquired businesses in
addition to sales volumes, competitive conditions, royalty payments by us on
licensed technologies, changes in average selling prices, and our ability to
make productivity improvements through continual cost reduction
programs.
  Engineering,
Research and Development
  Engineering,
research and development expenses primarily consist of the costs for the
internal and external development of our wireless broadband products and
technologies, including our chipsets.  Of the $95.3 million increase
in engineering, research and development expenses in 2007, $51.1 million is due
primarily to the expansion of the engineering development organization and
development activities in our Semiconductor segment relating to the
pre-commercialization of our 65 nanometer WiMAX baseband and RFIC integrated
circuits.
  The
increase in engineering, research and development expenses in 2007 is also due
to the research and development activities at our Networks segment, including
the IPWireless and GO Networks subsidiaries, which were acquired in 2007, and
which accounted for $35.2 million of the increase.
  The
remaining $9.0 million increase in engineering, research and development
expenses in 2007 is attributable to costs for the internal and external
development of our PacketVideo multimedia software applications at the
Multimedia segment.  Of this increase, $3.1 million is due to business
acquisitions in 2007 and 2006 and the remainder is due to increased engineering
headcount.
  Included
in engineering, research and development expenses in 2007 and 2006 is $0.9
million and $0.4 million, respectively, of purchased intangibles amortization
expense primarily resulting from our acquisitions of GO Networks and IPWireless
in 2007.  Also included in engineering, research and development
expenses in 2007 and 2006 is $8.6 million and $2.1 million, respectively, of
share-based compensation expense.
  Over the
past fifteen months, the Semiconductor segment has progressed from early stage
WiMAX development to pre-commercialization of its family of WiMAX integrated
circuit products. To accomplish our business and financial objectives of
commercializing these products in 2008 and beyond, we have added the required
complement of engineering and product development staff. In addition to
augmenting the staff of our Base Station Development teams in the Networks
segment, primarily through IPWireless and GO Networks, we have increased the
staff of our Semiconductor segment to produce WiMAX baseband, network and radio
frequency integrated circuit products.
  Largely
due to our planned increase in engineering personnel coupled with our business
acquisitions to further our WiMAX related and other technology development
initiatives, we expect our engineering, research and development expenses to
increase over the next twelve months.
  Sales
and Marketing
  Of the
increase in sales and marketing expenses, $13.7 million directly resulted from
our business acquisitions since October 2006, primarily our acquisitions of
IPWireless, GO Networks and WiMax Telecom in 2007.
  Overall,
the increase in sales and marketing expenses reflects increases in spending for
compensation and associated costs for marketing and sales personnel of $13.4
million, expenses associated with marketing and promotional activities of $3.0
million, share-based compensation of $2.1 million and amortization of intangible
assets of $1.2 million.
  Included
in sales and marketing expenses in 2007 and 2006 is $2.0 million and $0.8
million, respectively, of purchased intangibles amortization expense primarily
resulting from our acquisitions of Packet Video in 2005, and IPWireless, GO
Networks, and WiMax Telecom in 2007.  Also included in sales and
marketing expenses in 2007 and 2006 is $2.4 million and $0.3 million,
respectively, of share-based compensation expense.
  52
  We expect
sales and marketing expenses to increase in absolute terms with the growth of
our global business in the upcoming year, primarily from the addition of
international sales offices and related personnel costs to support company
products and services.
  General
and Administrative
  Of the
increase in general and administrative expenses during 2007, $11.1 million
directly resulted from our business acquisitions since October 2006, primarily
our acquisitions of IPWireless, GO Networks and WiMax Telecom.
  Overall,
the increase in general and administrative expenses reflects increases in
spending for compensation and associated costs of general and administrative
personnel of $31.1 million, amortization of intangible assets of $4.8 million,
professional fees of $5.7 million, and share-based compensation of $2.0 million,
offset by $0.6 million in lower losses on disposal of property and
equipment.
  Included
in general and administrative expenses in 2007 and 2006 is $6.3 million and $2.9
million, respectively, of amortization of finite-lived wireless spectrum
licenses, and $1.6 million and $0.2 million, respectively, of purchased
intangibles amortization expense primarily resulting from our acquisitions of
Packet Video in 2005, and GO Networks and IPWireless in 2007.  Also
included in general and administrative expenses in 2007 and 2006 is $4.7 million
and $2.7 million, respectively, of share-based compensation
expense.
  We expect
that general and administrative costs will increase in absolute terms due to our
business acquisitions and as we hire additional personnel and incur costs
related to the anticipated growth of our business and our global operations. We
also expect an increase in our general and administrative expenses to occur as a
result of our efforts to develop and protect intellectual property rights,
including expenses associated with the identification and documentation of
intellectual property, the preparation and prosecution of patent applications
and as we incur additional expenses associated with being a publicly traded
company, including expenses associated with comprehensively analyzing,
documenting and testing our system of internal controls and maintaining our
disclosure controls and procedures as a result of the regulatory requirements of
the Sarbanes-Oxley Act.
  Purchased
In-Process Research and Development Costs
  Purchased
in-process research and development costs totaled $12.1 million and $3.5 million
during 2007 and 2006, respectively.  In 2007, purchased in-process
research and development consisted of the assigned value of IPWireless’s SoC3
wireless device chip development project of $11.2 million and SDC’s video and
audio software for handsets development project of $0.9 million.  In
2006, purchased in-process research and development consisted of the assigned
value of CYGNUS Communications Inc.’s (“CYGNUS”) 802.16e base station and low
power ASIC products development project of $1.9 million and Tusonic’s server and
database applications for delivering music-related content using web services
development project of $1.6 million.  The values allocated to
purchased in-process research and development costs were based on projects that
had not reached technological feasibility and had no alternative future uses and
were determined through established valuation techniques used in the high
technology industry.  These costs were expensed at the respective
dates of acquisition.
  Interest
Income
  Interest
income for 2007 was $16.1 million, as compared to $12.5 million for 2006, an
increase of $3.6 million, and consisted of interest earned during the respective
periods on our unrestricted and restricted cash, cash equivalents and marketable
securities balances, which totaled $241.7 million and $275.7 million at the end
of 2007 and 2006, respectively.
  Interest
income in the future will be affected by changes in short-term interest rates
and changes in our cash, cash equivalents and marketable securities balances,
which may be materially impacted by development plans, acquisitions and other
financial or equity activities.
  Interest
Expense
  Interest
expense for 2007 was $46.4 million, as compared to $20.6 million for 2006, an
increase of $25.8 million. Our issuance of $350.0 million in principal amount of
7% Senior Secured Notes in July 2006 accounted for $23.7 million of the increase
and the accretion of discounted wireless spectrum license lease liabilities
acquired during 2006 and 2007 accounted for $0.8 million of the increase. The
remainder of the increase of $1.3 million consists primarily of interest on debt
assumed in connection with our acquisitions during 2007 and the accretion of the
value of the put/call option to acquire the WiMax Telecom minority
interest.
  Our
interest expense will continue to increase during 2008 primarily due to higher
amortization of the discount and debt issue costs related to our 7% Senior
Secured Notes, accrual of interest for a full year on debt assumed in connection
with our 2007 acquisitions and interest accreted on our newly acquired spectrum
lease liabilities.
  53
  Other
Income (Expense), Net
  Other
expense, net, for 2007 was $1.8 million compared to $23,000 in 2006, an increase
of $1.8 million.  The change in the estimated fair value of the Series
A Senior Convertible Preferred Stock embedded derivatives accounted for $0.8
million of the increase and net foreign currency exchange losses accounted for
$0.2 million of the increase.
  Provision
for Income Taxes
  The
effective income tax rate for 2007 was 0.2%, resulting in a $0.6 million income
tax provision in 2007 on our pre-tax loss of $320.5 million which primarily
relates to income taxes in foreign jurisdictions. The effective tax rate in 2007
was unfavorably impacted by the recording of $100.0 million of valuation
allowances on the increase in our U.S. net deferred tax asset balance. The
effective income tax rate for 2006 was 0.0%, resulting in no income tax
provision in 2006 on our pre-tax loss of $106.7 million. The effective tax rate
in 2006 was unfavorably impacted by the recording of a $41.3 million of
valuation allowance on the increase in our U.S. net deferred tax asset
balance.
  Minority
Interest
  Minority
interest during 2007 and 2006 of $1.0 million and $1.6 million, respectively,
primarily represents the minority shareholder's share of losses to the extent of
their capital contributions in Inquam Broadband Holding Limited (“Inquam”). In
October 2007, we acquired the remaining minority interest ownership in
Inquam.
  Comparison
of Our Fiscal Year Ended December 30, 2006 to Our Period From Inception (April
13, 2005) to December 31, 2005
  Revenues
  Revenues
for 2006 were $24.3 million compared to $4.1 million for the period from
inception (April 13, 2005) to December 31, 2005, an increase of $20.2 million.
The increase in revenue resulted primarily from unit sales growth and market
penetration of mobile subscriber services by PacketVideo’s customer base, which
includes wireless operators and device manufacturers, and from higher contract
revenues from our PacketVideo subsidiary, which resulted from growth in
technology development contracts, addressing an increasing number of wireless
devices in which PacketVideo technology is embedded, in addition to the
inclusion of PacketVideo’s revenues for a full twelve months in 2006.
Additionally, certain revenues reported by PacketVideo licensees during the
period from our acquisition in July 2005 to December 31, 2005, were not
recognizable by us under Emerging Issues Task Force ("EITF") Issue No. 01-3,
Accounting in a Business
Combination for Deferred Revenue of an Acquiree, as these represented
customer revenues that were generated prior to our acquisition of
PacketVideo.
  Operating
Expenses
  (in
      millions)
                
                Year
      Ended
                    December
      30,
                    2006
                
                
                Inception
                    (April
      13, 2005) to December 31,
                    2005
                
                
                Increase
                    (Decrease)Cost
      of revenues
                
                $
                12.1
                
                
                $
                4.6
                
                
                $
                7.5Engineering,
      research and development
                
                
                54.3
                
                
                
                17.5
                
                
                
                36.8Sales
      and marketing
                
                
                10.0
                
                
                
                3.0
                
                
                
                7.0General
      and administrative
                
                
                50.0
                
                
                
                15.1
                
                
                
                34.9Purchased
      in-process research and development
                
                
                3.5
                
                
                
                6.6
                
                
                
                (3.1
                )Business
      realignment costs
                
                
                (7.1
                )
                
                
                13.0
                
                
                
                (20.1
                )Total
      operating expenses
                
                $
                122.8
                
                
                $
                59.8
                
                
                $
                63.0
  Cost
of Revenues
  The $7.5
million increase in cost of revenues for our PacketVideo subsidiary during 2006
includes higher amortization expenses of $0.9 million for the purchase of
intangible assets related to the acquisition of PacketVideo, resulting from a
full year of amortization in 2006. Cost of revenues includes direct engineering
labor expenses, allocated overhead costs, costs associated with offshore
contract labor costs, other direct costs related to the execution of technology
development contracts as well as amortization of acquired software and other
costs.
  Engineering,
Research and Development
  Costs for
the internal and external development of our wireless broadband products and
technologies, including our chipsets, for 2006 were $42.9 million compared to
$15.2 million for the period from inception (April 13, 2005) to December 31,
2005, an increase of $27.7 million which is due primarily to the expansion of
the engineering development organization and inclusion of expenses for a full
twelve months in 2006 and higher losses incurred by our strategic investment of
$1.3 million.
  54
  Costs for
the internal and external development of our PacketVideo software for 2006 were
$11.4 million compared to $2.3 million for the period from inception (April 13,
2005) to December 31, 2005, an increase of $9.1 million, which is due primarily
to the inclusion of expenses for a full twelve months in 2006, additional 2006
acquisitions by PacketVideo and an increase in headcount in the engineering
development organization.
  Share-based
compensation within engineering, research and development for 2006 totaled $2.1
million.
  Sales
and Marketing
  PacketVideo
and NextWave accounted for $4.9 million and $2.1 million of the increase in
2006, respectively. The increases are comprised primarily of increased spending
for compensation and associated costs for marketing and sales personnel of $6.1
million, share-based compensation of $0.3 million, expenses associated with
marketing and promotional activities of $0.3 million, and amortization expenses
related to intangible assets of $0.3 million.
  General
and Administrative
  NextWave
and PacketVideo accounted for $31.9 million and $3.0 million of the increase in
2006, respectively. These increases, which are affected by the inclusion of
expenses for a full twelve months in 2006, are comprised primarily of increased
spending for compensation and associated costs of general and administrative
personnel of $24.6 million, professional fees of $6.2 million, amortization of
intangible assets of $1.4 million, and share-based compensation of $2.7
million.
  Purchased
In-Process Research and Development Costs
  Purchased
in-process research and development costs totaled $3.5 million and $6.6 million
during 2006 and 2005, respectively.  In 2006, purchased in-process
research and development consisted of the assigned value of CYGNUS’s 802.16e
base station and low power ASIC products development project of $1.9 million and
Tusonic’s server and database applications for delivering music-related content
using web services development project of $1.6 million.  In 2005,
purchased in-process research and development represents the assigned value of
PacketVideo’s music on demand software, reference design platform and internet
signaling protocol project.  The values allocated to purchased
in-process research and development costs were based on projects that had not
reached technological feasibility and had no alternative future uses and were
determined through established valuation techniques used in the high technology
industry.  These costs were expensed at the respective dates of
acquisition.
  Business
Realignment Costs
  Business
realignment costs for the period from inception (April 13, 2005) to December 31,
2005 were $13.0 million and include non-cash impairment costs of $5.9 million
for certain hardware and service costs deemed to have no value in consideration
of current technology and then-anticipated test site plans in Henderson, Nevada.
The impairment loss recognized was equal to the carrying value of impaired
assets. Additionally, we accrued $7.1 million related to minimum purchase
obligations that we believed we would not utilize due to the then-anticipated
technology and market trial plans in Henderson, Nevada. In the fourth quarter of
2006, we renegotiated this minimum purchase obligation with the vendor and
reversed the 2005 accrual to reflect the reduction in the contractual
obligation.
  Interest
Income
  Interest
income for 2006 was $12.5 million compared to $11.1 million for the period from
inception (April 13, 2005) to December 31, 2005, an increase of $1.4 million,
and consisted of interest earned during the respective periods on our
unrestricted and restricted cash and investment balances, which totaled $275.7
million and $459.2 million at the end of 2006 and 2005,
respectively.
  Interest
Expense
  Interest
expense for 2006 was $20.6 million compared to $1.0 million for the period from
inception (April 13, 2005) to December 31, 2005, an increase of $19.6 million.
Our issuance of $350.0 million in principal amount of 7% Senior Secured Notes in
July 2006 accounted for $19.2 million of the increase. The remainder of the
increase of $0.4 million consists primarily of the accretion of discounted
wireless spectrum license lease liabilities acquired in 2006.
  Provision
for Income Taxes
  The
effective income tax rate for 2006 was 0.0%, resulting in no income tax
provision in 2006 on our pre-tax loss of $106.7 million. The effective tax rate
in 2006 was unfavorably impacted by the recording of $41.3 million of valuation
allowance on the increase in our U.S. net deferred tax asset balance. The
effective income tax rate for the period from inception (April 13, 2005) to
December 31, 2005 was a negative 0.9%, resulting in an income tax provision of
$0.4 million on our pre-tax loss of $45.7 million. The effective tax rate in
2005 was unfavorably impacted by the recording of $17.1 million of valuation
allowance on the net increase in our U.S. deferred tax asset
balance.
  55
  Minority
Interest
  Minority
interest for 2006 was $1.6 million compared to $0.1 million for the period from
inception (April 13, 2005) to December 31, 2005. Minority interest in 2006
primarily represents our minority partner’s share of losses in Inquam Broadband.
Minority interest in 2005 represents the minority shareholders’ share of losses
in CYGNUS.
  Segment
Results
  During
the fourth quarter of 2007, we reorganized our businesses into four reportable
business segments on the basis of products, services and strategic
initiatives.  The four business segments are: Semiconductor,
Multimedia, Network and Strategic Initiatives.  Results for our
reportable operating segments for 2007 are as follows.  Segment
information for all periods prior to 2007 has not been provided as it would be
impracticable to do so.
  (in
      millions)
                
                Semi-
                    conductor
                
                
                Multimedia
                
                
                Networks
                
                
                Strategic
                    Initiatives
                
                
                Other
      or
                    Unallocated
                
                
                ConsolidatedRevenues
      from external customers
                
                $
                —
                
                
                $
                36.3
                
                
                $
                20.9
                
                
                $
                1.9
                
                
                $
                —
                
                
                $
                59.1Depreciation
      and amortization expense
                
                
                1.1
                
                
                
                5.0
                
                
                
                18.1
                
                
                
                4.2
                
                
                
                7.9
                
                
                
                36.3Purchased
      in-process research and development costs
                
                
                —
                
                
                
                0.9
                
                
                
                11.2
                
                
                
                —
                
                
                
                —
                
                
                
                12.1Loss
      from operations
                
                
                (67.9
                )
                
                
                (24.8
                )
                
                
                (142.3
                )
                
                
                (13.3
                )
                
                
                (40.1
                )
                
                
                (288.4
                )
 
 
  Liquidity and Capital
Resources
  We have
funded our operations, acquisitions, strategic investments and wireless spectrum
license acquisitions primarily with the $550.0 million in cash received in our
initial capitalization in April 2005, the net proceeds of $295.0 million from
the issuance of our 7% Senior Secured Notes in July 2006 and the net proceeds of
$351.1 million from our issuance of Series A Senior Convertible Preferred Stock
in March 2007. Our total unrestricted cash, cash equivalents and marketable
securities at December 29, 2007 totaled $166.7 million.
  The
following table presents working capital, cash, cash equivalents and marketable
securities:
  (in
      millions)
                
                December
      29,
                    2007
                
                
                Increase
                    (Decrease)
                    for
      the
                    Year
      Ended
                    December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                Decrease
                    for
      the
                    Year
      Ended
                    December
      30,
                    2006
                
                
                December
      31,
                    2005Working
      capital
                
                $
                56.1
                
                
                $
                (110.2
                )
                
                $
                166.3
                
                
                $
                (290.1
                )
                
                $
                456.4Cash
      and cash equivalents
                
                
                53.0
                
                
                
                20.0
                
                
                
                33.0
                
                
                
                (60.6
                )
                
                
                93.6Marketable
      securities
                
                
                113.7
                
                
                
                (54.0
                )
                
                
                167.7
                
                
                
                (197.9
                )
                
                
                365.6Total
      cash, cash equivalents and marketable securities
                
                $
                166.7
                
                
                $
                (34.0
                )
                
                $
                200.7
                
                
                $
                (258.5
                )
                
                $
                459.2
  Uses
of Cash, Cash Equivalents and Marketable Securities
  The
following table presents our utilization of cash, cash equivalents and
marketable securities for the years ended December 29, 2007, December 30, 2006
and for the period from inception (April 13, 2005) to December 31,
2005:
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005) to(in
      millions)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Beginning
      cash, cash equivalents and marketable securities
                
                $
                200.7
                
                
                $
                459.2
                
                
                $
                555.1Proceeds
      from the issuance of Series A Senior Convertible Preferred Stock, net of
      issuance costs
                
                
                351.1
                
                
                
                —
                
                
                
                —Proceeds
      from 7% Senior Secured Notes
                
                
                —
                
                
                
                295.0
                
                
                
                —Payment
      to restricted cash account securing long-term obligation
                
                
                —
                
                
                
                (75.0
                )
                
                
                —Cash
      paid for business combinations, net of cash acquired
                
                
                (99.2
                )
                
                
                (8.4
                )
                
                
                (51.1
                )Cash
      paid for acquisition of wireless spectrum licenses and subsequent lease
      obligations
                
                
                (57.5
                )
                
                
                (402.7
                )
                
                
                (18.8
                )Cash
      used by operating activities
                
                
                (196.3
                )
                
                
                (56.3
                )
                
                
                (18.7
                )Purchases
      of property and equipment
                
                
                (29.9
                )
                
                
                (13.0
                )
                
                
                (7.3
                )Other,
      net
                
                
                (2.2
                )
                
                
                1.9
                
                
                
                —Ending
      cash, cash equivalents and marketable securities
                
                $
                166.7
                
                
                $
                200.7
                
                
                $
                459.2
  56
  The
decrease in cash, cash equivalents and marketable securities of $34.0 million
during 2007 is primarily due to $99.2 million in net cash paid in business
combinations, $57.5 million in cash paid for wireless spectrum licenses and
subsequent lease obligations, cash used in operating activities of $196.3
million and purchases of property and equipment of $29.9 million, offset by the
net proceeds of $351.1 million from our issuance of Series A Senior Convertible
Preferred Stock in March 2007.
  The
decrease in cash, cash equivalents and marketable securities of $258.5 million
during 2006, primarily reflects $402.7 million in cash paid for wireless
spectrum licenses and subsequent lease obligations, $75.0 million paid into a
restricted cash account to secure our 7% Senior Secured Notes, cash used in
operating activities of $56.3 million, purchases of property and equipment of
$13.0 million and $8.4 million in net cash paid in business combinations offset
by the net proceeds of $295.0 million from our issuance of 7% Senior Secured
Notes.
  The
decrease in cash, cash equivalents and investments of $95.9 million during the
period from inception (April 13, 2005) to December 31, 2005, primarily reflects
$51.1 million in net cash paid to acquire PacketVideo and to capitalize our
joint venture investment, $18.8 million in cash paid for wireless spectrum
licenses and subsequent lease obligations, cash used in operating activities of
$18.7 million and purchases of property and equipment of $7.3
million.
  Significant
Investing Activities in 2007
  During
2007, we completed six business combinations resulting in net cash paid of $97.9
million, which includes cash paid to the selling shareholders and closing costs
of $97.0 million and the assumption of $7.4 million in debt which was paid at
closing, less cash acquired of $6.4 million.  In addition, we paid an
aggregate of $1.3 million to acquire the minority interest in Inquam Broadband
and for certain escrow holdbacks and deferred earn out payments related to one
of our 2006 acquisitions.
  At
December 29, 2007, we have accrued for $51.6 million in additional purchase
consideration payable to the selling shareholders of IPWireless as a result of
the achievement of certain revenue milestones in 2007 as specified in the
acquisition agreement.  Of the total amount accrued, $1.3 million is
expected to be paid in cash and $50.3 million is expected to be paid through the
issuance of shares of our common stock.  The actual number of shares
to be issued will be based on the average closing price of our common stock for
the 30 consecutive trading days ending with the third trading day immediately
preceding the actual payment date.  We anticipate that the substantial
majority of the amount due will be paid in March 2008.
  Additional
purchase consideration of up to $77.5 million may be paid to the selling
shareholders of IPWireless based upon the achievement of certain revenue
milestones in 2008 and 2009, inclusive, as specified in the acquisition
agreement, with potential payments of up to $24.2 million in 2009 and up to
$53.3 million in 2010. If earned, up to $56.3 million of such additional
consideration will be payable in cash or shares of common stock at our election,
up to $18.7 million of such amounts will be payable in cash or shares of common
stock at the election of the representative of IPWireless shareholders and up to
$2.5 million is required to be paid in cash.
  Additional
purchase consideration of up to $25.6 million and $0.1 million may be paid to
the selling shareholders of GO Networks in shares of our common stock and cash,
respectively, subject to the achievement of certain operational milestones in
February and August 2008.  We expect to complete our analysis of the
February 2008 milestone measurement by March 30, 2008.
  During
the 2007, we also consummated transactions to acquire licensed wireless spectrum
rights totaling $54.5 million, which includes the acquisition of all of the
outstanding shares of common stock of 4253311 Canada Inc., a Canadian company
whose assets are comprised almost entirely of wireless spectrum, for $26.2
million in cash, and the acquisitions of spectrum in other locations, including
Switzerland, Texas and Illinois, for a total of $8.3 million in cash and $5.6
million in future lease obligations. In November 2007, we entered into
definitive agreements to lease wireless spectrum located in California for
initial payments aggregating $20.0 million, plus annual lease payments
approximating $0.8 million through 2017. The leases expire on various dates
through 2017 and each provides for three consecutive 10-year
renewals.
  Capital
expenditures totaled $29.9 million during 2007 and were primarily related to our
acquisition of a build-to-suit office building in Las Vegas, Nevada, interior
improvements to our leased facilities in San Diego, California and expansions of
our lab facilities and semiconductor test equipment assets.
  Significant
Financing Activities in 2007
  On March
28, 2007, we issued and sold 355,000 shares of our Series A Senior Convertible
Preferred Stock (the "Series A Preferred Stock") at a price of $1,000 per share
resulting in net proceeds of $351.1 million. Costs incurred to issue the shares
totaled $3.9 million. The net proceeds are used to fund operations, accelerate
the development of new wireless technologies, expand our business, and enable
future strategic acquisitions. Holders of the Series A Preferred Stock are
entitled to receive quarterly dividends on the liquidation preference at a rate
of 7.5% per annum. Until March 2011, we can elect whether to declare dividends
in cash or to not declare and pay dividends, in which case the per share
dividend amount will be added to the liquidation preference. From and after
March 2011, we must declare dividends in cash each quarter, subject to
applicable law. We accrued for $20.8 million in undeclared dividends during
2007. We will be required to redeem all outstanding shares of Series A Preferred
Stock, if any, on March 28, 2017, at a price equal to the liquidation preference
plus unpaid dividends. If we elect to convert the Series A Preferred Stock after
our common stock price has reached the qualifying threshold, we must redeem the
shares of holders of Series A Preferred Stock who elect not to convert into
common stock at a price equal to 130% of the liquidation
preference.
  57
  During
2007, we paid $24.5 million in interest on our 7% Senior Secured Notes due 2010.
We are obligated to pay interest of 7% per annum semi-annually in January and
July each year, or $24.5 million per year. The Purchase Agreement for the 7%
Senior Secured Notes contains representations and warranties, affirmative and
negative covenants including, without limitation, our obligation to not become
liable to any additional indebtedness, subject to certain exceptions including
the ability to enter into spectrum leases or to incur $25.0 million of acquired
company debt or purchase money indebtedness. As of December 29, 2007, we have
become liable for additional indebtedness totaling $4.4 million, and were in
compliance with all note covenants.
  During
2007, we paid $2.0 million in cash distributions that were accrued for in 2006
to the former NextWave Wireless LLC membership holders.
  Looking
Forward
  As of
December 29, 2007, we had $166.7 million of unrestricted cash, cash equivalents
and marketable securities, and $75.0 million in restricted cash required to be
reserved under our 7% Senior Secured Notes.  On March 2, 2008, we
amended the original purchase agreement for the Notes.  Under the
amended purchase agreement, we may withdraw up to the full amount of the $75.0
million cash reserve account for use in funding our business plan, subject to
the payment of a consent fee of $3.5 million per $25.0 million
withdrawn.  The amended purchase agreement also permits us to incur an
additional $25.0 million of indebtedness to fund a working capital line of
credit subject to specified subordination terms, and an additional $100.0
million of second lien indebtedness our ability incur the second lien
indebtedness remains subject to negotiation of intercreditor terms that are
reasonably satisfactory to the holders of at least two-thirds in aggregate
principal amount of the Notes and the provider of such funding must be
reasonably satisfactory to the holders of a majority in aggregate principal
amount of the notes.  In addition, the amended purchase agreement
restricts the types of investments that can be held in the cash reserve account
to exclude auction rate or similar securities.
  As of
December 29, 2007, $102.2 million of our marketable securities were invested in
auction rate securities (“ARS”).  None of the auctions involving our
ARS holdings had failed as of December 29, 2007. Through March 10, 2008,
auctions for eight ARS, including certain municipalities and education auction
rate securities, with principal amounts aggregating $29.5 million, were not
successful due to recent weakness in the auction markets.  The
unsuccessful securities are District of Columbia Savrs freedom forum-A (insured
by MBIA), Houston Tex Util Sys Rev Adj-Rfdg-Comb (insured by AMBAC), Education
Loan Trust (insured by FFELP), Utah State Board of Rgts (insured by FFELP),
Indiana Transportation Finance Authority (insured by CIFG), Indiana Secondary
Market Education loans (insured by FFELP), Illinois Student Assist Comm (backed
by student loan), and Kentucky Higher Education (insured by FFELP). The interest
rates on these securities at the date of the failed auction range from 2.2% to
18.0%, with a weighted average rate of 6.0%.
  As a
result, we continue to hold these securities and the issuers are required pay
interest on the securities at the maximum contractual rates.  We
reduced our total ARS investments principally by investing in other short-term
marketable securities, as individual ARS reset periods came
due.  Unsuccessful auctions have caused us to hold these securities
beyond their scheduled auction reset dates, limiting the short-term liquidity of
these investments. Such developments may result in the classification of some or
all of these securities as long-term in our consolidated balance sheets in 2008
or future periods. In addition, if the issuers are unable to successfully close
future auctions and their credit ratings deteriorate, we may, in the future, be
required to adjust the carrying value of these investments which would result in
a charge to our consolidated statement of operations.
  Based on
current market conditions, there is no assurance that auctions on the remaining
ARS in our investment portfolio will be successful. Unsuccessful auctions will
cause us to hold securities beyond their next scheduled auction reset dates and
limit the short-term liquidity of these investments. While these failures in the
auction process have affected our ability to access these funds in the near
term, we do not believe that the underlying securities or collateral have been
affected. We believe that the higher reset rates on failed auctions provide
sufficient incentive for the security issuers to address this lack of liquidity.
However, our ability to liquidate and fully recover the carrying value of our
remaining ARS in the near term may be limited. These developments may result in
the classification of some or all of these securities as long-term in our
consolidated financial statements in 2008 or future periods. In addition, if the
issuers are unable to successfully close future auctions and their credit
ratings deteriorate, we may, in the future, be required to adjust the carrying
value of these investments through an impairment charge.
  58
  Excluding
ARS, at February 26, 2008, we had approximately $143.3 million in cash, cash
equivalents and marketable securities.
  In
February 2008, we executed a loan agreement with Hughes Systique Corporation,
our equity method investee, for 6% senior secured convertible notes, whereby we
have committed to make available up to $1.5 million in funding.  The
commitment expires in February 2011 and all principal and interest is due three
years from the date of the advance. At the maturity date or upon a default
event, we have the option to convert any unpaid amounts into shares of preferred
stock of Hughes Systique.
  We
anticipate that our businesses, other than the multimedia software business of
our PacketVideo subsidiary, will require further substantial investment before
our revenues are sufficient to fund our expenses and generate
earnings:
  ·
                Our
      wireless broadband products, services and technologies, which are in the
      Semiconductor segment, are in the pre-commercialization stage of
      development and will require a substantial investment before they may
      become commercially viable. Although we currently anticipate that our
      second generation WiMAX Semiconductor technologies designed for high
      volume commercial production will initially be available in the first half
      of 2008, we are currently unable to project when our chipsets, network
      components and related technology licensing agreements based on WiMAX and
      Wi-Fi technologies will be commercially deployed.·
                GO
      Networks, Inc., acquired in February 2007, which is in the Networks
      segment, develops high-performance mobile Wi-Fi products and services for
      commercial and municipal service providers. GO Networks will continue to
      require working capital funding through 2008 to invest in establishing
      worldwide sales and distribution channels, along with high volume
      manufacturing capabilities and related administrative and information
      technology products and services to support anticipated unit volume
      growth.·
                IPWireless,
      Inc., acquired in May 2007, which is in the Networks segment, is a leading
      supplier of TD-CDMA based mobile broadband network equipment and
      subscriber terminals. We expect increased investment through 2008 in
      augmenting sales and distribution channels, working capital, capital
      equipment and research and development with respect to the
      commercialization of TDtv, WiMAX, and additional public safety
      products.·
                Inquam
      Broadband and WiMax Telecom, which are in the Strategic Initiatives
      segment,  are strategic investments in European wireless
      spectrum and wireless broadband network operations and we are presently
      exploring alternative plans in order to further enhance these investments
      in 2008. If these plans are successful, we do expect further working
      capital investments will be needed to expand these
    businesses.
  If we are
unable to liquidate our ARS when we need such liquidity for business purposes,
we may need to change or postpone such business purposes or find alternative
financing for such business purposes, if available. If funding is insufficient
at any time in the future, we may be unable to develop or enhance our products
or services, take advantage of business opportunities or respond to competitive
pressures, any of which could harm our business.
  Based on
the operating plan for the year ended December 27, 2008 approved by our board of
directors, management believes our existing cash, cash equivalents and
marketable securities, the release of the $75 million of restricted cash and
cash forecasted to be generated by operations will be sufficient to meet our
estimated working capital and capital expenditures requirements through at least
March 2009.
  If events
or circumstances occur such that we do not meet our operating plan as expected,
we may be required to seek additional capital and or to reduce certain
discretionary spending, which could have a material adverse effect on our
ability to achieve our intended business objectives.
  Our long
term operating success will depend on our ability to develop, introduce and
market enhancements to our existing products and services, to introduce new
products and services in a timely manner, which meet customer requirements and
to respond to competitive pressures and technological advances.  In order
for us to achieve positive operating results and positive cash flows, we will
need to achieve a substantial increase in the level of revenues and achieve
sufficient gross margins to cover our ongoing operating expenses and debt
service costs.
  We may
also require additional cash resources for other future developments, including
any investments or acquisitions we may pursue, such as investments or
acquisitions of other business or technologies. To augment our existing working
capital resources in order to satisfy our cash requirements, we may seek to sell
debt securities or additional equity securities or to obtain a credit facility.
Our Senior Secured Notes and our Series A Senior Convertible Preferred Stock
prohibit our incurrence of additional indebtedness, subject to certain premitted
baskets. The sale of equity securities or convertible debt securities could
result in additional dilution to our stockholders.
  59
  The
incurrence of additional indebtedness would result in additional debt service
obligations and could impose operating and financial covenants that could
restrict our operations. In addition, there can be no assurance that any
additional financing will be available on acceptable terms, if at
all.
  We have
been approached by a number of wireless carriers with preliminary indications of
interest in acquiring certain of our wireless spectrum licenses.  We plan
to entertain such offers to the extent we deem the terms to be attractive and
have met with a nationally recognized investment banking firm to discuss our
plans for a disposition of spectrum. There can be no assurance that any spectrum
disposition will be consummated.
  Critical Accounting Policies and
Estimates
  Our
discussion and analysis of our results of operations and liquidity and capital
resources are based on our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates and judgments,
including those related to revenue recognition, valuation of intangible assets
and investments, and litigation. We base our estimates on historical and
anticipated results and trends and on various other assumptions that we believe
are reasonable under the circumstances, including assumptions as to future
events. These estimates form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. By their nature, estimates are subject to an inherent degree of
uncertainty. Actual results that differ from our estimates could have a
significant adverse effect on our operating results and financial position. Our
accounting policies are described in more detail in Note 1 to our consolidated
financial statements included elsewhere in this Form 10-K. We believe that the
following significant accounting policies and assumptions may involve a higher
degree of judgment and complexity than others.
  Revenue
Recognition
  We derive
revenues primarily from contracts to provide embedded multimedia software
products for mobile devices and related royalties through our PacketVideo
subsidiary.  In 2007, we also began to derive revenues from sales of
wireless broadband and mobile broadcast network products and services by
our newly acquired subsidiaries, IPWireless and GO Networks. The wireless
broadband and mobile broadcast network products and services sold by
IPWireless and GO Networks generally include embedded software.  We
also recognize revenue from customer subscriptions for the WiMAX network
operated by our WiMax Telecom subsidiary.
  For
arrangements that do not contain software or embedded software that is more than
incidental to the arrangement, we recognize revenue in accordance with the basic
principles in Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition, that
is, when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, and collectibility is reasonably
assured.
  For
software arrangements, or in cases where the software is considered more than
incidental and is essential to the functionality of the hardware products,
revenue is recognized pursuant to American Institute of Certified Public
Accountants (“AICPA”) Statement of Position ("SOP") No. 97-2, Software Revenue Recognition,
and SOP No. 98-9, a Modification of SOP 97-2 Software Revenue Recognition
with Respect to Certain Transactions, and Emerging Issues Task Force (“EITF”)
Issue No. 03-5, Applicability
of SOP 97-2 to Non-Software Deliverables in an Arrangement Containing
More-Than-Incidental Software. In the case of loss contracts, we also
consider the provisions of SOP No. 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts.
  We
evaluate each deliverable in the arrangement to determine whether it represents
a separate unit of accounting. If objective and reliable evidence of fair value
exists (vendor specific objective evidence or “VSOE”) for all units of
accounting in the arrangement, revenue is allocated to each unit of accounting
or element based on those relative fair values. If VSOE of fair value exists for
all undelivered elements, but not for delivered elements, the residual method
would be used to allocate the arrangement consideration.
  To date,
we have not been able to establish VSOE for any of the elements included in our
revenue arrangements, as the software or hardware products or services have not
yet been sold separately, nor has a standard price list been established. As a
result, once the software or technology is delivered and the only undelivered
element is services, the entire non-contingent contract value is recognized
ratably over the remaining service period. Costs directly attributable to
providing these services are also deferred and amortized over the remaining
service period of the respective revenues.
  For
arrangements in which customers pay one contracted amount for multiple products
and services, or a combination of products and services, we also consider EITF
Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. Our software arrangements can
include a software or technology license, non-recurring engineering (“NRE”)
services and post-contract support (“PCS”).  Our sales of hardware can
include PCS on the embedded software.
  60
  If
elements cannot be treated as separate units of accounting, they are combined
into a single unit of accounting and the associated revenue is deferred until
all combined elements have been delivered or, until there is only one
remaining element to be delivered.
  Services
sold separately are generally billed on a time and materials basis at
agreed-upon billing rates, and revenue is recognized as the services are
performed.
  We earn
royalty revenues on licensed embedded multimedia products sold by our licensees.
Generally, royalties are paid by licensees on a per unit or contingent usage
basis. The licensees generally report and pay the royalty in the quarter
subsequent to the period of delivery or usage. We recognize royalty revenues
based on royalties reported by licensees.
  If we
receive non-refundable advanced payments from licensees that are allocable to
future contracts periods or could be creditable against other obligations of the
licensee to us, the recognition of the related revenue is deferred until such
future periods or until such creditable obligations lapse.
  When
royalty arrangements also provide for ongoing PCS that does not meet the
criteria to be accrued on delivery of the software, the royalty is recognized
ratably from the date the royalty report is received through the stated
remaining term of the PCS arrangement.
  In
limited situations, we have determined that PCS revenue can be recognized upon
delivery of the hardware or software. In these situations, we have determined
that if PCS is for one year or less, the estimated cost of providing PCS during
the arrangement is insignificant and unspecified upgrades or enhancements
offered for the particular PCS arrangement historically has been and are
expected to continue to be minimal and infrequently provided. In these limited
situations, we have accrued all the estimated costs of providing the services,
which to date have been insignificant.
  Arrangements
generally do not allow for product returns and we have no history of product
returns. Accordingly, no allowance for returns has been provided. In instances
where we have noted extended payment terms revenue is recognized in the period
the payment becomes due. If an arrangement includes specified upgrade rights,
revenue is deferred until the specified upgrade has been delivered.
  The
timing and amount of revenue recognition depends upon a variety of factors,
including the specific terms of each arrangement and the nature of our
deliverables and obligations. Determination of the appropriate amount of revenue
recognized involves judgments and estimates that we believe are
reasonable.
  Wireless
Spectrum Licenses
  We
capitalize as intangible assets wireless spectrum licenses that we acquire from
third parties or through government auctions.  For wireless
spectrum licenses purchased directly from third parties or through spectrum
auctions, the cost basis of the wireless spectrum asset includes the purchase
price paid for the license at the time of acquisition plus legal costs incurred
to acquire the license. For wireless spectrum licenses acquired through a
business combination or through the acquisition of a business where the assets
of the business are comprised almost entirely of wireless spectrum, the cost
basis of the wireless spectrum asset is determined through an allocation of the
total purchase price to the tangible and identifiable intangible assets and
liabilities of the acquired business or asset(s) and includes any deferred tax
liabilities determined in accordance with Emerging Issues Task Force
(“EITF”) Issue No. 98-11, Accounting for Acquired Temporary
Differences in Certain
Purchase Transactions That Are Not Accounted for as Business
Combinations. For leased wireless spectrum rights, the asset and related
liability are recorded at the net present value of future cash outflows using
our incremental borrowing rate at the time of acquisition.
  We have
determined that certain of our wireless spectrum licenses meet the definition of
indefinite-lived intangible assets under SFAS No. 142, Goodwill and Other Intangible
Assets, because the licenses are either perpetual or may be renewed
periodically for a nominal fee, provided that we continue to meet the service
and geographic coverage provisions. Moreover, we have determined that there are
currently no legal, regulatory, contractual, competitive, economic or other
factors that limit the useful lives of these wireless spectrum licenses. As
of December 29, 2007, indefinite-lived wireless spectrum licenses that are not
subject to amortization totaled $524.1 million.
  Wireless
spectrum licenses for which we have acquired lease rights from third parties are
considered to have finite lives. The wireless license asset is then amortized
over the contractual life of the lease. We have also acquired the rights to
wireless spectrum licenses in Europe where the renewal terms are not yet well
established.  We amortize these assets on a straight-line basis over
the initial license period.  Amortization expense on wireless spectrum
licenses is charged to general and administrative expense. As of December 29,
2007, amortized wireless spectrum licenses, net of accumulated amortization,
totaled $109.7 million.
  Valuation
of Goodwill
  At
December 29, 2007, the aggregate carrying value of our goodwill was
$171.1million. In accordance with SFAS No. 142, we do not amortize goodwill. In
lieu of amortization, we are required to perform an annual review for
impairment, or more frequently if impairment indicators arise. Goodwill is
considered to be impaired if we determine that the carrying value of the
goodwill exceeds its fair value.
  61
  We test
goodwill for impairment annually at a reporting unit level using a two-step
process. The first step of the impairment test involves comparing the fair
values of the applicable reporting units with their aggregate carrying values,
including goodwill. If the carrying amount of a reporting unit exceeds the
reporting unit’s fair value, we then perform the second step of the goodwill
impairment test to determine the amount of the impairment loss. The second step
of the goodwill impairment test involves comparing the implied fair value of the
affected reporting unit’s goodwill with the carrying value of that goodwill. If
the carrying amount of goodwill exceeds the implied fair value of that goodwill,
an impairment loss is recognized in an amount equal to that
excess.  We determined that our reporting units, as that term is
defined in SFAS No. 142, are one level below our identified operating segments
because discrete financial information is available. At December 29, 2007, our
goodwill resides in three reporting units.
  We
primarily utilize an income approach that includes the discounted cash flow
method to determine the fair value of our goodwill.  The discounted
cash flow method determines fair value based on the present value of projected
cash flows over a specific projection period and a residual value related to
future cash flows beyond the projection period.  Both values are
discounted to reflect the degree of risk inherent in an investment in the
reporting unit and achieving the projected cash flows.  A weighted
average cost of capital is determined for each reporting unit to be used as the
discount rate.  The residual value is generally determined by applying
a constant terminal growth rate to the estimated net cash flows at the end of
the projection period.  Alternatively, the present value of the
residual value may be determined by applying a market multiple at the end of the
projection period.  For the goodwill impairment test performed during
the fourth quarter of 2007, the discounted cash flows used to estimate fair
value were based on discrete financial forecasts of five years for each of the
reporting units. These forecasts were developed by management for planning
purposes. Cash flows beyond these periods were estimated using terminal value
calculations. The future cash flows were discounted to present value using
discount rates ranging from 15% to 29% and terminal growth
rates ranging from 4% to 6%. Based on the analysis, we concluded that
our goodwill was not impaired.
  We cannot
assure you that the underlying assumptions used to forecast the cash flows will
materialize as estimated. For example, if our projections of future customer
order growth do not materialize, the fair value of our goodwill may fall below
its carrying value. Therefore, we cannot assure you that when we complete our
future reviews of our goodwill for impairment that a material impairment charge
will not be recorded.  A variance in the discount rate or in
management’s forecasts would have a significant impact on the estimated fair
value of the reporting unit and consequently the amount of identified goodwill
impairment, if any.
  Valuation
of Indefinite-Lived Intangible Assets
  In
accordance with SFAS No. 142, we do not amortize indefinite-lived intangible
assets. In lieu of amortization, we are required to perform an annual review for
impairment, or more frequently if impairment indicators arise. Indefinite-lived
intangible assets are considered to be impaired if we determine that the
carrying value of the asset exceeds its fair value.
  We test
indefinite-lived intangible assets by making a determination of the fair value
of the intangible asset. If the fair value of the intangible asset is less than
its carrying value, an impairment loss is recognized in an amount equal to the
difference. We also evaluate the remaining useful life of our intangible assets
that are not subject to amortization on an annual basis to determine whether
events and circumstances continue to support an indefinite useful life. If an
intangible asset that is not being amortized is subsequently determined to have
a finite useful life, that asset is tested for impairment. After recognition of
the impairment, if any, the asset is amortized prospectively over its estimated
remaining useful life and accounted for in the same manner as other
intangible assets that are subject to amortization.
  At
December 29, 2007, the aggregate carrying value of our indefinite-lived wireless
spectrum licenses was $524.1 million. For our indefinite-lived wireless spectrum
licenses, we primarily utilize a market approach which determines fair value
based on observed prices paid for equivalent licenses in the
market.  There are established primary and secondary markets for our
wireless spectrum licenses which provide sufficient data upon which to estimate
fair market values.  We also considered other factors, such as trends
in spectrum prices in general and evolving technology, consumer market and
regulatory issues, that may potentially affect the value of our spectrum. We
believe the market approach provides a more accurate estimate of the fair value
of our indefinite lived wireless spectrum licenses as compared to an income
approach. For purposes of performing our annual impairment assessment of
indefinite-lived wireless spectrum licenses, we have segregated our indefinite
lived intangible wireless spectrum licenses into five separate units of
accounting using the guidance provided by EITF Issue No. 02-7, Unit of Accounting for Testing of
Impairment of Indefinite-Lived Intangible Assets, based on the type of
spectrum and location. Based on this analysis, we concluded that our
indefinite-lived wireless spectrum licenses were not impaired.
 62
  At
December 29, 2007, the aggregate carrying value of our other indefinite-lived
intangible assets, which primarily consist of purchased tradenames and
trademarks, was $2.4 million. For our other indefinite-lived intangible assets,
we primarily utilize an income approach that includes the discounted cash flow
method to determine fair value.  The discounted cash flow method
determines fair value based on the present value of projected cash flows over a
specific projection period and a residual value related to future cash flows
beyond the projection period.  Both values are discounted to reflect
the degree of risk inherent in an investment in the reporting unit and achieving
the projected cash flows.  A weighted average cost of capital is
determined for each reporting unit to be used as the discount
rate.  The residual value is generally determined by applying a
constant terminal growth rate to the estimated net cash flows at the end of the
projection period.  Alternatively, the present value of the residual
value may be determined by applying a market multiple at the end of the
projection period.  For the indefinite-lived intangible asset
impairment test performed during the fourth quarter of 2007, the discounted cash
flows used to estimate fair value were based on discrete financial forecasts of
five years for each of the reporting units. These forecasts were developed by
management for planning purposes. Cash flows beyond these periods were estimated
using terminal value calculations. The future cash flows were discounted to
present value using a discount rate of 15% and a terminal growth rate of 6%.
Based on this analysis, we concluded that our indefinite-lived intangible assets
were not impaired.
  We cannot
assure you that the underlying assumptions used to forecast the cash flows will
materialize as estimated. For example, if our projections of future customer
order growth do not materialize, the fair value of our indefinite-lived
intangible assets may fall below their carrying value. Therefore, we cannot
assure you that when we complete our future reviews of our indefinite-lived
intangible assets for impairment that a material impairment charge will not be
recorded.  A variance in the discount rate or in management’s
forecasts would have a significant impact on the estimated fair value of the
reporting unit and consequently the amount of identified indefinite-lived
intangible asset impairment, if any.
  Impairment of Long-Lived
Assets
  In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we review long-lived assets to be held and
used, including acquired intangible assets subject to amortization and property
and equipment, for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable.
Conditions that would necessitate an impairment assessment include a significant
decline in the market price of an asset or asset group, a significant adverse
change in the extent or manner in which an asset or asset group is being used,
the loss of legal ownership or title to the asset, significant negative industry
or economic trends or the presence of other indicators that would indicate that
the carrying amount of an asset or asset group is not recoverable.
  A
long-lived asset is considered to be impaired if the estimated undiscounted
future cash flows resulting from the use of the asset and its eventual
disposition are not sufficient to recover the carrying value of the asset. In
order to estimate an asset’s undiscounted future cash flows, we utilize our
internal forecast of our future operating results and cash flows, our strategic
business plans and anticipated future economic and market conditions. There are
inherent estimates and assumptions underlying this information and management’s
judgment is required in the application of this information to the determination
of an asset’s undiscounted future cash flows. No assurance can be given that the
underlying estimates and assumptions utilized in our determination of an asset’s
undiscounted future cash flows will materialize as anticipated. During 2007, we
did not identify any conditions that would necessitate an impairment assessment
of our long-lived assets.
  Valuation
of Share-Based Awards
  We
account for the grant of employee share-based awards under provisions of SFAS
No. 123 (revised 2004), Share-Based Payments(“SFAS
No. 123R”).  Accordingly, we estimate the fair value of our
share-based stock awards on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes option-pricing model requires the use of
certain input variables, as follows:
  Expected Volatility.
Volatility is a measure of the amount the stock price will fluctuate during the
expected life of an award. We determine expected volatility based on an average
of the historical stock price volatilities of certain of our peer companies due
to lack of trading history of our common stock.
  Risk-Free Interest Rate.Our assumption of the
risk-free interest rate is based on the implied yield available on U.S. constant
rate treasury securities in effect at the time of the grant with remaining terms
equivalent to the respective expected terms of the share-based
award.
  Expected Dividend Yield.Because we have not
paid any cash dividends since our inception and do not anticipate paying
dividends in the foreseeable future, we assume a dividend yield of
zero.
  Expected Award Life.As none of the plans
have sufficient history for estimating the term from grant date to full exercise
of the option, we consider expected terms applied, in part, by certain of our
peer companies to determine the expected life of each grant.
  Under
SFAS No. 123R, we are also required to estimate at the grant date the likelihood
that the award will ultimately vest (the “pre-vesting forfeiture rate”), and
revise the estimate, if necessary, in future periods if the actual forfeiture
rate differs. We determine the pre-vesting forfeiture rate of an award based on
industry and employee turnover data as well as an historical pre-vesting
forfeitures occurring over the previous year. Under the true-up provisions of
SFAS No. 123R, we recognize additional share-based compensation expense if the
actual forfeiture rate is lower than estimated and a recovery of previously
recognized share-based compensation expense if the actual forfeiture rate is
higher than estimated.
  63
  We
believe it is important for investors to be aware of the high degree of
subjectivity involved when using option pricing models to estimate share-based
compensation under SFAS No. 123R. Option-pricing models were developed for use
in estimating the value of traded options that have no vesting or hedging
restrictions, are fully transferable and do not cause dilution. Because our
share-based payments have characteristics significantly different from those of
freely traded options, and because changes in the subjective input assumptions
can materially affect our estimates of fair values, in our opinion, existing
valuation models, including the Black-Scholes option-pricing model, may not
provide reliable measures of the fair values of our share-based compensation.
Consequently, there is a risk that our estimates of the fair values of our
share-based compensation awards on the grant dates may bear little resemblance
to the actual values realized upon the exercise, expiration, early termination
or forfeiture of those share-based payments in the future. Certain share-based
payments, such as employee stock options, may expire worthless or otherwise
result in zero intrinsic value as compared to the fair values originally
estimated on the grant date and reported in our financial statements.
Alternatively, value may be realized from these instruments that is
significantly in excess of the fair values originally estimated on the grant
date and reported in our financial statements. There currently is no
market-based mechanism or other practical application to verify the reliability
and accuracy of the estimates stemming from these valuation models, nor is there
a means to compare and adjust the estimates to actual values. Although the fair
value of employee share-based awards is determined in accordance with SFAS No.
123R and the SAB No. 107, Share-Based Payment, using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer and willing seller market transaction. If factors
change and we employ different assumptions in the application of SFAS No. 123R
in future periods than those currently applied, the share-based compensation
expense that we recognize in the future may differ significantly from what we
have reported historically.
  Purchased
In-Process Research and Development Costs
  The
values allocated to purchased in-process research and development costs were
based on projects that had not reached technological feasibility and had no
alternative future uses and were determined through established valuation
techniques used in the high technology industry.  These costs were
expensed at the respective dates of acquisition. The fair values assigned to
purchased in-process research and development projects were determined by
applying the income approach using the excess earnings methodology which
involves estimating the future discounted cash flows to be derived from the
currently existing technologies.
  The
following table summarizes our significant assumptions at the acquisition dates
underlying the valuations of in-process research and development for our
acquisitions completed in 2007, 2006 and 2005:
  (dollars
      in millions)
                Project
                
                Weighted
                    Average
                    Estimated
                    Percent
                    Complete
                
                
                Average
                    Estimated
                    Time
      to
                    Complete
                
                
                Estimated
                    Cost
      to
                    Complete
                
                
                Risk
                    Adjusted
                    Discount
                    Rate
                
                
                Estimated
                    Fair
                    Value2007
      Acquisitions:IPWireless
                SoC3
      wireless device chip
                
                
                50
                %
                
                
                1.0
                
                
                $
                9.0
                
                
                
                19
                %
                
                $
                11.2SDC
                Video
      and audio software for handsets
                
                
                50
                %
                
                
                0.5
                
                
                
                0.7
                
                
                
                26
                %
                
                
                0.92006
      Acquisitions:CYGNUS
                802.16e
      base station and low power ASIC products
                
                
                40
                %
                
                
                2.0
                
                
                
                19.8
                
                
                
                20
                %
                
                
                1.92005
      Acquisition:PacketVideo
                Music
      on demand software, reference design platform and internet signaling
      protocol
                
                
                35
                %
                
                
                1.7
                
                
                
                2.3
                
                
                
                21
                %
                
                
                6.6
 
  Additionally,
we acquired Tusonic’s server and database applications for delivering
music-related content using web services development project which was
determined to have an estimated fair value of $1.6 million using a risk adjusted
discount rate of 19%.  At December 29, 2007, the SoC3 wireless device
chip development project at IPWireless was still in process.  All
other acquired in-process research and development projects were substantially
completed.  Actual results to date have been consistent, in all
material respects, with our assumptions at the time of the respective
acquisitions.  The assumptions consist primarily of expected
completion dates for the in-process research and development projects, estimated
costs to complete the projects, and revenue and expense projections for the
products once they have entered the market.
  64
  Litigation
  We are
currently involved in certain legal proceedings. Although there can be no
assurance that unfavorable outcomes in any of these matters would not have a
material adverse effect on our operating results, liquidity or financial
position, we believe the claims are without merit and intend to vigorously
defend the actions. We estimate the range of liability related to pending
litigation where the amount and range of loss can be estimated. We record our
best estimate of a loss when the loss is considered probable. Where a liability
is probable and there is a range of estimated loss with no best estimate in the
range, we record the minimum estimated liability related to the claim. As
additional information becomes available, we assess the potential liability
related to our pending litigation and revise our estimates. We have not recorded
any accrual for contingent liability associated with our legal proceedings based
on our belief that a liability, while possible, is not probable. Further, any
possible range of loss cannot be estimated at this time. Revisions in our
estimates of the potential liability could materially impact our results of
operations.
  Income
Taxes
  We
adopted Financial Accounting Standards Board ("FASB") Interpretation (“FIN”) No.
48, Accounting for Uncertainty
in Income Taxes, effective December 31, 2006, the beginning of our 2007
fiscal year. FIN No. 48 prescribes a recognition threshold and measurement
standard for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN No. 48 requires that
we determine whether the benefits of our tax positions are more likely than not
of being sustained upon audit based on the technical merits of the tax
position.  The initial application of FIN No. 48 to our tax positions
had no impact on stockholders’ equity.  We did not record a
cumulative effect adjustment related to the adoption of FIN No.
48.  We did not have any unrecognized tax benefits as of December 29,
2007.
  Contractual
Obligations
  The
following table summarizes our cash contractual obligations at December 29, 2007
as well as significant cash contractual obligations entered into subsequent to
that date, and the effect such obligations are expected to have on our liquidity
and cash flows in future periods.
  Payments
      Due by Period(in
      thousands)
                
                Total
                
                
                2008
                
                
                Years
      2009-
                    2010
                
                
                Years
      2011-
                    2012
                
                
                Years
      2013
                    and
                    ThereafterLong-term
      obligations(1)
                
                $
                397,471
                
                
                $
                6,745
                
                
                $
                358,077
                
                
                $
                6,565
                
                
                $
                26,084Pending
      spectrum lease obligations(2)
                
                
                7,985
                
                
                
                902
                
                
                
                1,574
                
                
                
                1,652
                
                
                
                3,857Services
      and other purchase agreements
                
                
                24,885
                
                
                
                12,767
                
                
                
                7,757
                
                
                
                4,361
                
                
                
                —Operating
      leases
                
                
                34,534
                
                
                
                11,306
                
                
                
                15,852
                
                
                
                7,236
                
                
                
                140Series
      A Senior Convertible Preferred Stock(3)
                
                
                375,811
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                375,811Accrued
      purchase consideration payable in cash(4)
                
                
                3,568
                
                
                
                3,568
                
                
                
                —
                
                
                
                —
                
                
                
                —Total
                
                $
                844,254
                
                
                $
                35,288
                
                
                $
                383,260
                
                
                $
                19,814
                
                
                $
                405,892Significant
      contractual obligation entered into subsequent to December 29,
      2007:Convertible
      loan agreement(5)
                
                $
                1,500
                
                
                $
                1,500
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Business
      acquisition(6)
                
                $
                4,500
                
                
                $
                4,500
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
  
 (1)
                Amounts
      presented do not include interest payments. We are required to make
      semiannual interest payments of approximately $12.3 million under the 7%
      Senior Secured Notes through 2010.(2)
                In
      November 2007, we entered into definitive agreements to lease spectrum
      located in California for initial payments aggregating $20.0 million, plus
      annual lease payments approximating $0.8 million through 2017. The leases
      expire on various dates through 2017 and each provides for three
      consecutive 10-year renewals.  At December 29, 2007, the
      transfers of control of the leases were pending final approval from the
      FCC.(3)
                We
      will be required to redeem all remaining outstanding shares of Series A
      Preferred Stock on March 28, 2017, at a price equal to the liquidation
      preference plus unpaid dividends. Each share of Series A Preferred Stock
      is convertible into a number of shares of our common stock equal to the
      liquidation preference then in effect divided by $11.05 and is convertible
      at any time at the option of the holder, or at our election after
      September 28, 2008, subject to the trading price of our common stock
      reaching $22.10 for a specified period of time, subject to adjustment. The
      Series A Preferred Stock is entitled to receive quarterly dividends on the
      liquidation preference at a rate of 7.5% per annum. Until March 28, 2011,
      we can elect whether to declare dividends in cash or to not declare and
      pay dividends, in which case the per share dividend amount will be added
      to the liquidation preference. At December 29, 2007, the liquidation
      preference totaled $375.8 million. If all shares of Series A Preferred
      Stock were converted at December 29, 2007, we would be obligated to issue
      34.0 million shares of our common stock. For the purposes of the
      contractual obligations table, we have assumed that the Series A Preferred
      Stock will be redeemed for cash on March 28,
  2017.
  65
  (4)
                In
      addition to amounts payable in cash, we have accrued for $50.3 million at
      December 29, 2007, in additional purchase consideration payable through
      the issuance of shares of our common stock to the selling shareholders of
      IPWireless as a result of the achievement of certain revenue milestones in
      2007 as specified in the acquisition agreement.  The actual
      number of shares to be issued will be based on the average closing price
      of our common stock for the 30 consecutive trading days ending with the
      third trading day immediately preceding the actual payment
      date.  We anticipate that the substantial majority of the amount
      due will be paid in March 2008.  Additional purchase
      consideration of up to $77.5 million may be paid to the selling
      shareholders of IPWireless based upon the achievement of certain revenue
      milestones in 2008 and 2009, inclusive, as specified in the acquisition
      agreement, with potential payments of up to $24.2 million in 2009 and up
      to $53.3 million in 2010. If earned, up to $56.3 million of such
      additional consideration will be payable in cash or shares of common stock
      at our election, up to $18.7 million of such amounts will be payable in
      cash or shares of common stock at the election of the representative of
      the IPWireless shareholders and up to $2.5 million is required to be paid
      in cash.  Additional purchase consideration of up to $25.6
      million and $0.1 million may be paid to the selling shareholders of GO
      Networks in shares of our common stock and cash, respectively, subject to
      the achievement of certain operational milestones in February and August
      2008.  We expect to complete our analysis of the achievement of
      the February 2008 milestone by the end of the first quarter of
      2008.(5)
                In
      February 2008, we executed a loan agreement with Hughes Systique, our
      equity method investee, for 6% senior secured convertible notes, whereby
      we have committed to make available up to $1.5 million in
      funding.  The commitment expires in February 2011 and all
      principal and interest is due three years from the date of the advance. At
      the maturity date or upon a default event, we have the option to convert
      any unpaid amounts into shares of preferred stock of Hughes
      Systique.(6)
                On
      March 3, 2008, we acquired all of the outstanding equity interests of
      Southam Chile SA, a Chilean corporation, and Sociedad Televisora CBC
      Limitada, a Chilean limited liability company, for an initial cash payment
      of $4.5 million and additional cash payments of up to $1.7 million upon
      the occurrence of certain specified events prior to the third anniversary
      of the acquisition date.
  Off-Balance
Sheet Arrangements and Related Party Transactions
  As of
December 29, 2007, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purposes. As such, we are not materially
exposed to any financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.
  In
addition to other investment funds and institutional investors, we sold 14%, 14%
and 28%, respectively, of our Series A Senior Convertible Preferred Stock to
Navation, Inc., an entity owned by Allen Salmasi, our Chairman and Chief
Executive Officer, Manchester Financial Group, L.P., an entity indirectly owned
and controlled by Douglas F. Manchester, a member of our board of directors, and
affiliates of Avenue Capital, of which a member of our board of directors,
Robert Symington, is a portfolio manager. Kevin Finn, our Chief Compliance
Officer, also purchased less than 1% of the Series A Senior Convertible
Preferred Stock.
  Recent Accounting
Pronouncements
  In
December 2007 the FASB issued SFAS No. 141R, Business Combinations.
SFAS 141R establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statement to evaluate the nature and
financial effects of the business combination. SFAS 141R is effective for
financial statements issued for fiscal years beginning after December 15,
2008. We expect SFAS No. 141R will have an impact on our consolidated
financial statements when effective, but the nature and magnitude of the
specific effects will depend upon the nature, terms and size of the acquisitions
we consummate after the effective date. We are still assessing the impact of
this standard on our future consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling interests in
Consolidated Financial Statements – and amendment of ARB No. 51. The
provisions of SFAS No. 160 establish accounting and reporting standards for the
noncontrolling interests of a subsidiary.  The provisions of SFAS No. 160
are effective for us on in fiscal year 2009 and will be applied prospectively,
except for the presentation of the noncontrolling interests, which for all
periods would be reclassified to equity in the consolidated balance sheet and
adjusted out of net income in the consolidated statements of operations. We are
currently evaluating the impact of the provisions of SFAS No. 160 on our future
consolidated financial statements.
 66
 In June
2007 the FASB ratified EITF No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services to Be Used in Future Research and Development
Activities. EITF 07-3 requires non-refundable advance payments for
goods and services to be used in future research and development activities to
be recorded as an asset and the payments to be expensed when the research and
development activities are performed. EITF 07-3 is effective for fiscal
years beginning after December 15, 2007. This standard is not expected to
have a material impact on our future consolidated financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.  SFAS No. 159 permits
entities to choose to measure certain financial assets and liabilities and other
eligible items at fair value, which are not otherwise currently required to be
measured at fair value. Under SFAS No. 159, the decision to measure items at
fair value is made at specified election dates on an irrevocable
instrument-by-instrument basis. Entities electing the fair value option would be
required to recognize changes in fair value in earnings and to expense upfront
cost and fees associated with the item for which the fair value option is
elected. Entities electing the fair value option are required to distinguish on
the face of the statement of financial position, the fair value of assets and
liabilities for which the fair value option has been elected and similar assets
and liabilities measured using another measurement attribute. If elected, SFAS
No. 159 is effective for our fiscal year that begins on December 30, 2007, with
earlier adoption permitted provided that the entity also early adopts all of the
requirements of SFAS No. 159. We are currently evaluating whether or not to
elect the option provided for in this standard.
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for our fiscal year that begins on
December 30, 2007. We are in the process of evaluating the impact of our
adoption of SFAS No. 157.
  Item
7a. Quantitative and Qualitative Disclosures about Market Risk
  Interest
Rate Risk
  At
December 29, 2007, our investment portfolios included unrestricted and
restricted investment securities with fair values of $166.7 million and $75.0
million, respectively. These securities are subject to interest rate risk and
will decline in value if interest rates increase. Interest income earned on our
investments is affected by changes in the general level of U.S. interest rates.
These income streams are generally not hedged.
  As of
December 29, 2007, $102.2 million of our marketable securities were invested in
auction rate securities (“ARS”).  Through March 10, 2008, we had
reduced our total investments in ARS to $29.5 million, principally by investing
in other short-term marketable securities as individual ARS reset periods came
due and the securities were once again subject to the auction process. Through
March 10, 2008, auctions for eight of these securities, with principal
amounts aggregating $29.5 million, were unsuccessful due to recent weakness in
the auction markets. As a result, we continued to hold these securities and earn
interest at the maximum contractual rate.
  Based on
current market conditions, there is no assurance that auctions on the remaining
ARS in our investment portfolio will be successful. Unsuccessful auctions will
cause us to hold securities beyond their next scheduled auction reset dates and
limit the short-term liquidity of these investments. While these failures in the
auction process have affected our ability to access these funds in the near
term, we do not believe that the underlying securities or collateral have been
affected. We believe that the higher reset rates on failed auctions provide
sufficient incentive for the security issuers to address this lack of liquidity.
However, our ability to liquidate and fully recover the carrying value of our
remaining ARS in the near term may be limited. These developments may result in
the classification of some or all of these securities as long-term in our
consolidated financial statements in 2008 or future periods. In addition, if the
issuers are unable to successfully close future auctions and their credit
ratings deteriorate, we may, in the future, be required to adjust the carrying
value of these investments through an impairment charge.
  Due
to the relatively short duration of our investment portfolio, an immediate ten
percent change in interest rates (e.g. 3.00% to 3.30%) would have no material
impact on our financial condition or results of operations.
  Foreign Currency
Risk
  In
addition to our U.S. operations, we conduct business through subsidiaries in
Europe, Israel, Asia-Pacific, Canada and South America. As a result, our
financial position, results of operations and cash flows can be affected by
fluctuations in foreign currency exchange rates, particularly fluctuations in
the Pound Sterling, Euro, Israeli Shekel and Swiss Franc exchange rates.
Additionally, a portion of our sales to customers located in foreign countries,
specifically certain sales by our IPWireless subsidiary, are denominated in
Euros, which subjects us to foreign currency risks related to those
transactions. We analyze our exposure to currency fluctuations and may engage in
financial hedging techniques in the future to reduce the effect of these
potential fluctuations. We do not currently have hedging contracts in
effect.
  67
  Item
8. Financial
Statements and Exhibits
   Index to
Consolidated Financial Statements and Financial Statement Schedule
 
 PageConsolidated
      Financial StatementsReport
      of Ernst & Young LLP, Independent Registered Public Accounting
      Firm
                69Consolidated
      Balance Sheets as of December 29, 2007 and December 30,
    2006
                70Consolidated
      Statements of Operations for the Years Ended December 29, 2007 and
      December 30, 2006, and for the Period from Inception (April 13, 2005) to
      December 31, 2005
                71Consolidated
      Statement of Redeemable Convertible Preferred Stock and
      Stockholders’/Members’ Equity for the Years Ended December 29, 2007 and
      December 30, 2006, and for the Period from Inception (April 13, 2005) to
      December 31, 2005
                72Consolidated
      Statements of Cash Flows for the Years Ended December 29, 2007 and
      December 30, 2006, and for the Period from Inception (April 13, 2005) to
      December 31, 2005
                73Notes
      to Consolidated Financial Statements
                74Schedule
      II - Valuation and Qualifying Accounts
                106
 
  Financial
Statement Schedules: Financial statements schedules other than those appearing
on page 106 are omitted as they are not applicable, are not required, or
the information is included in the Consolidated Financial Statements or the
Notes to Consolidated Financial Statements.
  68
  Report
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
  The Board
of Directors and Stockholders
 NextWave
Wireless Inc.
  We have
audited the accompanying consolidated balance sheets of NextWave Wireless Inc.
as of December 29, 2007 and December 30, 2006, and the related consolidated
statements of operations, redeemable convertible preferred stock and
stockholders’/members’ equity and cash flows for the years then ended and for
the period from April 13, 2005 (date of inception) through December 31, 2005.
Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of NextWave Wireless Inc.
at December 29, 2007 and December 30, 2006, and the consolidated results of its
operations and its cash flows for the years then ended and for the period from
April 13, 2005 (date of inception) through December 31, 2005, in conformity with
U.S. generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
 
 As
discussed in Note 1 to the consolidated financial statements, effective January
1, 2006, the Company changed its method of accounting for share-based payments
in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), NextWave Wireless Inc.’s internal control over
financial reporting as of December 29, 2007, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 11, 2008
expressed an unqualified opinion thereon.
  
  /s/ ERNST &
      YOUNG LLP
  San
Diego, California
 March 11,
2008
 
 69
  NEXTWAVE
WIRELESS INC.
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands, except par value data)
 December
      29,
                    2007
                
                
                December
      30,
                    2006ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                53,050
                
                
                $
                32,980Marketable
      securities
                
                
                113,684
                
                
                
                167,705Accounts
      receivable, net of allowance for doubtful accounts of $1,419 and $321,
      respectively
                
                
                14,788
                
                
                
                5,056Inventory
                
                
                4,934
                
                
                
                266Deferred
      contract costs
                
                
                27,840
                
                
                
                2,397Prepaid
      expenses and other current assets
                
                
                9,444
                
                
                
                7,571Total
      current assets
                
                
                223,740
                
                
                
                215,975Restricted
      cash
                
                
                75,000
                
                
                
                75,000Wireless
      spectrum licenses, net
                
                
                633,881
                
                
                
                527,998Goodwill
                
                
                171,056
                
                
                
                32,184Other
      intangible assets, net
                
                
                82,388
                
                
                
                18,570Property
      and equipment, net
                
                
                44,382
                
                
                
                17,529Other
      noncurrent assets
                
                
                28,291
                
                
                
                9,823Total
      assets
                
                $
                1,258,738
                
                
                $
                897,079LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                
                $
                25,885
                
                
                $
                1,630Accrued
      expenses
                
                
                76,137
                
                
                
                33,537Current
      portion of long-term obligations
                
                
                6,745
                
                
                
                3,065Deferred
      revenue
                
                
                55,964
                
                
                
                10,253Other
      current liabilities and deferred credits
                
                
                2,931
                
                
                
                1,240Total
      current liabilities
                
                
                167,662
                
                
                
                49,725Deferred
      income tax liabilities
                
                
                103,264
                
                
                
                75,774Long-term
      obligations, net of current portion
                
                
                320,782
                
                
                
                298,030Accrued
      purchase consideration and bonuses payable
                
                
                57,903
                
                
                
                —Other
      long-term obligations and deferred credits
                
                
                8,376
                
                
                
                3,324Minority
      interest in subsidiary
                
                
                —
                
                
                
                1,048Commitments
      and contingenciesRedeemable
      Series A Senior Convertible Preferred Stock, $0.001 par value; 355 shares
      authorized; 355 shares issued and outstanding, liquidation preference of
      $375,811 at December 29, 2007
                
                
                371,986
                
                
                
                —Stockholders’
      equity:Preferred
      stock, $0.001 par value; 25,000 shares authorized; 355 shares designated
      as Series A Senior Convertible Preferred Stock; no other shares issued or
      outstanding
                
                
                —
                
                
                
                —Common
      stock, $0.001 par value; 400,000 shares authorized; 92,667 and 83,716
      issued and outstanding at December 29, 2007, and December 30, 2006,
      respectively
                
                
                93
                
                
                
                84Additional
      paid-in-capital
                
                
                686,918
                
                
                
                620,423Accumulated
      other comprehensive income (loss)
                
                
                12,836
                
                
                
                (357
                )Accumulated
      deficit
                
                
                (471,082
                )
                
                
                (150,972
                )Total
      stockholders’ equity
                
                
                228,765
                
                
                
                469,178Total
      liabilities and stockholders’ equity
                
                $
                1,258,738
                
                
                $
                897,079
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 70
  NEXTWAVE
WIRELESS INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (in
thousands, except per share data)
 
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  toDecember
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Revenues:Technology
      licensing and service
                
                $
                38,246
                
                
                $
                24,284
                
                
                $
                4,144Hardware
                
                
                20,861
                
                
                
                —
                
                
                
                —Total
      revenues
                
                
                59,107
                
                
                
                24,284
                
                
                
                4,144Operating
      expenses:Cost
      of technology licensing and service revenues
                
                
                22,080
                
                
                
                12,054
                
                
                
                4,573Cost
      of hardware revenues
                
                
                41,017
                
                
                
                —
                
                
                
                —Engineering,
      research and development
                
                
                149,645
                
                
                
                54,304
                
                
                
                17,508Sales
      and marketing
                
                
                29,727
                
                
                
                9,992
                
                
                
                2,960General
      and administrative
                
                
                92,992
                
                
                
                50,043
                
                
                
                15,159Purchased
      in-process research and development costs
                
                
                12,060
                
                
                
                3,538
                
                
                
                6,600Business
      realignment costs (credits)
                
                
                —
                
                
                
                (7,121
                )
                
                
                13,031Total
      operating expenses
                
                
                347,521
                
                
                
                122,810
                
                
                
                59,831Loss
      from operations
                
                
                (288,414
                )
                
                
                (98,526
                )
                
                
                (55,687
                )Other
      income (expense):Interest
      income
                
                
                16,076
                
                
                
                12,533
                
                
                
                11,051Interest
      expense
                
                
                (46,408
                )
                
                
                (20,647
                )
                
                
                (1,006
                )Other
      income (expense), net
                
                
                (1,777
                )
                
                
                (23
                )
                
                
                (20
                )Total
      other income (expense), net
                
                
                (32,109
                )
                
                
                (8,137
                )
                
                
                10,025Loss
      before provision for income taxes and minority interest
                
                
                (320,523
                )
                
                
                (106,663
                )
                
                
                (45,662
                )Income
      tax benefit (provision)
                
                
                (635
                )
                
                
                35
                
                
                
                (417
                )Minority
      interest
                
                
                1,048
                
                
                
                1,608
                
                
                
                127Net
      loss
                
                
                (320,110
                )
                
                
                (105,020
                )
                
                
                (45,952
                )Less:
      Preferred stock dividends
                
                
                (20,810
                )
                
                
                —
                
                
                
                —Accretion
      of issuance costs on preferred stock
                
                
                (210
                )
                
                
                —
                
                
                
                —Net
      loss applicable to common shares
                
                $
                (341,130
                )
                
                $
                (105,020
                )
                
                $
                (45,952
                )Net
      loss per common share – basic and diluted
                
                $
                (3.81
                )
                
                $
                (1.28
                )
                
                
                N/AWeighted
      average shares used in per share calculation
                
                
                89,441
                
                
                
                81,841
                
                
                
                N/A
 
  See Note
1 for pro forma net loss per common share information for the period ending
December 31, 2005.
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 71
  NEXTWAVE
WIRELESS INC.
 CONSOLIDATED
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’/MEMEBERS’
EQUITY
 (in
thousands)
  Redeemable
                    Convertible
                    Preferred
      Stock
                
                
                Common
      Stock
                
                
                Membership
      Interests
                
                
                Additional
      Paid-In
                
                
                Accumulated
      Other Comprehensive
                  Income
                
                
                Accumulated
                
                
                Total
      Stockholders’/
                  Members’
                
                
                ComprehensiveShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Units
                
                
                Amount
                
                
                Capital
                
                
                (Loss)
                
                
                Deficit
                
                
                Equity
                
                
                LossCapital
      contributions upon inception
                  (April
      13, 2005)
                
                
                —
                
                
                $
                —
                
                
                
                —
                
                
                $
                —
                
                
                
                488,672
                
                
                $
                588,279
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                588,279Accumulated
      deficit of variable interest entity contributed upon inception (April 13,
      2005)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,206
                )
                
                
                (3,206
                )Share-based
      compensation for non-employee advisory services
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,075
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,075Unrealized
      net losses on marketable securities
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (832
                )
                
                
                —
                
                
                
                (832
                )
                
                $
                (832
                )Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (45,952
                )
                
                
                (45,952
                )
                
                
                (45,952
                )Balance
      at December 31, 2005
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                488,672
                
                
                
                589,354
                
                
                
                —
                
                
                
                (832
                )
                
                
                (49,158
                )
                
                
                539,364
                
                
                $
                (46,784
                )Units
      issued and stock options exchanged in a business
    acquisition
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,558
                
                
                
                1,558
                
                
                
                904
                
                
                
                —
                
                
                
                —
                
                
                
                2,462Shares/units
      issued for stock/unit options and warrants exercised, net of
      repurchases
                
                
                —
                
                
                
                —
                
                
                
                1,504
                
                
                
                2
                
                
                
                1,382
                
                
                
                1,382
                
                
                
                6
                
                
                
                —
                
                
                
                —
                
                
                
                1,390Sale
      of restricted units
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,000
                
                
                
                1,000
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,000Share-based
      compensation expense
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,969
                
                
                
                1,187
                
                
                
                —
                
                
                
                —
                
                
                
                5,156Distributions
      to members
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,481
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,481
                )Accumulated
      deficit of variable interest entity eliminated upon acquisition by
      NextWave
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                3,206
                
                
                
                3,206Fair
      value of warrants issued in connection with the issuance of 7% Senior
      Secured Notes
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                24,626
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                24,626Exchange
      membership interests for common shares in conjunction with the Corporate
      Conversion Merger
                
                
                —
                
                
                
                —
                
                
                
                82,212
                
                
                
                82
                
                
                
                (492,612
                )
                
                
                (618,408
                )
                
                
                618,326
                
                
                
                —
                
                
                
                —
                
                
                
                —Unrealized
      net gains on marketable securities
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                475
                
                
                
                —
                
                
                
                475
                
                
                $
                475Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (105,020
                )
                
                
                (105,020
                )
                
                
                (105,020
                )Balance
      at December 30, 2006
                
                
                —
                
                
                
                —
                
                
                
                83,716
                
                
                
                84
                
                
                
                —
                
                
                
                —
                
                
                
                620,423
                
                
                
                (357
                )
                
                
                (150,972
                )
                
                
                469,178
                
                
                $
                (104,545
                )Shares
      issued for cash, net of issuance costs and embedded derivatives of
      $4,035
                
                
                355
                
                
                
                350,966
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      issued to acquire IPWireless, Inc.
                
                
                —
                
                
                
                —
                
                
                
                7,651
                
                
                
                8
                
                
                
                —
                
                
                
                —
                
                
                
                74,514
                
                
                
                —
                
                
                
                —
                
                
                
                74,522Shares
      issued under stock incentive plans
                
                
                —
                
                
                
                —
                
                
                
                379
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2,174
                
                
                
                —
                
                
                
                —
                
                
                
                2,174Shares
      issued for warrants exercised
                
                
                —
                
                
                
                —
                
                
                
                670
                
                
                
                1
                
                
                
                —
                
                
                
                —
                
                
                
                3
                
                
                
                —
                
                
                
                —
                
                
                
                4Share-based
      compensation expense
                
                
                —
                
                
                
                —
                
                
                
                251
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                10,824
                
                
                
                —
                
                
                
                —
                
                
                
                10,824Imputed
      dividends on Series A Senior Convertible Preferred Stock
                
                
                —
                
                
                
                20,810
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (20,810
                )
                
                
                —
                
                
                
                —
                
                
                
                (20,810
                )Accretion
      of issuance costs on Series A Senior Convertible Preferred
      Stock
                
                
                —
                
                
                
                210
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (210
                )
                
                
                —
                
                
                
                —
                
                
                
                (210
                )Unrealized
      net gains on marketable securities
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                348
                
                
                
                —
                
                
                
                348
                
                
                $
                348Foreign
      currency translation adjustment
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                12,845
                
                
                
                —
                
                
                
                12,845
                
                
                
                12,845Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (320,110
                )
                
                
                (320,110
                )
                
                
                (320,110
                )Balance
      at December 29, 2007
                
                
                355
                
                
                $
                371,986
                
                
                
                92,667
                
                
                $
                93
                
                
                
                —
                
                
                $
                —
                
                
                $
                686,918
                
                
                $
                12,836
                
                
                $
                (471,082
                )
                
                $
                228,765
                
                
                $
                (306,917
                )
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
 72
 
 NEXTWAVE
WIRELESS INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (in
thousands)
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  toDecember
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005OPERATING
      ACTIVITIESNet
      loss
                
                $
                (320,110
                )
                
                $
                (105,020
                )
                
                $
                (45,952
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                
                
                11,957
                
                
                
                6,081
                
                
                
                661Amortization
      of intangible assets
                
                
                24,320
                
                
                
                5,831
                
                
                
                2,926Non-cash
      share-based compensation
                
                
                18,419
                
                
                
                5,156
                
                
                
                1,075In-process
      research and development
                
                
                12,060
                
                
                
                3,538
                
                
                
                6,600Accretion
      of interest expense
                
                
                21,201
                
                
                
                9,503
                
                
                
                939Minority
      interest
                
                
                (1,048
                )
                
                
                (1,537
                )
                
                
                —Non-cash
      business realignment costs (credits)
                
                
                —
                
                
                
                (7,121
                )
                
                
                13,031Losses
      incurred on strategic investment
                
                
                1,359
                
                
                
                1,494
                
                
                
                159Other
      non-cash adjustments
                
                
                6,234
                
                
                
                848
                
                
                
                (614
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                4,317
                
                
                
                (1,513
                )
                
                
                (406
                )Inventory
                
                
                1,124
                
                
                
                (266
                )
                
                
                —Deferred
      contract costs
                
                
                (24,024
                )
                
                
                (1,499
                )
                
                
                (424
                )Prepaid
      expenses and other current assets
                
                
                (2,118
                )
                
                
                (2,197
                )
                
                
                (3,742
                )Other
      assets
                
                
                1,376
                
                
                
                (724
                )
                
                
                205Accounts
      payable and accrued liabilities
                
                
                13,557
                
                
                
                22,819
                
                
                
                4,758Deferred
      revenue
                
                
                34,063
                
                
                
                8,599
                
                
                
                1,760Other
      current liabilities and deferred credits
                
                
                988
                
                
                
                (329
                )
                
                
                350Net
      cash used in operating activities
                
                
                (196,325
                )
                
                
                (56,337
                )
                
                
                (18,674
                )INVESTING
      ACTIVITIESProceeds
      from maturities of marketable securities
                
                
                45,005
                
                
                
                457,985
                
                
                
                1,137,962Proceeds
      from sales of marketable securities
                
                
                1,101,201
                
                
                
                1,091,844
                
                
                
                —Purchases
      of marketable securities
                
                
                (1,091,837
                )
                
                
                (1,351,477
                )
                
                
                (1,503,544
                )Cash
      paid for business combinations, net of cash acquired
                
                
                (99,198
                )
                
                
                (8,446
                )
                
                
                (46,621
                )Payments
      for wireless spectrum licenses
                
                
                (54,464
                )
                
                
                (400,337
                )
                
                
                (18,780
                )Purchase
      of property and equipment
                
                
                (29,922
                )
                
                
                (13,036
                )
                
                
                (7,278
                )Cash
      paid for investment in software development company
                
                
                —
                
                
                
                —
                
                
                
                (4,500
                )Other,
      net
                
                
                (551
                )
                
                
                (1,909
                )
                
                
                —Net
      cash used in investing activities
                
                
                (129,766
                )
                
                
                (225,376
                )
                
                
                (442,761
                )FINANCING
      ACTIVITIESProceeds
      from the sale of Series A Senior Convertible Preferred Stock, net of costs
      to issue
                
                
                351,146
                
                
                
                —
                
                
                
                —Proceeds
      from long-term obligations, net of costs to issue
                
                
                —
                
                
                
                295,018
                
                
                
                —Payment
      to restricted cash account securing long-term obligations
                
                
                —
                
                
                
                (75,000
                )
                
                
                —Payments
      on long-term obligations
                
                
                (4,777
                )
                
                
                (2,502
                )
                
                
                (15
                )Proceeds
      from the sale of common shares and membership equity
    interests
                
                
                2,178
                
                
                
                2,390
                
                
                
                —Proceeds
      from investment by joint venture partner
                
                
                —
                
                
                
                2,585
                
                
                
                —Cash
      distributions paid to members
                
                
                (2,034
                )
                
                
                (1,447
                )
                
                
                —Net
      cash provided by financing activities
                
                
                346,513
                
                
                
                221,044
                
                
                
                (15
                )Effect
      of foreign currency exchange rate changes on cash
                
                
                (352
                )
                
                
                —
                
                
                
                —Net
      increase (decrease) in cash and cash equivalents
                
                
                20,070
                
                
                
                (60,669
                )
                
                
                (461,450
                )Cash
      and cash equivalents, beginning of period
                
                
                32,980
                
                
                
                93,649
                
                
                
                555,099Cash
      and cash equivalents, end of period
                
                $
                53,050
                
                
                $
                32,980
                
                
                $
                93,649
  The
accompanying notes are an integral part of these consolidated financial
statements.
 73
  NEXTWAVE
WIRELESS INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
                Description
      of Business and Summary of Significant Accounting Policies and Significant
      Accounts
  NextWave
Wireless Inc. (together with its subsidiaries, “NextWave”, “we”, “our” or “us”)
is a wireless technology company that develops, produces, and markets mobile
multimedia and wireless broadband products, including device-embedded software
for mobile handsets, advanced mobile TV systems, fourth generation (“4G”)
wireless broadband semiconductors and mobile broadband network equipment. Our
products and technologies are designed to power wireless networks and devices
that enable mobile multimedia and wireless broadband services. Our customers
include many of the world’s largest mobile handset and wireless service
providers.
  The
accompanying consolidated financial statements have been prepared assuming that
we will continue as a going concern.  This basis of accounting contemplates
the recovery of our assets and the satisfaction of our liabilities in the normal
course of business. We have generated net losses of $320.1 million, $105.0
million and $46.0 million for the years ended December 29, 2007 and December 30,
2006 and for the period from inception (April 13, 2005) to December 31, 2005,
respectively, and have an accumulated deficit of $471.1 million at December 31,
2007.  We have used cash from operating activities of $196.3 million, $56.3
million and $18.7 million for the years ended December 29, 2007 and December 30,
2006 and for the period from April 13, 2005 through December 31, 2005,
respectively.  We have net working capital of $56.1 million at December 29,
2007.
  We have
funded our operations, strategic investments and wireless spectrum license
acquisitions primarily with the $550.0 million in cash received in our initial
capitalization in April 2005, the net proceeds of $295.0 million from our
issuance of 7% Senior Secured Notes in July 2006 and the net proceeds of $351.1
million from our issuance of Series A Senior Convertible Preferred Stock in
March 2007. Our total unrestricted cash, cash equivalents and marketable
securities at December 29, 2007 totaled $166.7 million.
  Based on
the operating plan for the year ended December 27, 2008 approved by our board of
directors, management believes our existing cash, cash equivalents and
marketable securities, the release of the $75 million of restricted cash and
cash forecasted to be generated by operations will be sufficient to meet the our
estimated working capital and capital expenditures requirements through at least
March 2009.
  If events
or circumstances occur such that we do not meet our operating plan as expected,
we may be required to seek additional capital and or to reduce certain
discretionary spending, which could have a material adverse effect on our
ability to achieve our intended business objectives.
  Our long
term operating success will depend on our ability to develop, introduce and
market enhancements to our existing products and services, to introduce new
products and services in a timely manner, which meet customer requirements and
to respond to competitive pressures and technological advances.  In order
for us to achieve positive operating results and positive cash flows, we will
need to achieve a substantial increase in the level of revenues and achieve
sufficient gross margins to cover our ongoing operating expenses and debt
service costs.
  We will
need to secure significant additional capital to implement changes to, or
expansions of, our business plan and to continue to fund our research and
development activities and our operating losses until we become cash flow
positive. We may also require additional cash resources for other future
developments, including any investments or acquisitions we may pursue, such as
investments or acquisitions of other business or technologies. To augment our
existing working capital resources in order to satisfy our cash requirements, we
may seek to sell debt securities or additional equity securities or to obtain a
credit facility. Our Senior Secured Notes and our Series A Senior Convertible
Preferred Stock prohibit our incurrence of additional indebtedness, subject to
certain exceptions. The sale of equity securities or convertible debt securities
could result in additional dilution to our stockholders.
  The
incurrence of additional indebtedness would result in additional debt service
obligations and the requirement that we comply with operating and financial
covenants that would restrict our operations. In addition, there can be no
assurance that any additional financing will be available on acceptable terms,
if at all.
  We have
been approached by a number of wireless carriers with preliminary indications of
interest in acquiring certain of our wireless spectrum licenses.  We plan
to entertain such offers to the extent we deem the terms to be attractive and
have met with a nationally recognized investment banking firm to discuss our
plans for a disposition of spectrum. There can be no assurance that any spectrum
disposition will be consummated.
  74
  Corporate
Conversion Merger
  In order
to convert NextWave Wireless LLC with and into a corporate form, the Board of
Managers and a majority in interest of the holders of NextWave Wireless LLC
membership units approved the merger of NextWave Wireless LLC with a wholly
owned subsidiary of a newly formed Delaware corporation, NextWave Wireless Inc.
(“Corporate Conversion Merger”). On November 13, 2006, the Corporate Conversion
Merger was completed and NextWave Wireless LLC became a wholly-owned subsidiary
of NextWave Wireless Inc. Under the terms of the merger agreement, NextWave
Wireless Inc. issued shares of its common stock to holders of NextWave Wireless
LLC’s membership units in exchange for all of the outstanding membership units
of NextWave Wireless LLC, with NextWave Wireless LLC unitholders receiving one
share of NextWave Wireless Inc. common stock for every six membership units of
NextWave Wireless LLC that they held. Additionally, the terms of the CYGNUS 2004
Stock Option Plan, a plan administered by NextWave’s wholly-owned subsidiary,
CYGNUS Communications, Inc. (“CYGNUS”), which was amended in February 2006,
provided for the conversion of each CYGNUS option into 0.05097 options to
purchase shares of NextWave common stock at the time of the conversion.
Following the Corporate Conversion Merger, NextWave Wireless LLC’s obligation to
file periodic reports under the Securities Exchange Act of 1934 was suspended,
and NextWave Wireless Inc. became the successor to NextWave Wireless LLC for
Securities and Exchange Commission (“SEC”) reporting purposes.
  All
references to per unit amounts in the notes to the consolidated financial
statements regarding per unit and stock option information have been restated to
their equivalent shares based on the conversion of the membership units of
NextWave Wireless LLC into shares of common stock of NextWave Wireless Inc and
the conversion of stock options of CYGNUS into stock options for shares of
common stock of NextWave Wireless Inc.
  Inception
of NextWave Wireless LLC
  NextWave
Wireless Inc. (“Old NextWave Wireless”) was formed in 1996 as a wholly-owned
operating subsidiary of NextWave Telecom, Inc. (“NTI”), which sought to develop
a nationwide CDMA-based personal communication services (“PCS”) network. In
1998, Old NextWave Wireless, together with NTI and its other subsidiaries (the
“NextWave Telecom group”), filed for protection under Chapter 11 of the United
States Bankruptcy Code. In December 2004, Old NextWave Wireless was converted
from a corporation to a limited liability company named NextWave Wireless LLC.
On March 1, 2005, the Bankruptcy Court confirmed the plan of reorganization of
the NextWave Telecom group. The cornerstone of the plan was the sale of NTI and
its subsidiaries, excluding Old NextWave Wireless, to Verizon Wireless for
approximately $3.0 billion. With the proceeds of the Verizon sale, as well as
the proceeds of prior PCS spectrum license sales to Cingular Wireless, Verizon
Wireless and MetroPCS, all creditors of the NextWave Telecom group were paid in
full and the NTI equity holders received an aggregate cash distribution of
approximately $2.6 billion. In addition, the plan provided for the
capitalization and distribution to the NTI equity holders of NextWave Wireless
LLC, a new wireless technology company. Pursuant to the plan, on April 13, 2005,
the NextWave Telecom group abandoned substantially all of its PCS assets other
than the spectrum licenses and all remaining non-PCS assets and liabilities were
contributed to Old NextWave Wireless. Immediately thereafter limited liability
company interests (“LLC Interests”) in NextWave Wireless LLC were distributed to
the NTI equity holders and NextWave Wireless LLC was capitalized with $550.0
million in cash. Through this process, Old NextWave Wireless was reconstituted
as a company with a new capitalization and a new wireless technology business
plan. The significant underlying assets contributed to NextWave Wireless LLC
included NTI’s residual cash referred to above, the common stock of NextWave
Broadband Inc., the convertible Series A Preferred Stock and notes receivable
from CYGNUS, and wireless spectrum licenses from the Federal Communications
Commission (“FCC”) useful to NextWave or its new wireless technology business.
Pursuant to the plan, the NTI shareholders received undivided interests in the
underlying assets of NextWave Wireless LLC as part of their consideration for
the redemption of their NTI shares, which was followed by the deemed
contribution of these undivided interests to NextWave Wireless LLC in return for
unit membership interests.
  The
assets and liabilities contributed to NextWave on April 13, 2005, were recorded
at their carryover basis, which we believe approximated fair value, at that date
and include the assets and liabilities of CYGNUS at their respective book
values, including cash of $5.1 million, which were consolidated in accordance
with Financial Accounting Standards Board Interpretation No. 46 (Revised) (“FIN
46(R)”). A summary of the consolidated assets and liabilities contributed to us
on April 13, 2005 is as follows:
  (in
      thousands)Cash
                
                $
                555,099Prepaid
      expenses and other current assets
                
                
                1,240Property
      and equipment, net
                
                
                9,706Wireless
      spectrum licenses
                
                
                33,597Goodwill
                
                
                4,619Deposits
      and other noncurrent assets
                
                
                369Lease
      obligations for wireless spectrum licenses
                
                
                (16,107
                )Accrued
      lease liability
                
                
                (1,260
                )Accrued
      expenses and other current liabilities
                
                
                (1,120
                )Minority
      interest in variable interest entity
                
                
                (1,070
                )Accumulated
      deficit of variable interest entity
                
                
                3,206Total
      membership interests
                
                $
                588,279
 
 75
 
 Principles
of Consolidation and Strategic Investments
  Our
consolidated financial statements include the assets, liabilities and operating
results of our wholly-owned and majority-owned subsidiaries as of December 29,
2007 and December 30, 2006 and for the years then ended, and for the period from
April 13, 2005 (date of inception) through December 31, 2005. Our operating
results through January 2006 also include those of CYGNUS, of which we were the
primary beneficiary until February 2006, when we acquired all of the remaining
ownership interests of the entity and it became a wholly-owned subsidiary.
Minority interest principally represents minority shareholders’ proportionate
share of the net equity in our consolidated subsidiary, Inquam Broadband Holding
(“Inquam Broadband”). All significant intercompany accounts and transactions
have been eliminated in consolidation.
  The
equity method of accounting is used for our October 2005 investment in preferred
stock of Hughes Systique Corporation, an early stage software development
services company. NextWave’s share in the income or loss is determined by
applying the equity method of accounting using the
“hypothetical-liquidation-at-book-value” method. Under the
hypothetical-liquidation-at-book-value method, the investor’s share of earnings
or losses is determined based on changes in the investor’s claim in the book
value of the investee. Additionally, the carrying value of investments accounted
for using the equity method of accounting is adjusted downward to reflect any
other-than-temporary declines in value. NextWave’s share of the losses of Hughes
Systique of $1.4 million, $1.5 million and $0.2 million for the years ended
December 29, 2007 and December 30, 2006, and the period from inception (April
13, 2005) to December 31, 2005, respectively, are included in engineering,
research and development expenses in the accompanying consolidated statements of
operations.
  Hughes
Systique also provides us with engineering consulting services under an
agreement whereby we have committed to use the services of 50 engineers at
Hughes Systique through June 2009.  Engineering consulting expenses
totaled $1.5 million and $0.2 million during the years ended December 29, 2007
and December 30, 2006.  No expenses were incurred during the period
from inception (April 13, 2005) to December 31, 2005.
  In
February 2008, we executed a loan agreement with Hughes Systique for 6% senior
secured convertible notes, whereby we committed to make available up to $1.5
million in funding.  The commitment expires in February 2011 and all
principal and interest is due three years from the date of the advance. At the
maturity date or upon a default event, we have the option to convert any unpaid
amounts into shares of preferred stock of Hughes Systique.  The
carrying value of this investment, was $1.5 million and $2.8 million at December
29, 2007 and December 30, 2006, respectively, and is reported in other
noncurrent assets in the accompanying consolidated balance sheets. These amounts
combined with the funds made available under the loan agreement of $1.5 million,
represent our maximum remaining exposure to a loss.
  Fiscal
Year End
  Effective
January 1, 2006, we changed our fiscal year end and quarterly reporting periods
from quarterly calendar periods ending on December 31, to a 52-53 week fiscal
year ending on the Saturday nearest to December 31 of the current calendar year
or the following calendar year. Normally, each fiscal year consists of 52 weeks,
but every five or six years the fiscal year consists of 53 weeks. Fiscal years
2007 and 2006 were 52-week years ending on December 29, 2007 and December 30,
2006, respectively, and the first 53-week year will occur in 2009.
  Use
of Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
  Revenues,
Cost of Revenues and Deferred Contract Costs
  We derive
revenues primarily from contracts to provide embedded multimedia software
products for mobile devices and related royalties through our PacketVideo
subsidiary.  In 2007, we also began to derive revenues from sales of
wireless broadband and mobile broadcast network products and services by
our newly acquired subsidiaries, IPWireless and GO Networks. The wireless
broadband and mobile broadcast network products and services sold by
IPWireless and GO Networks generally include embedded software.  We
also recognize revenue from customer subscriptions for the WiMAX network
operated by our WiMax Telecom subsidiary.
  For
arrangements that do not contain software or embedded software that is
incidental to the arrangement, we recognize revenue in accordance with the basic
principles in Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition, when
persuasive evidence of an arrangement exists, delivery has occurred, the fee is
fixed or determinable and collectibility is reasonably assured.
  76
  For
software arrangements, or in cases where the software is considered more than
incidental and is essential to the functionality of the hardware or the
infrastructure products, revenue is recognized pursuant to American Institute of
Certified Public Accountants (“AICPA”) Statement of Position ("SOP") No. 97-2,
Software Revenue
Recognition, SOP No. 98-9, A Modification of SOP 97-2
Software Revenue
Recognition with
Respect to Certain Transactions and Emerging Issues Task Force (“EITF”)
Issue No. 03-5, Applicability
of SOP 97-2 to Non-Software Deliverables in an Arrangement Containing
More-Than-Incidental Software. We also consider the provisions of SOP No.
81-1, Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.
  We
evaluate each deliverable in the arrangement to determine whether it represents
a separate unit of accounting. If objective and reliable evidence of fair value
exists (i.e. vendor specific objective evidence or “VSOE”) for all units of
accounting in the arrangement, revenue is allocated to each unit of accounting
or element based on those relative fair values. If VSOE of fair value exists for
all undelivered elements, but not for delivered elements, the residual method
would be used to allocate the arrangement consideration.
  To date,
we have not been able to establish VSOE for any of the elements included in our
revenue arrangements, as the software and hardware products or services have not
yet been sold separately, nor has a standard price list been established. As a
result, once the software or technology is delivered and the only undelivered
element is services, the entire non-contingent contract value is recognized
ratably over the remaining service period. Costs directly attributable to
providing these services are also deferred and amortized over the remaining
service period of the respective revenues.
  For
arrangements in which customers pay one contracted amount for multiple products
and services, or a combination of products and services, we also consider EITF
Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. Our software arrangements can
include a software or technology license, non-recurring engineering (“NRE”)
services, and post contract support (“PCS”).
  If
elements cannot be treated as separate units of accounting under EITF No. 00-21,
they are combined into a single unit of accounting and the associated revenue is
deferred until all combined elements have been delivered or, until there is only
one remaining element to be delivered. Services sold separately are generally
billed on a time and materials basis at agreed-upon billing rates, and revenue
is recognized as the services are performed.
  We earn
royalty revenues on licensed embedded multimedia products sold by our licensees.
Generally, royalties are paid by licensees on a per unit or contingent usage
basis. The licensees generally report and pay the royalty in the quarter
subsequent to the period of delivery or usage. We recognize royalty revenues
based on royalties reported by licensees.
  If we
receive non-refundable advanced payments from licensees that are allocable to
future contracts periods or could be creditable against other obligations of the
licensee to us, the recognition of the related revenue is deferred until such
future periods or until such creditable obligations lapse.
  When
royalty arrangements also provide for ongoing PCS that does not meet the
criteria to be accrued on delivery of the software, the royalty is recognized
ratably from the date the royalty report is received through the stated
remaining term of the PCS arrangement. In limited situations, we have determined
that PCS revenue can be recognized upon delivery of the software because the
obligation to provide PCS is for one year or less, the estimated cost of
providing the PCS during the arrangement is insignificant and unspecified
upgrades or enhancements offered for the particular PCS arrangement historically
has been and are expected to continue to be minimal and infrequently provided.
In these instances, we have accrued all the estimated costs of providing the
services, which to date have been insignificant.
  Arrangements
generally do not allow for product returns and we have no history of product
returns. Accordingly, no allowance for returns has been provided. In instances
where we have noted extended payment terms revenue is recognized in the period
the payment becomes due. If an arrangement includes specified upgrade rights,
revenue is deferred until the specified upgrade has been delivered.
  The
timing and amount of revenue recognition depends upon a variety of factors,
including the specific terms of each arrangement and the nature of our
deliverables and obligations. Determination of the appropriate amount of revenue
recognized involves judgments and estimates that our management believes are
reasonable.
  Warranty
Obligations
  Our
products typically carry a one-year hardware warranty.  We establish
reserves for estimated product warranty costs at the time revenue is recognized
based upon our historical warranty experience and any known product warranty
issues.
  77
  Sales
Taxes Collected
  Sales
taxes collected from customers and remitted to various governmental agencies are
excluded from revenues in our consolidated statement of operations.
  Shipping
Revenues and Costs
  Product
shipping costs billed to our customers are included in hardware revenues in the
accompanying consolidated statements of operations. The costs of shipping
products to our customers are expensed as incurred and are included in cost of
revenue in our consolidated statements of operations.
  Engineering,
Research and Development
  Engineering,
research and development costs are expensed as incurred, except for burdened
direct costs associated with deferred revenue from contract engineering services
performed by NextWave.
  We
account for research and development costs in accordance with several accounting
pronouncements, including Statement of Financial Accounting Standards (“SFAS”)
No. 2, Accounting for Research
and Development Costs, and SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed. SFAS No. 86 specifies
that costs incurred internally in researching and developing a software product
should be charged to expense until technological feasibility has been
established for the product. Once technological feasibility is established, all
software costs should be capitalized until the product is available for general
release to customers. Judgment is required in determining when technological
feasibility of a product is established. As a result of the manner in which we
develop software, technological feasibility is often reached only when a working
model of the software is completed and has been confirmed by testing, which is
generally shortly before the products are available for general release to
customers. Through December 29, 2007, costs incurred after technological
feasibility is established have been insignificant, and accordingly, we have
expensed all research and development costs when incurred.
  Business
Realignment Costs
  Business
realignment costs for the period from inception (April 13, 2005) to December 31,
2005 were $13.0 million and include non-cash impairment costs of $5.9 million
for certain hardware and service costs deemed to have no value in consideration
of the then current technology and marketing trial plans in Las Vegas, Nevada.
The impairment loss recognized was equal to the carrying value of impaired
assets. Additionally, upon emergence from bankruptcy, we assumed certain future
purchasing obligations regarding the procurement of network services, up to a
contract value of $30.0 million, which had a termination liability equal to $9.0
million, less 30% of the contract value utilized subsequent to emergence and
prior to termination. In October 2005, upon completion of a business review of
our planned market trial plans in Las Vegas, Nevada and other markets, we
determined that we could not reasonably foresee meeting our minimum purchase
obligations under this agreement. Therefore, an accruable event was deemed to
have occurred and a $7.1 million impairment loss was recognized in October 2005.
During 2006, this reserve was reversed as a result of a contract renegotiation
reducing the contract value to $10.0 million and extending the term of the
agreement to 2016. We are presently contracting certain network services with
this vendor and believe that we will continue to fulfill our obligation under
the terms of the amended contract.
  Income
Taxes
  We
adopted Financial Accounting Standards Board ("FASB") Interpretation (“FIN”) No.
48, Accounting for Uncertainty
in Income Taxes, effective in 2007. FIN No. 48 prescribes a recognition
threshold and measurement standard for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN
No. 48 requires that we determine whether the benefits of our tax positions are
more likely than not of being sustained upon audit based on the technical merits
of the tax position. The initial application of FIN No. 48 to our tax positions
had no impact on stockholders’ equity.  We did not record a
cumulative effect adjustment related to the adoption of FIN No.
48.  We did not have any unrecognized tax benefits as of December 29,
2007.
  Accumulated
Other Comprehensive Income (Loss)
  Accumulated
other comprehensive income (loss) includes unrealized gains and losses on
available-for-sale marketable securities and foreign currency translation
adjustments that are excluded from the consolidated statements of operations and
are reported as a separate component in stockholders’/members’
equity.
 
 Accumulated other comprehensive income
(loss) consists of the following:
  (in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006Cumulative
      foreign currency translation adjustments
                
                $
                12,845
                
                
                $
                —Cumulative
      unrealized losses on marketable securities
                
                
                (9
                )
                
                
                (357
                )$
                12,836
                
                
                $
                (357
                )
 
 78
  Net
Loss Per Common Share, Pro Forma Net Loss and Pro Forma Net Loss Per Common
Share Information
  Basic and
diluted net loss per common share for the year ended December 29, 2007 is
computed by dividing net loss applicable to common shares by the weighted
average number of common shares outstanding during the year, without
consideration of common stock equivalents.  Basic and diluted net loss
per common share for the year ended December 30, 2006 is computed by dividing
net loss for the year by the weighted average number of membership units
outstanding prior to the Corporate Conversion Merger, on a converted basis as if
the Corporate Conversion Merger occurred on January 1, 2006, combined with the
weighted average number of shares of common stock outstanding after the
Corporate Conversion Merger, without consideration of common stock
equivalents.
  The pro
forma basic and diluted loss per share for the period from inception (April 13,
2005) to December 31, 2005 is computed by dividing the net loss for the period
by the weighted average number of shares of common stock outstanding during the
period as if the Corporate Conversion Merger occurred at April 13, 2005. The pro
forma net loss assumes that the Corporate Conversion Merger occurred as of the
beginning of the periods presented and that we were a taxable corporation from
the beginning of those periods.
  The
computations for basic and diluted loss per common share and pro forma basic and
diluted loss per common share are as follows:
  Years
      Ended
                
                
                (Pro
      Forma)
                  Inception
                  (April
      13, 2005) to(in
      thousands, except per share data)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Net
      loss
                
                $
                (320,110
                )
                
                $
                (105,020
                )
                
                $
                (45,952
                )Net
      loss applicable to common shares
                
                $
                (341,130
                )
                
                $
                (105,020
                )
                
                $
                (45,952
                )Basic
      and diluted loss per common share
                
                $
                (3.81
                )
                
                $
                (1.28
                )Pro
      forma basic and diluted loss per common share
                
                
                
                
                
                
                
                
                
                $
                (0.56
                )Weighted
      average shares used in per share calculation
                
                
                89,441
                
                
                
                81,841
                
                
                
                —Pro
      forma weighted average shares used in per share
calculation
                
                
                —
                
                
                
                —
                
                
                
                81,445
 
 The
following securities that could potentially dilute earnings per share in the
future are not included in the determination of diluted loss per share as they
are antidilutive.  The share amounts are determined using a weighted
average of the shares outstanding during the respective periods and assume that
December 29, 2007 was the end of the contingency period for any contingently
issuable shares in accordance with SFAS No. 128, Earnings per
Share.
  Years
      Ended
                
                
                (Pro
      Forma)
                  Inception
                  (April
      13, 2005) to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Series
      A Senior Convertible Preferred Stock
                
                
                24,928
                
                
                
                —
                
                
                
                —Outstanding
      stock options
                
                
                16,619
                
                
                
                9,209
                
                
                
                —Common
      stock warrants
                
                
                2,500
                
                
                
                2,313
                
                
                
                —Contingently
      issuable shares under advisory contract
                
                
                833
                
                
                
                833
                
                
                
                366Restricted
      stock
                
                
                210
                
                
                
                149
                
                
                
                —Pro
      forma outstanding stock options
                
                
                —
                
                
                
                —
                
                
                
                5,934Pro
      forma common stock warrants
                
                
                —
                
                
                
                —
                
                
                
                220
 
 In
addition to the securities listed above, we may be required to issue shares of
our common stock in payment of additional purchase consideration due in
connection with our acquisitions of IPWireless and GO Networks (Note
2).  We may also be required to issue shares of common stock in
payment of bonuses due under the IPWireless Employee Stock Bonus Plan and the GO
Networks Employee Stock Bonus Plan (Note 9).
  Cash
and Cash Equivalents, Marketable Securities and Restricted Cash
  We
consider all highly liquid investments with original maturities of three months
or less to be cash equivalents. Cash equivalents at December 29, 2007 and
December 30, 2006 consisted primarily of money market funds. The carrying
amounts approximate fair value due to the short maturities of these
instruments.
  79
  Restricted
cash at December 29, 2007 and December 30, 2006 represents $75.0 million in a
restricted collateral account which is required to be maintained at all times
while the 7% Senior Secured Notes remain outstanding. The cash may be invested
in U.S. Treasury or agency obligations, municipal securities, commercial paper,
certificates of deposit or bankers’ acceptances, all with maturities less than
one year and with certain minimum credit ratings. The restricted cash is
reported as a non-current asset in the consolidated balance sheets at December
29, 2007 and December 30, 2006, as it secures our 7% Senior Secured Notes, which
are non-current. On March 10, 2008, the holders of the 7% Senior Secured Notes
agreed to release the restriction on the $75.0 million, subject to the payment
of a consent fee (Note 4).
  At
December 29, 2007 and December 30, 2006, all marketable securities have been
categorized as available-for-sale and are reported at fair value. Fair value is
determined using quoted market prices. Unrealized gains and losses are reported
in other comprehensive income (loss) in stockholders’/members’ equity, unless
the decline in value is deemed to be other-than-temporary, in which case the
loss is charged to expense. Realized gains and losses are included in interest
income in the consolidated statements of operations. The cost of securities sold
is based on the specific identification method.  There were no
significant gross realized gains or losses related to sales of marketable
securities for any of the periods presented.  Gross unrealized gains
(losses) are as follows:
  Gross
      Unrealized(in
      thousands)
                
                Amortized
                    Cost
                
                
                Gains
                
                
                Losses
                
                
                Fair
      ValueDecember
      29, 2007Auction
      rate securities
                
                $
                102,247
                
                
                $
                —
                
                
                $
                —
                
                
                $
                102,247Commercial
      paper
                
                
                84,946
                
                
                
                3
                
                
                
                (12
                )
                
                
                84,937Money
      market funds
                
                
                1,500
                
                
                
                —
                
                
                
                —
                
                
                
                1,500Total
      portfolio
                
                
                188,693
                
                
                
                3
                
                
                
                (12
                )
                
                
                188,684Less
      restricted portion
                
                
                (75,000
                )
                
                
                —
                
                
                
                —
                
                
                
                (75,000
                )Total
      unrestricted short-term investments
                
                $
                113,693
                
                
                $
                3
                
                
                $
                (12
                )
                
                $
                113,684December
      30, 2006Auction
      rate securities
                
                $
                118,986
                
                
                $
                —
                
                
                $
                —
                
                
                $
                118,986Municipal
      securities
                
                
                58,456
                
                
                
                —
                
                
                
                (6
                )
                
                
                58,450U.S.
      Treasury and Agency obligations
                
                
                39,251
                
                
                
                —
                
                
                
                (200
                )
                
                
                39,051Corporate
      notes
                
                
                25,845
                
                
                
                —
                
                
                
                (151
                )
                
                
                25,694Money
      market funds
                
                
                500
                
                
                
                —
                
                
                
                —
                
                
                
                500Cash
                
                
                24
                
                
                
                —
                
                
                
                —
                
                
                
                24Total
      portfolio
                
                
                243,062
                
                
                
                —
                
                
                
                (357
                )
                
                
                242,705Less
      restricted portion
                
                
                (75,000
                )
                
                
                —
                
                
                
                —
                
                
                
                (75,000
                )Total
      unrestricted short-term investments
                
                $
                168,062
                
                
                $
                —
                
                
                $
                (357
                )
                
                $
                167,705
 
 Contractual
maturities for all marketable securities held at December 29, 2007 are as
follows:
  (in
      thousands)
                
                Amortized
                    Cost
                
                
                Fair
      ValueDue
      in less than one year
                
                $
                86,446
                
                
                $
                86,437Due
      in greater than 10 years
                
                
                102,247
                
                
                
                102,247$
                188,693
                
                
                $
                188,684
 
 We
regularly monitor and evaluate the realizable value of our marketable
securities. When assessing marketable securities for other-than-temporary
declines in value, we consider such factors as, among other things, how
significant the decline in value is as a percentage of the original cost, how
long the market value of the security has been less than its original cost,
analyst recommendations, any news that has been released specific to the
investee and the outlook for the overall industry in which the investee
operates. If events and circumstances indicate that a decline in the value of
these assets has occurred and is other than temporary, we record a charge to
investment expense which is reported in interest income in the statements of
operations.
  Investments
considered to be temporarily impaired are as follows:
  Less
      than 12 months of
                    Temporary
      Impairment
                
                
                12
      months or More of
                    Temporary
      Impairment
                
                
                Total(dollars
      in thousands)
                
                Number
      of investments
                
                
                Fair
      Value
                
                
                Gross
                    Unrealized
                    Losses
                
                
                Fair
      Value
                
                
                Gross
                    Unrealized
                    Losses
                
                
                Fair
      Value
                
                
                Gross
                    Unrealized
                    LossesDecember
      29, 2007Commercial
      paper
                
                2
                
                
                $
                9,936
                
                
                $
                (12
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                9,936
                
                
                $
                (12
                )December
      30, 2006Municipal
      securities
                
                5
                
                
                $
                11,411
                
                
                $
                (6
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                11,411
                
                
                $
                (6
                )U.S.
      Treasury and Agency obligations
                
                3
                
                
                
                4,031
                
                
                
                (1
                )
                
                
                34,797
                
                
                
                (199
                )
                
                
                38,828
                
                
                
                (200
                )Corporate
      notes
                
                3
                
                
                
                —
                
                
                
                —
                
                
                
                25,141
                
                
                
                (151
                )
                
                
                25,141
                
                
                
                (151
                )Total
      portfolio
                
                
                
                
                $
                15,442
                
                
                $
                (7
                )
                
                $
                59,938
                
                
                $
                (350
                )
                
                $
                75,380
                
                
                $
                (357
                )
 
 80
  The
unrealized losses on these securities were primarily caused by recent increases
in market interest rates, and not the credit quality of the issuer, and we have
the ability and intent to hold these securities until a recovery of fair value,
which may be at maturity.  As a result, we do not believe these
securities to be other-than-temporarily impaired as of December 29,
2007
  As of
December 29, 2007, $102.2 million of our marketable securities were invested in
auction rate securities (“ARS”).  None of the auctions involving our
ARS holdings had failed as of December 29, 2007.
  Accounts
Receivable and Allowance for Doubtful Accounts
  Accounts
receivable are recorded according to contractual agreements. Credit terms for
payment of products and services are extended to customers in the normal course
of business and no collateral is required. The allowance for doubtful accounts
is estimated based on our historical losses, the existing economic conditions,
and the financial stability of our customers. Receivables are written-off in the
period that they are deemed uncollectible.  At December 29, 2007,
gross accounts receivable consisted of $14.5 million and $1.7 million in billed
and unbilled receivables, respectively.  At December 30, 2006, gross
accounts receivable consisted of $4.6 million and $0.8 million in billed and
unbilled receivables, respectively.
  Inventory
  Inventories
are stated at the lower of cost (first-in, first out) or market. We establish
allowances for estimated obsolete and unmarketable inventory based upon
assumptions about future market demand.  Lower of cost or market
adjustments reduce the carrying value of the related inventory and take into
considerations reduction in sales prices, excess inventory levels and obsolete
inventory. These adjustments are done on a part-by-part basis. Once established,
these adjustments are considered permanent and are not reversed until the
related inventory is sold or disposed of. Inventory consists of raw materials,
work-in-process and finished goods as follows:
  (in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006Raw
      materials
                
                $
                1,152
                
                
                $
                —Work
      in process
                
                
                89
                
                
                
                266Finished
      goods
                
                
                3,693
                
                
                
                —$
                4,934
                
                
                $
                266
   Property
and Equipment
  Property
and equipment is recorded at cost and depreciated using the straight-line method
over the estimated useful life. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the remaining term of the related
lease. Direct external costs of developing software for internal use are
capitalized through implementation of the software. Maintenance, repairs, and
minor renewals and betterments are charged to expense as incurred.
  81
  Property
and equipment, net, consists of the following:
  (dollars
      in thousands)
                
                Estimated
                    Useful
      Life
                    (in
      years)
                
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006Furniture
      and equipment
                
                2-10
                
                
                $
                33,940
                
                
                $
                13,626Purchased
      software
                
                2-3
                
                
                
                9,400
                
                
                
                7,296Building
      and improvements
                
                15
                
                
                
                6,401
                
                
                
                —Leasehold
      improvements
                
                1-15
                
                
                
                5,850
                
                
                
                2,358Land
                
                
                
                
                
                4,109
                
                
                
                —Construction
      in progress
                
                
                
                
                
                2,191
                
                
                
                84661,891
                
                
                
                24,126Less:
      Accumulated depreciation
                
                
                
                
                
                (17,509
                )
                
                
                (6,597
                )Total
      property and equipment, net
                
                
                
                
                $
                44,382
                
                
                $
                17,529
 
 Wireless
Spectrum Licenses, Goodwill and Other Intangible Assets
  We
capitalize as intangible assets wireless spectrum licenses that we acquire from
third parties or through government auctions.  For wireless
spectrum licenses purchased directly from third parties or through spectrum
auctions, the cost basis of the wireless spectrum asset includes the
purchase price paid for the license at the time of acquisition plus legal costs
incurred to acquire the license. For wireless spectrum licenses acquired through
a business combination or through an asset acquisition, the cost basis of the
wireless spectrum asset is determined through an allocation of the total
purchase price to the tangible and identifiable intangible assets and
liabilities of the acquired business or asset(s) and includes any deferred
tax liabilities determined in accordance with Emerging Issues Task Force
(“EITF”) Issue No. 98-11, Accounting for Acquired
Temporary Differences
in Certain Purchase Transactions That Are Not Accounted for as Business
Combinations. For leased wireless spectrum rights, the asset and related
liability are recorded at the net present value of future cash outflows using
our incremental borrowing rate at the time of acquisition.
  We have
determined that certain of our wireless spectrum licenses meet the definition of
indefinite-lived intangible assets under SFAS No. 142, Goodwill and Other Intangible
Assets, because the licenses are either perpetual or may be renewed
periodically for a nominal fee, provided that we continue to meet the service
and geographic coverage provisions. Moreover, we have determined that there are
currently no legal, regulatory, contractual, competitive, economic or other
factors that limit the useful lives of these wireless spectrum
licenses.
  Wireless
spectrum licenses for which we have acquired lease rights from third parties are
considered to have finite lives. The wireless license asset is then amortized
over the contractual life of the lease. We have also acquired the rights to
wireless spectrum licenses in Europe where the renewal terms are not yet well
established.  We amortize these assets on a straight-line basis
over the initial license period.  Amortization expense on wireless
spectrum licenses is charged to general and administrative
expense.
  Wireless
spectrum licenses, goodwill and other intangible assets consist of the
following:
  December
      29, 2007
                
                
                December
      30, 2006(dollars
      in thousands)
                
                Weighted
                    Average
                    Life
                    (in
      years)
                
                
                Gross
                    Carrying
                    Amount
                
                
                Accumulated
      Amortization
                
                
                Weighted
                    Average
                    Life
                    (in
      years)
                
                
                Gross
                    Carrying
                    Amount
                
                
                Accumulated
      AmortizationAmortized
      intangible assets:Leased
      wireless spectrum licenses
                
                
                14.9
                
                
                $
                122,102
                
                
                $
                12,366
                
                
                
                14.1
                
                
                $
                82,385
                
                
                $
                4,438Purchased
      technology
                
                
                7.0
                
                
                
                70,215
                
                
                
                13,767
                
                
                
                7.0
                
                
                
                9,614
                
                
                
                1,821Purchased
      customer base
                
                
                7.4
                
                
                
                14,620
                
                
                
                2,876
                
                
                
                8.0
                
                
                
                5,960
                
                
                
                1,044Purchased
      tradenames and trademarks
                
                
                6.0
                
                
                
                9,708
                
                
                
                1,250
                
                
                
                5.0
                
                
                
                110
                
                
                
                24Non-compete
      agreements
                
                
                3.6
                
                
                
                4,628
                
                
                
                2,667
                
                
                
                4.0
                
                
                
                2,800
                
                
                
                1,193Other
                
                
                7.0
                
                
                
                1,848
                
                
                
                475
                
                
                
                7.5
                
                
                
                1,892
                
                
                
                22811.2
                
                
                $
                223,121
                
                
                $
                33,401
                
                
                
                12.6
                
                
                $
                102,761
                
                
                $
                8,748Intangible
      assets not subject to amortization:Wireless
      spectrum licenses
                
                
                
                
                
                $
                524,145
                
                
                
                
                
                
                
                
                
                
                $
                450,051Goodwill
                
                
                
                
                
                
                171,056
                
                
                
                
                
                
                
                
                
                
                
                32,184Purchased
      tradenames and trademarks
                
                
                
                
                
                
                2,404
                
                
                
                
                
                
                
                
                
                
                
                2,504$
                697,605
                
                
                
                
                
                
                
                
                
                
                $
                484,739
  82
  In March
2007, we acquired all of the outstanding shares of common stock of 4253311
Canada Inc., a Canadian corporation, which resulted in the addition of $41.7
million of indefinite-lived wireless spectrum licenses. The assets of 4253311
Canada Inc. were comprised almost entirely of wireless spectrum and therefore
the acquisition was accounted for as an asset purchase rather than as the
purchase of a business based on guidance under EITF Issue No. 98-3,Determining Whether a Nonmonetary
Transaction Involves Receipt of Productive Assets or of a
Business.  The value assigned to the wireless spectrum includes
the cash purchase price of $26.0 million, closing costs of $0.2 million and
$15.5 million in associated deferred tax liabilities as determined in accordance
with EITF Issue No. 98-11.
  In July
2006, we acquired WCS Wireless, Inc., which resulted in the addition of $236.4
million of indefinite-lived wireless spectrum licenses. The assets of WCS
Wireless, Inc. were comprised almost entirely of wireless spectrum and therefore
the acquisition was accounted for as an asset purchase rather than as the
purchase of a business based on guidance under EITF Issue
No.  98-3.The value assigned to
the wireless spectrum includes the cash purchase price of $160.5 million, legal
costs of $0.1 million and $75.8 million in associated deferred tax liabilities
as determined in accordance with EITF 98-11. During the year ended December 30,
2006, we also acquired other licensed spectrum rights for $245.0 million in cash
and $4.0 million through the assumption of lease liabilities.
  During
the year ended December 29, 2007, our gross wireless spectrum assets increased
by $113.8 million, of which $46.0 million was acquired through business
acquisitions and $40.1 million was acquired directly for cash of $34.5 million
and future lease commitments of $5.6 million.  The remaining increase
was due to non-cash deferred tax adjustments under EITF Issue No. 98-11 of $15.5
million and the effects from foreign currency translation of $12.2
million.
  The
estimated aggregate amortization expense for amortized intangible assets as of
December 29, 2007 is expected to be $29.1 million, $26.4 million, $23.8 million,
$21.2 million, $21.3 million and $67.9 million during fiscal years 2008, 2009,
2010, 2011, 2012 and thereafter, respectively.
  Changes
in our goodwill are as follows:
  (in
      thousands)
                
                Balance
      at
                    Beginning
      of
                    Year
                
                
                Current
                    Year
                    Acquisitions
                
                
                Adjustments(1)
                
                
                Foreign
                    Currency
                    Translation
                    Effect
                
                
                Balance
      at
                    End
      of YearYear
      Ended December 29, 2007
                
                $
                32,184
                
                
                $
                139,072
                
                
                $
                (1,516
                )
                
                $
                1,316
                
                
                $
                171,056Year
      Ended December 30, 2006
                
                $
                24,782
                
                
                $
                7,776
                
                
                $
                (374
                )
                
                $
                —
                
                
                $
                32,184
 
 (1)
                Adjustments
      during the year ended December 29, 2007 resulted from adjustments to
      deferred tax assets acquired and liabilities assumed in prior year
      acquisitions. Adjustments during the year ended December 30, 2006 resulted
      from adjustments to liabilities assumed in prior year
      acquisitions
  Spectrum Clearing
Obligations
  We own
Advanced Wireless Services (“AWS”) spectrum that we acquired via the Federal
Communications Commission (“FCC”) Auction #66.  Our AWS spectrum
currently is used by U.S. federal government and/or incumbent commercial
licensees. FCC rules require winning bidders to avoid interfering with these
existing users or to clear the incumbent users from the spectrum through
specified relocation procedures. We have not incurred any spectrum clearing
costs to date.
 Valuation
of Goodwill and Indefinite-Lived Intangibles
  In
accordance with SFAS No. 142, we do not amortize goodwill and indefinite-lived
intangible assets. In lieu of amortization, we are required to perform an annual
review for impairment, or more frequently if impairment indicators arise.
Goodwill and indefinite-lived intangible assets are considered to be
impaired if we determine that their carrying values exceed their fair
values.
  We test
goodwill for impairment annually at a reporting unit level using a two-step
process. The first step of the impairment test involves comparing the fair
values of the applicable reporting units with their aggregate carrying values,
including goodwill. If the carrying amount of a reporting unit exceeds the
reporting unit’s fair value, we then perform the second step of the goodwill
impairment test to determine the amount of the impairment loss. The second step
of the goodwill impairment test involves comparing the implied fair value of the
affected reporting unit’s goodwill with the carrying value of that goodwill. If
the carrying amount of goodwill exceeds the implied fair value of that goodwill,
an impairment loss is recognized in an amount equal to that excess. We
determined that our reporting units, as that term is defined in SFAS No. 142,
are one level below our identified operating segments because discrete financial
information is available. At December 29, 2007, our goodwill resides in three
reporting units.
  83
  We test
indefinite-lived intangible assets, such as indefinite-lived wireless
spectrum licenses, at the unit of accounting level by making a
determination of the fair value of the intangible asset. If the fair value of
the intangible asset is less than its carrying value, an impairment loss is
recognized in an amount equal to the difference. We also evaluate the remaining
useful life of our intangible assets that are not subject to amortization on an
annual basis to determine whether events and circumstances continue to support
an indefinite useful life. If an intangible asset that is not being amortized is
subsequently determined to have a finite useful life, that asset is tested for
impairment. After recognition of the impairment, if any, the asset is amortized
prospectively over its estimated remaining useful life and accounted for in the
same manner as other intangible assets that are subject to
amortization.
  For our
goodwill and indefinite-lived intangible assets, excluding indefinite-lived
wireless spectrum licenses, we primarily utilize an income approach that
includes the discounted cash flow method to determine fair value.  The
discounted cash flow method determines fair value based on the present value of
projected cash flows over a specific projection period and a residual value
related to future cash flows beyond the projection period.  Both
values are discounted to reflect the degree of risk inherent in an investment in
the reporting unit and achieving the projected cash flows.  A weighted
average cost of capital is determined for each reporting unit to be used as the
discount rate.  The residual value is generally determined by applying
a constant terminal growth rate to the estimated net cash flows at the end of
the projection period.  Alternatively, the present value of the
residual value may be determined by applying a market multiple at the end of the
projection period.
  For our
indefinite-lived wireless spectrum licenses, we primarily utilize a market
approach which determines fair value based on observed prices paid for
equivalent licenses in the market.  There are established markets for
our wireless spectrum licenses which provide sufficient data upon which to
estimate fair value.  We also considered other factors, such as trends
in spectrum prices in general and evolving technology, consumer market and
regulatory issues, that may potentially affect the value of our
spectrum.  For purposes of performing our annual impairment assessment
of indefinite-lived wireless spectrum licenses, we have segregated our
indefinite lived intangible wireless spectrum licenses into five separate units
of accounting using the guidance provided by EITF Issue No. 02-7, Unit of Accounting for Testing of
Impairment of Indefinite-Lived Intangible Assets, based on the type of
spectrum and location.
  We
performed our annual impairment assessments for goodwill and indefinite-lived
intangible assets in October 2007 and 2006, and concluded that our goodwill and
indefinite-lived intangible assets were not impaired.
  Impairment of Long-Lived
Assets
  In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, we review long-lived assets to be held and
used, including acquired intangible assets subject to amortization and property
and equipment, for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be fully recoverable.
Conditions that would necessitate an impairment assessment include a significant
decline in the market price of an asset or asset group, a significant adverse
change in the extent or manner in which an asset or asset group is being used,
the loss of legal ownership or title to the asset, significant negative industry
or economic trends or the presence of other indicators that would indicate that
the carrying amount of an asset or asset group is not recoverable.
  A
long-lived asset is considered to be impaired if the estimated undiscounted
future cash flows resulting from the use of the asset and its eventual
disposition are not sufficient to recover the carrying value of the asset. In
order to estimate an asset’s undiscounted future cash flows, we utilize our
internal forecast of our future operating results and cash flows, our strategic
business plans and anticipated future economic and market conditions. There are
inherent estimates and assumptions underlying this information and management’s
judgment is required in the application of this information to the determination
of an asset’s undiscounted future cash flows. No assurance can be given that the
underlying estimates and assumptions utilized in our determination of an asset’s
undiscounted future cash flows will materialize as anticipated.
  During
2007 and 2006, we did not identify any conditions that would necessitate an
impairment assessment of our long-lived assets.  For the period from
inception (April 13, 2005) to December 30, 2006, business realignment costs in
the consolidated statements of operations includes impairment losses of $5.9
million. The impairment loss recognized included the carrying value of impaired
assets and loss contracts.
  Deferred
Financing Costs, Debt Discount and Debt-Related Warrants
  Costs
incurred to issue debt are deferred and included in other noncurrent assets in
the accompanying consolidated balance sheets.  We amortize debt
issuance costs over the expected term of the related debt using the effective
interest method. Debt discounts and the fair value of any warrants issued in
conjunction with the debt are recorded as a reduction to the debt balance and
accreted over the expected term of the debt to interest expense using the
effective interest method.
  84
  Accrued
Expenses
  Accrued
expenses consist of the following:
  (in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006Accrued
      compensation and related expenses
                
                $
                23,845
                
                
                $
                9,417Accrued
      consulting and purchase commitments
                
                
                17,716
                
                
                
                4,870Accrued
      contract losses
                
                
                14,220
                
                
                
                528Accrued
      interest
                
                
                11,151
                
                
                
                11,178Accrued
      professional fees
                
                
                3,896
                
                
                
                3,746Accrued
      acquisition consideration and related costs
                
                
                3,568
                
                
                
                —Accrued
      equity distributions payable
                
                
                —
                
                
                
                2,034Other
                
                
                1,741
                
                
                
                1,764Total
      accrued expenses
                
                $
                76,137
                
                
                $
                33,537
 
 Redeemable
Series A Senior Convertible Preferred Stock
  Costs
incurred to issue the Series A Preferred Stock are deferred and recorded as a
reduction to the reported balance of the preferred stock in the consolidated
balance sheet. The costs are accreted using the effective interest method over
the period from the date of issuance through March 28, 2017, the stated
redemption date. In accordance with EITF Issue No. D-98, Classification and Measurement of
Redeemable Securities, the resulting increases from the accretion of the
issue costs and accrued dividends on the preferred stock are affected by charges
against retained earnings or, in the absence of retained earnings, by charges
against paid-in capital. This increases loss applicable to common stockholders
in the calculation of loss per common share.
  Our
obligation to pay contingent cash dividends and cash premiums upon redemption or
liquidation of the preferred shares constitute embedded derivatives under SFAS
No. 133, Accounting for
Derivative Instruments and Hedging Activities. The initial estimated fair
values of the respective embedded derivative were recorded as long-term
liabilities in the consolidated balance sheet, reducing the reported value of
the Series A Preferred Stock. In accordance with SFAS No. 133, these derivatives
will be measured at fair value at each reporting date and any subsequent changes
in the estimated fair value of the embedded derivative are recorded as a charge
to other income (expense) in the accompanying consolidated statements of
operations.
  Share-Based
Compensation
  We
adopted SFAS No. 123(R), Share-Based Payments, on
January 1, 2006.  SFAS No. 123(R) requires the recognition of the fair
value of share-based compensation in results of operations. We recognize
share-based compensation expense over the requisite service period of the
individual grants, which generally equals the vesting period. Compensation
expense for awards with graded vesting is recognized on a straight-line basis
with adjustments to at least equal the measured cost of the vested tranches.
Prior to January 1, 2006, we accounted for employee equity awards using
Accounting Policies Board Opinion No. 25, Accounting for Stock Issued to
Employees (“APB No. 25”) and related interpretations in accounting for
share-based compensation, and provided the pro forma disclosure information
required under SFAS No. 123, Accounting for Stock-Based
Compensation.
  We
adopted the provisions of SFAS No. 123(R) using the prospective transition
method, whereby we continue to account for nonvested equity awards to employees
outstanding at December 31, 2005 using APB No. 25, and apply SFAS No. 123(R) to
all awards granted or modified after that date. In accordance with the
prospective method transition rules of SFAS No. 123(R), we no longer provide the
pro forma disclosures required by SFAS No. 123 as SFAS No. 123(R) precludes
companies that used the minimum value method for pro forma disclosure from
continuing to provide those pro forma disclosures for outstanding awards
accounted for under the intrinsic value method of APB No. 25.
  Share-based
compensation expense related to non-employee options, warrants and restricted
shares is measured using the fair value method as prescribed by SFAS No. 123(R)
and EITF Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling Goods or Services.
  Litigation
  We are
currently involved in certain legal proceedings. Although there can be no
assurance that unfavorable outcomes in any of these matters would not have a
material adverse effect on operating results, liquidity or financial position,
we believe the claims are without merit and intends to vigorously defend the
actions. We estimate the range of liability related to pending litigation where
the amount and range of loss can be estimated. We record our best estimate of a
loss when the loss is considered probable. Where a liability is probable and
there is a range of estimated loss with no best estimate in the range, we record
the minimum estimated liability related to the claim. As additional information
becomes available, we assess the potential liability related to our pending
litigation and revise our estimates. As of December 29, 2007, we have not
recorded any accrual for contingent liabilities associated with our legal
proceedings based on our belief that a liability, while possible, is not
probable. Further, any possible range of loss cannot be estimated at this time.
Revisions to our estimate of the potential liability could materially impact
results of operations.
  85
  Foreign
Currency
  Monetary
assets and liabilities of our foreign subsidiaries whose functional currency is
the U.S. dollar are remeasured into U.S. dollars at the exchange rate in effect
at the balance sheet date. Revenues, expenses, gains and losses associated with
monetary assets and liabilities are translated at the rates of exchange that
approximate the rates in effect at the transaction date. Non-monetary assets and
liabilities and related elements of revenues, expenses, gains and losses are
remeasured at historical exchange rates. Resulting exchange gains or losses are
recognized in the consolidated statements of operations in other income and
expense, net.
  Assets and liabilities of our foreign
subsidiaries whose functional currency is other than the U.S. dollar are
translated into U.S. dollars at exchange rates in effect as of the balance sheet
date and monthly results of operations are translated into U.S. dollars at the
average rates of exchange for that month.  Gains or losses resulting
from these foreign currency translations are recorded in accumulated other
comprehensive income (loss) in the consolidated balance sheets.
  Net
foreign currency exchange losses included in our consolidated statements of
operations totaled $0.2 million, $0.1 million and $20,000 for the years ended
December 29, 2007, December 30, 2006 and for the period from inception (April
13, 2005) to December 31, 2005, respectively.
  Segments
of a Business Enterprise
  SFAS No.
131, Disclosures about
Segments of an Enterprise and Related Information, provides public
business enterprises with standards for reporting information about operating
segments in annual and interim financial reports, including disclosures of
profit or loss and total assets for each reportable segment. During the fourth
quarter of 2007, after a series of significant acquisitions, we reorganized our
businesses into four reportable segments on the basis of products, services and
strategic initiatives: Semiconductors, Multimedia, Networks and Strategic
Initiatives.  Prior to the fourth quarter of 2007, we operated in one
reportable segment, a wireless technology business focused on developing,
acquiring and marketing next-generation mobile broadband and wireless multimedia
products and technologies.
  Guarantees
  We
account for guarantees in accordance with Financial Accounting Standards Board
Interpretation (“FASB”) Interpretation (“FIN”) No. 45, Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. FIN No. 45 requires that a guarantor
recognize, at the inception of a guarantee, a liability for the fair value of
certain guarantees and requires certain disclosures to be made by a guarantor
about its obligations under certain guarantees that it has issued.
  Recent
Accounting Pronouncements
  In
December 2007, the FASB issued SFAS No. 141R, Business Combinations.
SFAS 141R establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. SFAS No. 141R also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statement to evaluate the nature and
financial effects of the business combination. SFAS 141R is effective for
financial statements issued for fiscal years beginning after December 15,
2008. We expect SFAS No. 141R will have an impact on our consolidated
financial statements when effective, but the nature and magnitude of the
specific effects will depend upon the nature, terms and size of the acquisitions
we consummate after the effective date. We are still assessing the impact of
this standard on our future consolidated financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling interests in
Consolidated Financial Statements – and amendment of ARB No. 51. The
provisions of SFAS No. 160 establish accounting and reporting standards for the
noncontrolling interests of a subsidiary.  The provisions of SFAS No. 160
are effective for us in fiscal year 2009 and will be applied prospectively,
except for the presentation of the noncontrolling interests, which for all
periods would be reclassified to equity in the consolidated balance sheet and
adjusted out of net income in the consolidated statements of operations. We are
currently evaluating the impact of the provisions of SFAS No. 160 on our future
consolidated financial statements.
 
 In June
2007 the FASB ratified EITF No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services to Be Used in Future Research and Development
Activities. EITF 07-3 requires non-refundable advance payments for
goods and services to be used in future research and development activities to
be recorded as an asset and the payments to be expensed when the research and
development activities are performed. EITF 07-3 is effective for fiscal
years beginning after December 15, 2007. This standard is not expected to
have a material impact on our future consolidated financial
statements.
 86
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.  SFAS No. 159 permits
entities to choose to measure certain financial assets and liabilities and other
eligible items at fair value, which are not otherwise currently required to be
measured at fair value. Under SFAS No. 159, the decision to measure items at
fair value is made at specified election dates on an irrevocable
instrument-by-instrument basis. Entities electing the fair value option would be
required to recognize changes in fair value in earnings and to expense upfront
cost and fees associated with the item for which the fair value option is
elected. Entities electing the fair value option are required to distinguish on
the face of the statement of financial position, the fair value of assets and
liabilities for which the fair value option has been elected and similar assets
and liabilities measured using another measurement attribute. If elected, SFAS
No. 159 is effective for our 2008 fiscal year. We are currently evaluating
whether or not to elect the option provided for in this standard.
  In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements.  SFAS No. 157 clarifies the principle that fair
value should be based on the assumptions market participants would use when
pricing an asset or liability and establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. Under the
standard, fair value measurements would be separately disclosed by level within
the fair value hierarchy. SFAS No. 157 is effective for our fiscal year that
begins on December 30, 2007. We are in the process of evaluating the impact of
the adoption of SFAS No. 157.
  Reclassifications
  Certain
amounts in the previously reported financial statements have been reclassified
to conform to the current period presentation.
  2.
                Business
      Combinations
  During
the two years ended December 29, 2007 and for the period from inception (April
13, 2005) to December 31, 2005, we completed the following significant business
combinations which were accounted for in accordance with SFAS No. 141, Business
Combinations:
  Company
      Acquired
                
                Date
      Acquired
                
                BusinessWebsky
      Argentina SA (“Websky”)
                
                October
      2007
                
                Developer
      and operator of wireless broadband services over licensed frequencies in
      ArgentinaWiMax
      Telecom AG
                
                July
      2007
                
                Developer
      and operator of WiMAX networks and wireless broadband spectrum concessions
      in Austria, Slovakia and CroatiaIPWireless,
      Inc.
                
                May
      2007
                
                Developer
      and supplier of TD-CDMA network equipment and subscriber
      terminalsGO
      Networks, Inc.
                
                February
      2007
                
                Developer
      of advanced mobile Wi-Fi network solutions for service
      providers.SDC
      Secure Digital Container AG (“SDC”)
                
                January
      2007
                
                Developer
      of Java music clients for mobile phonesCYGNUS
      Communications, Inc.
                
                February
      2006
                
                Developer
      of hardware products for wireless broadband servicesPacketVideo
      Corporation
                
                July
      2005
                
                Provider
      of multimedia software for mobile handsets and other converged
      devices
 
 In
addition to the business combinations listed above, we also completed two
individually immaterial business combinations in each of 2007 and
2006.  At December 29, 2007, we owned 100% of the voting interests of
all of the acquired companies listed above.
  In
addition to the acquisitions listed above, in January 2006, we acquired 51% of
the equity securities of newly formed Inquam Broadband for $1.6 million. The
primary reason for the investment is to provide us with an entry into the
wireless broadband telecommunications market in Germany and
Switzerland.  In October 2007, we acquired the remaining interest in
Inquam Broadband for a cash payment of $0.9 million and the assignment to the
selling shareholder of a $2.1 million receivable owned by Inquam
Broadband.  Additionally, in connection with the acquisition, Inquam
Broadband agreed to provide certain project management and support services with
an implied total value of $0.6 million to a subsidiary of the selling
shareholder for a period of up to two years.
  87
  Contemporaneously
with our acquisition of a 65.38% ownership interest in WiMax Telecom in July
2007, we were granted an exclusive and irrevocable call option and the remaining
minority shareholders were granted an exclusive and irrevocable put option for
the shares held by the remaining minority shareholders for 3.6 million
Euros.  We exercised our call option in December 2007 for $5.2
million.  Based on the guidance provided by EITF Issue No. 00-4, Majority Owner’s Accounting for a
Transaction in the Shares of Consolidated Subsidiary and a Derivative Indexed to
the Minority Interest in That Subsidiary, we treated the WiMax Telecom
put/call option as a derivative contract that is viewed on a combined basis with
the minority interest and accounted for the derivative as a financing of our
acquisition of the minority interest in WiMax Telecom.  Accordingly,
we consolidated 100% of WiMax Telecom from the acquisition date.  At
acquisition, we recognized a liability for the fair value of the derivative of
$4.5 million which was included in the determination of the purchase price of
WiMax Telecom.  We accreted $0.3 million in imputed interest on the
liability to interest expense during the year ended December 29,
2007.
  Our
primary reasons for entering into these acquisitions were to accelerate our
time-to-market and growth plans for embedded multimedia software products and
services, expand our product portfolio to incorporate WiMAX and/or Wi-Fi
technologies, and complement our WiMAX product line with wide-area and
local-area wireless broadband services using stand-alone or integrated
Wi-Fi/WiMAX solutions that utilize both licensed and license-exempt
spectrum.
  The
consolidated financial statements include the operating results of each business
from their respective dates of acquisition, except for CYGNUS and its
subsidiaries which were already included in the consolidated financial
statements from the date of our inception (April 13, 2005) through the date of
acquisition in February 2006 as we were deemed to be the primary beneficiary
during that time in accordance with Financial Interpretation Number (“FIN”) No.
46(R), Consolidation of
Variable Interest Entities.
  Purchase
Price
  The total
purchase price of our acquisitions was as follows:
  (in
      thousands)
                
                IPWireless
                
                
                WiMax
                    Telecom
                
                
                SDC
                
                
                GO
                    Networks
                
                
                Websky
                
                
                Other
                    Acquisitions
                
                
                Total2007
      AcquisitionsCash,
      including closing costs
                
                $
                28,804
                
                
                $
                14,321
                
                
                $
                19,110
                
                
                $
                15,795
                
                
                $
                13,229
                
                
                $
                5,715
                
                
                $
                96,974Fair
      value of common stock issued
                
                
                74,522
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                74,522Accrual
      for contingent consideration
                
                
                51,594
                
                
                
                —
                
                
                
                —
                
                
                
                223
                
                
                
                1,875
                
                
                
                —
                
                
                
                53,692Debt
      assumed and paid at closing
                
                
                —
                
                
                
                5,825
                
                
                
                —
                
                
                
                1,338
                
                
                
                —
                
                
                
                259
                
                
                
                7,422Less
      cash acquired
                
                
                (3,768
                )
                
                
                (676
                )
                
                
                (1,340
                )
                
                
                (462
                )
                
                
                (13
                )
                
                
                (149
                )
                
                
                (6,408
                )Total
      purchase price
                
                $
                151,152
                
                
                $
                19,470
                
                
                $
                17,770
                
                
                $
                16,894
                
                
                $
                15,091
                
                
                $
                5,825
                
                
                $
                226,2022006
      Acquisitions
                
                CYGNUS
                
                
                Immaterial
      Acquisitions
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                TotalCash,
      including closing costs
                
                $
                18,198
                
                
                $
                9,039
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                27,237Conversion
      of convertible preferred stock into common stock
                
                
                1,884
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,884Membership
      interest issued
                
                
                1,558
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,558Fair
      value of stock options exchanged
                
                
                904
                
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                904Debt
      assumed
                
                
                —
                
                
                
                320
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                320Accumulated
      CYGNUS losses while consolidated in accordance with FIN
    46(R)
                
                
                (8,550
                )
                
                
                —
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (8,550
                )Less
      cash acquired
                
                
                (4,190
                )
                
                
                (49
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,239
                )Total
      purchase price
                
                $
                9,804
                
                
                $
                9,310
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                19,1142005
      Acquisition
                
                PacketVideo
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                TotalCash,
      including closing costs
                
                $
                47,033
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                47,033Less
      cash acquired
                
                
                (337
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (337
                )Total
      purchase price
                
                $
                46,696
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                46,696
 
  The fair
value of common stock issued was based upon the actual number of shares issued
to the IPWireless shareholders using the average closing trading price of our
common stock on Nasdaq during a five-day trading period beginning two trading
days prior to the announcement of the acquisition on April 9, 2007. Of the
initial purchase consideration paid in our acquisition of IPWireless, $5.0
million was deposited into an escrow account to settle any potential loss
contingencies existing at acquisition. We must submit any claims for
indemnifiable losses, as defined in the acquisition agreement, to escrow by May
11, 2008, the first anniversary of the acquisition date.
  88
  Purchase Price Allocation
  Under the
purchase method of accounting, the purchase prices were allocated to the assets
acquired and liabilities assumed based upon their estimated fair values at the
respective dates of acquisition in accordance with SFAS No. 141 as follows for
our acquisitions:
  (in
      thousands)
                
                2007
                    Acquisitions(1)
                
                
                2006
                    CYGNUS
                
                
                2005
                    PacketVideoAccounts
      receivable
                
                $
                14,671
                
                
                $
                196
                
                
                $
                3,498Inventory
                
                
                5,792
                
                
                
                —
                
                
                
                —Deferred
      contract costs
                
                
                1,687
                
                
                
                —
                
                
                
                474Prepaid
      and other current assets
                
                
                3,195
                
                
                
                511
                
                
                
                792Property
      and equipment
                
                
                9,034
                
                
                
                704
                
                
                
                679Wireless
      spectrum licenses
                
                
                45,969
                
                
                
                —
                
                
                
                —Intangible
      assets
                
                
                76,516
                
                
                
                1,790
                
                
                
                19,500In-process
      research and development
                
                
                12,060
                
                
                
                1,890
                
                
                
                6,600Goodwill
                
                
                135,419
                
                
                
                5,066
                
                
                
                20,238Other
      noncurrent assets
                
                
                505
                
                
                
                1,039
                
                
                
                825Accounts
      payable and other current liabilities
                
                
                (41,070
                )
                
                
                (613
                )
                
                
                (3,047
                )Deferred
      revenue
                
                
                (13,449
                )
                
                
                —
                
                
                
                (2,343
                )Provision
      for loss contract
                
                
                (13,440
                )
                
                
                —
                
                
                
                —Long-term
      obligations and deferred credits
                
                
                (16,512
                )
                
                
                (779
                )
                
                
                (520
                )Total
      purchase price
                
                $
                220,377
                
                
                $
                9,804
                
                
                $
                46,696
  
 (1)
                Includes
      only the individually significant acquisitions listed in the purchase
      price table above.
  The
excess of the purchase price over the acquired net tangible assets of $39.7
million, plus $9.7 million attributed to associated deferred tax liabilities
under EITF Issue No. 98-11, for our acquisitions of WiMax Telecom and Websky in
2007 has been preliminarily allocated to wireless spectrum licenses and
purchased customer base intangible asset at December 29, 2007.  The
purchased intangible asset valuations for these two acquisitions are expected to
be completed during the second quarter of 2008. The related impact from value
assigned to in-process research and development costs or to amortization
expense, if any, will be adjusted on a prospective basis.
  In
connection with the acquisition of IPWireless, we recorded an accrual for
severance totaling $0.6 million for four IPWireless employees whose employment
terminated as a result of the acquisition, all of which was paid as of December
29, 2007.
  Experienced
employees with expertise in wireless technology, reduction in the time required
to develop products, expansion of our portfolio of product and services, enhance
the functionality of existing products and services and operations in
specialized niches in the wireless industry were among the factors that
contributed to purchase prices that resulted in the recognition of goodwill.
None of our goodwill is anticipated to be tax deductible.
  Purchased
Intangible Assets and In-Process Research and Development
  The
amounts allocated to purchased intangible assets and in-process research and
development and their respective amortizable lives are as follows:
  (dollars
      in thousands)
                
                Weighted
                    Average
                    Life
                    (in
      Years)
                
                
                2007
                    Acquisitions(1)
                
                
                Weighted
                    Average
                    Life
                    (in
      Years)
                
                
                2006
                    CYGNUS
                
                
                Weighted
                    Average
                    Life
                    (in
      Years)
                
                
                2005
                    PacketVideoPurchased
      technology
                
                
                7.0
                
                
                $
                58,090
                
                
                
                7.0
                
                
                $
                1,680
                
                
                
                7.0
                
                
                $
                8,600Purchased
      trade names and trademarks
                
                
                6.0
                
                
                
                9,270
                
                
                
                5.0
                
                
                
                110
                
                
                indefinite
                
                
                
                2,400Non-compete
      agreements
                
                
                2.6
                
                
                
                1,620
                
                
                
                —
                
                
                
                —
                
                
                
                4.0
                
                
                
                2,800Purchased
      customer base
                
                
                6.6
                
                
                
                7,536
                
                
                
                —
                
                
                
                —
                
                
                
                8.0
                
                
                
                5,700In-process
      research and development
                
                none
                
                
                
                12,060
                
                
                none
                
                
                
                1,890
                
                
                none
                
                
                
                6,600$
                88,576
                
                
                
                
                
                
                $
                3,680
                
                
                
                
                
                
                $
                26,100
 
 (1)
                Includes
      only the individually significant acquisitions listed in the purchase
      price table above.
  The fair
values assigned to purchased technology and purchased in-process research and
development were determined by applying the income approach using the excess
earnings methodology which involves estimating the future discounted cash flows
to be derived from the currently existing technologies. The purchased trade
names and trademarks were valued using the income approach using the relief from
royalty method, which assumes value to the extent that the acquired company is
relieved of the obligation to pay royalties for the benefits received from them.
The fair values assigned to the purchased customer base existing on the
acquisition date was determined by applying the income approach using the excess
earnings methodology based upon estimated future discounted cash flows
attributable to revenues project to be generated from those customers. The
non-compete agreements were valued using the with-and-without method, based on
the present value of cash flows associated with the savings due to having the
agreements in place.
  89
  The
amounts allocated to purchased in-process research and development costs were
determined through established valuation techniques used in the high technology
industry and were expensed upon acquisition as it was determined that the
underlying projects had not reached technological feasibility and no alternative
future uses existed. In accordance with SFAS No. 2, Accounting for Research and
Development Costs, as clarified by FIN No. 4, Applicability of FASB Statement
No. 2 to Business Combinations Accounted for by the Purchase Method, an
Interpretation of FASB Statement No. 2, amounts assigned to
in-process research and development meeting the above-stated criteria were
charged to expense as part of the allocation of the purchase price.
  Purchased
in-process research and development costs related to 2007 acquisitions include
IPWireless’ next-generation backwards compatible chip for use in wireless
devices and six of SDC’s video and audio software projects valued at $11.2
million and $0.9 million, respectively. Purchased in-process research and
development costs related to 2006 acquisitions include developed core technology
for CYGNUS’s family of low power ASIC products and its 802.16e MAC and PHY
infrastructure base station product, with an aggregate fair value of $1.9
million and for Tusonic Corporation’s server and database applications for
delivering music-related content using web services,valued at $1.6
million.  Purchased in-process research and development costs for 2005
include PacketVideo’s Music on Demand Service software suite, the development of
a reference design platform that incorporates multimedia communications and
entertainment software, and a signaling protocol for internet conferencing,
telephony, presence, events notification and instant messaging, with an
aggregate value of $6.6 million.   These in-process projects had
not yet reached technological feasibility and had no alternative future uses at
the respective dates of acquisition and, therefore, expensed in the consolidated
statement of operations at the respective dates of acquisition.
  Contingent
Purchase Consideration
  At
December 29, 2007, we accrued $51.6 million in additional purchase consideration
payable to the selling shareholders of IPWireless as a result of the achievement
of certain revenue milestones in 2007 as specified in the acquisition
agreement.  Of the total amount accrued, $1.3 million is expected to
be paid in cash and $50.3 million is expected to be paid through the issuance of
shares of our common stock.  The actual number of shares to be issued
will be based on the average closing price of our common stock for the 30
consecutive trading days ending with the third trading day immediately preceding
the actual payment date.  We anticipate that the substantial majority
of the amount due will be paid in March 2008. Of the $51.6 million in additional
purchase consideration, $21.0 million will be deposited into an escrow account
to settle any potential contingencies existing at acquisition. We must submit
any claims for indemnifiable losses, as defined in the acquisition agreement, to
escrow by May 11, 2008, the first anniversary of the acquisition date. We have
preliminarily allocated the additional purchase consideration of $51.6 million
to goodwill. Were we to recover any amounts deposited into escrow as a result of
a successful claim, the cash and/or shares of common stock received would be
recorded as a reduction in previously recognized goodwill.
  Additional
purchase consideration of up to $77.5 million may be paid to the selling
shareholders of IPWireless based upon the achievement of certain revenue
milestones in 2008 and 2009 as specified in the acquisition agreement, with
potential payments of up to $24.2 million in 2009 and up to $53.3 million in
2010. If earned, up to $56.3 million of such additional consideration will be
payable in cash or shares of common stock at our election, up to $18.7 million
of such amounts will be payable in cash or shares of common stock at the
election of the representative of IPWireless shareholders and up to $2.5 million
is required to be paid in cash. In accordance with SFAS No. 141, the contingent
consideration will be recorded as additional purchase price when the contingency
is resolved and the consideration is determinable and becomes
issuable.
  Additional
purchase consideration of up to $25.6 million and $0.1 million may be paid to
the selling shareholders of GO Networks in shares of our common stock and cash,
respectively, subject to the achievement of specified operational milestones in
February and August 2008, which include customer acceptance of certain product
units and the continued employment of certain key employees. In accordance with
SFAS No. 141, the contingent consideration payable to non-employee stockholders
and to employee stockholders where payment is not contingent upon continuing
employment will be recorded as additional purchase price when the contingency is
resolved and the consideration is determinable and becomes issuable. In
accordance with EITF Issue No. 95-8, Accounting for Contingent
Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase
Business Combination, contingent consideration payable to employee
stockholders that is contingent upon continuing employment will be expensed over
any remaining earnout period as compensation when the payment becomes probable.
The probability of achievement of the performance conditions is reassessed at
each reporting date.  At December 29, 2007, we assessed the
probability of achievement of the milestones and determined that additional
purchase consideration was probable of payment.  Accordingly, during
the year ended December 29, 2007, we recognized $1.0 million of share-based
compensation expense based on the portion of the requisite service period
elapsed through December 29, 2007.  This amount has been reported in
other long-term liabilities and deferred credits in the consolidated balance
sheet at December 29, 2007.  We expect to complete our analysis of the
achievement of the February 2008 milestone by the end of the first quarter of
2008.
  90
  In
connection with our acquisition of Websky, we entered into a supplemental
agreement with the selling shareholder whereby additional purchase consideration
of $2.5 million is payable to the selling shareholder in monthly installments
over the one-year period following the acquisition date. The selling shareholder
may also receive additional payments upon the occurrence of certain events
specified in the agreement on or before the one-year anniversary of the
acquisition. We have concluded that the payments due to the selling shareholder
under the supplemental agreement represent additional purchase consideration in
accordance with EITF Issue No. 95-8 as the payments are not contingent upon to a
service requirement by the selling shareholder. Accordingly, we have included
the $2.5 million payable to the selling shareholder in the determination of the
initial purchase price of Websky.
  Pro
Forma Results
  The
following unaudited pro forma financial information assumes that the
acquisitions of IPWireless, SDC, GO Networks and WiMax Telecom occurred at the
beginning of fiscal 2007 and 2006, respectively, and that the acquisition of
PacketVideo occurred at inception (April 13, 2005). The unaudited pro forma
financial information does not reflect any other acquisitions, as the effects of
those acquisitions were not significant on an individual basis or in the
aggregate. These unaudited pro forma financial results have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations that would have actually resulted had the acquisitions occurred on
these dates, or of future results of operations.
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  to(in
      thousands, except per share amounts)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Pro
      Forma Amounts:
                
                (Unaudited)Revenues
                
                $
                63,005
                
                
                $
                31,532
                
                
                $
                8,449Net
      loss
                
                
                (356,235
                )
                
                
                (213,617
                )
                
                
                (48,659
                )Net
      loss applicable to common shares
                
                
                (377,255
                )
                
                
                (213,617
                )
                
                
                N/ANet
      loss per common share – basic and diluted
                
                $
                (4.09
                )
                
                $
                (2.39
                )
                
                
                N/A
  The pro
forma amounts above include interest expense on debt assumed that is calculated
using our effective borrowing rate at the date of acquisition and nonrecurring
charges for in-process research and development of $12.1 million for the years
ended December 29, 2007 and December 30, 2006, and $6.6 million for the period
from inception (April 13, 2005) to December 31, 2005.
  3.
                Related
      Party Transactions
  On March
28, 2007, we issued and sold 355,000 shares of our Series A Senior Convertible
Preferred Stock at a price of $1,000 per share. In addition to other investment
funds and institutional investors, 14%, 14% and 28% of the Series A Senior
Convertible Preferred Stock was sold respectively, to Navation, Inc., an entity
owned by Allen Salmasi, our Chairman and Chief Executive Officer, Manchester
Financial Group, L.P. ("Manchester Financial"), an entity indirectly owned and
controlled by Douglas F. Manchester, a member of our board of directors, and
affiliates of Avenue Capital, of which a member of our board of directors,
Robert Symington, is a portfolio manager. Kevin Finn, our Chief Compliance
Officer, also purchased less than 1% of the Series A Senior Convertible
Preferred Stock (Note 8).
  On July
17, 2006, we issued 7% Senior Secured Notes due July 17, 2010 in the aggregate
principal amount of $350.0 million. The purchasers of the 7% Senior Secured
Notes were investment funds and other institutional investors, including
affiliates of Avenue Capital, among others. Neither Mr. Symington nor Avenue
Capital or its affiliates received any compensation in connection with the
financing (Note 4).
  On July
18, 2005, we issued options to purchase 83,000 common shares to Manchester
Financial as consideration for services rendered in connection with our
acquisition of certain licensed spectrum leases. The options were immediately
vested with a one year term at an exercise price of $6.00 per share and were
subsequently exercised in 2006. The fair value of these options was estimated at
the date of grant to be $108,000 using the Black Scholes method of valuing
options with the following assumptions: risk free interest rate of 3.64%,
dividend yield of 0%, expected volatility of 51% and an expected life of 1 year.
The fair value was recorded to general and administrative expense at the date of
grant.
  91
  4.
                Long-Term
      Obligations
  Long-term
obligations consist of the following:
  (dollars
      in thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    20067%
      Senior Secured Notes, $350,000 due 2010, net of unamortized discount and
      fair value of warrants of $51,399 and $69,325 at December 29, 2007 and
      December 30, 2006, respectively, interest payable semiannually in January
      and July each year, secured by FCC licenses and spectrum leases with a
      book value of $433,523 and $75,000 in restricted cash
                
                $
                298,601
                
                
                $
                280,675Wireless
      spectrum leases, weighted average imputed interest rates of 9.66% and
      8.43% at December 29, 2007 and December 30, 2006, respectively, expiring
      from 2011 through 2036, net of unamortized discounts of $18,505 and $9,758
      at December 29, 2007 and December 30, 2006, respectively, with one to five
      renewal options ranging from 10 to 15 years each
                
                
                24,799
                
                
                
                20,0919.08%
      note, due June 1, 2009, principal and interest of $214 payable monthly,
      net of unamortized discount of $40, secured by $24,139 in assets held by
      GO Networks
                
                
                3,540
                
                
                
                —Other
                
                
                587
                
                
                
                329Total
      long-term obligations
                
                
                327,527
                
                
                
                301,095Less
      current portion
                
                
                (6,745
                )
                
                
                (3,065
                )Long-term
      portion
                
                $
                320,782
                
                
                $
                298,030
  Payments
due on these obligations during each of the five years subsequent to December
29, 2007 are as follows:
  (in
      thousands)Fiscal
      Years:2008
                
                $
                6,7452009
                
                
                4,6852010
                
                
                353,3922011
                
                
                3,3262012
                
                
                3,239Thereafter
                
                
                26,084397,471Less
      unamortized discount
                
                
                (69,944
                )Less
      current portion
                
                
                (6,745
                )Total
      long-term obligations
                
                $
                320,782
 
  On July
17, 2006, we issued 7% Senior Secured Notes due July 17, 2010 (the “Notes”) in
the aggregate principal amount of $350.0 million. The Notes were issued at a 15%
original issue discount, resulting in gross proceeds of $297.5 million. After
the payment of transaction related expenses, we received net proceeds of $295.0
million available for the sole purpose of financing spectrum acquisitions and
leases. The costs incurred to issue the Notes, which totaled $2.5 million were
deferred and are included in other assets in the consolidated balance
sheet.  We are amortizing the deferred financing costs over the
expected term of the Notes using the effective interest method. No scheduled
principal payments will be due on the Notes before the maturity date of July 17,
2010. The Notes are pre-payable at our option at specified premiums to the
principal amount that will decline over the term of the Notes from 105% to 100%,
plus a make-whole amount applicable until July 17, 2008. The obligations under
the Notes are secured by first priority liens on certain pledged equity
interests, FCC licenses, spectrum leases, securities accounts, proceeds from any
of the foregoing as well as proceeds derived in any way from foreign licenses.
We are required to maintain $75.0 million in cash or cash equivalents from funds
other than the proceeds of the Notes in a restricted collateral account at all
times while the Notes remain outstanding, which is classified as restricted cash
in the accompanying consolidated balance sheets.
 
 The
purchase agreement for the 7% Senior Secured Notes contains representations and
warranties, affirmative and negative covenants including, without limitation,
our obligation to not become liable to any additional indebtedness, subject to
certain exceptions including the ability to enter into spectrum leases or to
incur $25.0 million of acquired company debt or purchase money indebtedness. As
of December 29, 2007, we have become liable for additional indebtedness totaling
$4.4 million.  Management believes that we are in compliance with our
debt covenants at December 29, 2007.
  In
connection with the issuance of the 7% Senior Secured Notes, we issued to the
purchasers of the Notes warrants to purchase an aggregate of 4.1 million shares
of our common stock at an exercise price of $0.01 per share. The warrants are
immediately exercisable and expire on July 15, 2009. During years ended December
29, 2007 and December 30, 2006, warrants to purchase 0.7 million and 1.5 million
shares of common stock were exercised for cash totaling $4,000 and $8,000,
respectively.  At December 29, 2007, 1.9 million shares of common
stock remained subject to issuance upon exercise of outstanding and exercisable
warrants.
  92
  On March
10, 2008, we amended the original purchase agreement for the
Notes.  Under the amended purchase agreement, we may withdraw up to
the full amount of the $75.0 million cash reserve account established as
collateral for the Notes for use in funding our business plan, subject to the
payment of a consent fee of $3.5 million per $25.0 million
withdrawn.  The amended purchase agreement also permits us to incur an
additional $25.0 million of indebtedness for the purposes of funding a working
capital line of credit subject to specified subordination terms, and an
additional $100.0 million of second lien indebtedness related to working capital
that remains subject to an intercreditor agreement with a party that is
reasonably satisfactory to the holders of a majority in aggregate principal
amount of the Notes and intercreditor terms that are reasonably satisfactory to
the holders of at least two-thirds in aggregate principal amount of the
Notes.  In addition, the amended purchase agreement restricts the
types of investments that can be held in the cash reserve account to exclude
auction rate or similar securities.
  Certain
of our wireless spectrum lease arrangements provide for the payment of royalties
based on 0.25% of gross revenues, realized on the use of the spectrum subject to
a cap ranging from 100% to 150% of the annual spectrum lease payments.
Additionally, all of our wireless spectrum lease agreements require us to
construct, operate and maintain wireless services so as to satisfy the FCC’s
substantial service deadline by May 1, 2011. Certain agreements require us to
make network connections available for the lessor’s use that are equivalent to a
specified percentage of the transmission capacity created.
  5.
                Fair
      Values of Financial Instruments
  We used
the following methods and assumptions in estimating the fair value
disclosures for financial instruments:
  Cash and cash equivalents:
The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
  Marketablesecurities: The fair values
for marketable debt securities are based on quoted market prices.
  Restricted cash: The fair
values for marketable debt securities included in restricted cash are based on
quoted market prices.
  7% Senior Secured Notes: Since we are accreting
the carrying value of the 7% Senior Secured Notes up to their face value over
the expected term of the notes using the effective interest method, the fair
value of the notes approximates their carrying value.
  Wireless spectrum leases, note
payable to bank and other long-term obligations: The fair values of
our wireless spectrum leases, note payable to bank and other long-term
obligations are estimated using a discounted cash flow analysis, based on
our current incremental borrowing rates for similar types of borrowing
arrangements.
  The
carrying amounts and fair values of financial instruments are as
follows:
  December
      29, 2007
                
                
                December
      30, 2006(in
      thousands)
                
                Carrying
                    Amount
                
                
                Fair
      Value
                
                
                Carrying
                    Amount
                
                
                Fair
      ValueFinancial
      assets:Cash
      and cash equivalents
                
                $
                53,056
                
                
                $
                53,056
                
                
                $
                32,980
                
                
                $
                32,980Marketable
      securities
                
                
                113,684
                
                
                
                113,684
                
                
                
                167,705
                
                
                
                167,705Restricted
      cash
                
                
                75,000
                
                
                
                75,000
                
                
                
                75,000
                
                
                
                75,000Financial
      liabilities:7%
      Senior Secured Notes
                
                
                298,601
                
                
                
                298,601
                
                
                
                280,675
                
                
                
                280,675Wireless
      spectrum leases
                
                
                24,799
                
                
                
                19,481
                
                
                
                20,091
                
                
                
                15,785Note
      payable to bank
                
                
                3,540
                
                
                
                3,540
                
                
                
                —
                
                
                
                —Other
      long-term obligations
                
                
                587
                
                
                
                587
                
                
                
                329
                
                
                
                329
 
 93
  6.
                Income
      Taxes
  Our loss
before provision for income taxes and minority interest is as
follows:
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005United
      States
                
                $
                (251,331
                )
                
                $
                (103,272
                )
                
                $
                (43,737
                )Foreign
                
                
                (69,192
                )
                
                
                (3,391
                )
                
                
                (1,925
                )$
                (320,523
                )
                
                $
                (106,663
                )
                
                $
                (45,662
                )
  Our
income tax provision (benefit) is as follows:
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Current
      income tax expense (benefit):Federal
                
                $
                —
                
                
                $
                (265
                )
                
                $
                258State
                
                
                35
                
                
                
                10
                
                
                
                7Foreign
                
                
                791
                
                
                
                220
                
                
                
                152Total
      current income tax expense (benefit)
                
                
                826
                
                
                
                (35
                )
                
                
                417Deferred
      income tax benefit:Federal
                
                
                —
                
                
                
                —
                
                
                
                —State
                
                
                —
                
                
                
                —
                
                
                
                —Foreign
                
                
                (191
                )
                
                
                —
                
                
                
                —Total
      deferred income tax benefit
                
                
                (191
                )
                
                
                —
                
                
                
                —Total
      provision (benefit) for income taxes
                
                $
                635
                
                
                $
                (35
                )
                
                $
                417
 
  Amounts
are reflected in the preceding table based on the jurisdiction of the taxing
authorities. Changes in enacted rates impact the tax provision in the year a
rate change is enacted.
  Deferred
income taxes are provided for the effects of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and the amounts recognized for income tax purposes. The deferred tax assets and
liabilities are determined by applying the enacted jurisdictional tax rate in
the year in which the temporary difference is expected to
reverse.
  The tax
effects of the major items recorded as deferred income tax assets and
liabilities are as follows:
  (in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006Current
      deferred income tax assets:Deferred
      revenue
                
                $
                14,485
                
                
                $
                4,777Other
      current reserves and accruals
                
                
                5,577
                
                
                
                1,802Total
      current deferred income tax assets
                
                
                20,062
                
                
                
                6,579Noncurrent
      deferred income tax assets:Net
      operating losses
                
                
                167,904
                
                
                
                48,453Research
      and experimentation and other credit carryforwards
                
                
                646
                
                
                
                298Capitalized
      start-up expenses
                
                
                53,672
                
                
                
                24,613Capitalized
      research and experimentation expenditures
                
                
                30,432
                
                
                
                761Other
      noncurrent reserves and accruals
                
                
                13,601
                
                
                
                2,532Total
      noncurrent deferred income tax assets
                
                
                266,255
                
                
                
                76,657Total
      current and noncurrent deferred income tax assets
                
                
                286,317
                
                
                
                83,236Noncurrent
      deferred income tax liabilities:Fixed
      assets and other intangible assets
                
                
                (31,332
                )
                
                
                (580
                )Intangible
      assets not subject to amortization
                
                
                (103,061
                )
                
                
                (75,774
                )Total
      noncurrent deferred income tax liabilities
                
                
                (134,393
                )
                
                
                (76,354
                )Valuation
      allowance
                
                
                (254,059
                )
                
                
                (82,656
                )Net
      deferred income tax liability
                
                $
                (102,135
                )
                
                $
                (75,774
                )
 
 94
  Reconciliations
of the U.S. federal statutory income tax rate to the effective tax rate are
as follows:
  Years
      Ended
                
                
                Inception
                  (April
      13, 2005)
                  to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005U.S.
      federal statutory rate
                
                
                (35.0
                )%
                
                
                (35.0
                )%
                
                
                (35.0
                )%State
      taxes, net of federal effect
                
                
                —
                
                
                
                —
                
                
                
                —Effect
      of non-consolidated affiliates
                
                
                —
                
                
                
                3.2
                
                
                
                (1.3
                )In-process
      research and experimentation
                
                
                1.2
                
                
                
                1.2
                
                
                
                4.1Increase
      in valuation allowance
                
                
                31.2
                
                
                
                30.1
                
                
                
                37.6Other
                
                
                2.8
                
                
                
                0.5
                
                
                
                (4.5
                )Effective
      tax rate
                
                
                0.2
                %
                
                
                0.0
                %
                
                
                0.9
                %
 
 As of
December 29, 2007, our U.S. operations are included in a consolidated
federal income tax return. The amount of current and deferred income tax expense
is computed on a separate entity basis for each member of the group based on
applying the principles of SFAS 109.  Prior to the corporate
conversion transaction on November 13, 2006, the assets and liabilities of
NextWave Wireless Inc. were recorded on the balance sheet of NextWave Wireless
LLC, which was classified as a partnership for U.S. federal and state income tax
purposes. Therefore, NextWave Wireless LLC’s income or loss generally was not
subject to federal or state income tax or benefit at the entity
level.  Accordingly, our 2006 provision for income taxes consists
of the aggregate of income tax or benefit generated by its corporate
subsidiaries, without including taxes or benefit on income or loss of NextWave
Wireless LLC.  Foreign taxes are recorded on a separate entity level
based on applicable jurisdictional income tax rates.
  As of
December 29, 2007, we had approximately $353.5 million in federal net operating
losses that will begin to expire in 2016. As of December 29, 2007, we had
approximately $99.7 million and $77.7 million in state and foreign net operating
loss carryforwards, respectively, that will begin to expire in 2008. Utilization
of certain net operating loss carryforwards and foreign tax credits are subject
to an annual limitation due to the ownership change limitations provided by
Internal Revenue Code Section 382 and similar state provisions. In addition, we
have a limited history of operations and are uncertain at this time whether we
will be able to utilize these carryforwards.
  We
increased our federal, state and foreign valuation allowance during 2007 by
$171.4 million, from $82.7 million to $254.1 million, due to the increase in our
net deferred tax asset balance. The increase consists of $120.0 million related
to the valuation allowance for amounts recorded as loss from operations and
$51.4 million recorded as goodwill, which relates primarily to our 2007 and
prior acquisitions.  At December 29, 2007, the balance of the
valuation allowance the reversal of which would be offset by goodwill equals
$73.6 million.
  In 2007,
in accordance with SFAS No. 142, a deferred income tax liability for U.S. and
state and local income taxes of $103.1 million, related to intangible assets
with an indefinite life, was not netted against deferred tax assets when
establishing the above valuation allowance.  The valuation allowance
as of December 29, 2007 and December 30, 2006 is attributable to deferred tax
assets related primarily to income tax loss carryforwards, mostly in the U.S.,
including certain states, as well as start-up costs and other net deferred tax
assets, for which it is more likely than not that the related tax benefits will
not be realized.  It is our policy that the valuation allowance is
decreased or increased in the period management determines that it is more
likely than not that the deferred tax assets will be realized or
not.
  At
December 29, 2007, we had undistributed foreign earnings of $0.6 million, which
we intend to be permanently reinvested and, accordingly, a deferred income tax
liability has not been established on those earnings.
  We
adopted FIN 48, Accounting for
Uncertainty in Income Taxes, on December 31, 2006, the beginning of
fiscal year 2007. As of December 30, 2006, we did not have any unrecognized tax
benefits or related accrued interest or penalties and did not record any
cumulative effect adjustment to retained earnings as a result of adopting FIN
48.  Our policy for recording interest and penalties on any
unrecognized tax benefits in the event such unrecognized benefits arise in
future reporting periods will be to record any interest and penalty amounts in
income tax expense.
  The
adoption of FIN 48 did not have an effect on our effective income tax rate for
the fiscal year ended December 29, 2007 as no unrecognized tax benefits were
generated during the year.  We do not believe that we will generate
any material unrecognized tax benefits within the next 12
months.  Since we did not have any unrecognized tax benefits as of
December 30, 2006 or December 29, 2007, and because management believes that we
will not generate any material unrecognized tax benefits within the next 12
months, a tabular reconciliation as prescribed by paragraph 21(a) of FIN 48 has
not been prepared.
  95
  We file
U.S. federal, state and foreign income tax returns in jurisdictions with varying
statutes of limitations.  The 2004 through 2007 tax years generally
remain subject to examination by federal and most state tax
authorities.  As of December 29, 2007, we were not subject to any U.S.
federal, state, local, or non-U.S. income tax examinations by tax authorities
for the current or any prior reporting periods.
  7.
                Commitments
      and Contingencies
  Pending
Acquisition of Wireless Spectrum
  During
2007, we entered into lease and lease purchase agreements for wireless spectrum
whose transfers of control were pending final approval from the FCC at December
29, 2007.  The lease agreements have a maximum term of 30 years,
including renewals, and will require monthly and annual
payments.  Amounts paid as deposits for these agreements totaled $20.1
million at December 29, 2007 and are included in other noncurrent assets in the
consolidated balance sheet.  Estimated future lease obligations due
under the terms of these wireless spectrum lease agreements at December 29, 2007
are as follows:
  (in
      thousands)Fiscal
      Years:2008
                
                $
                9022009
                
                
                7772010
                
                
                7972011
                
                
                8162012
                
                
                836Thereafter
                
                
                3,857Total
                
                $
                7,985
  Services
and Other Agreements
  We enter
into non-cancelable software license agreements and agreements for the purchase
of software development and engineering services to facilitate and expedite the
development of software modules and applications required in our WiMAX
development activities. The services agreements contain provisions for minimum
commitments based on the number of team members and their respective billing
rates. Amounts paid under these contracts, which expire on various dates through
2011, totaled $17.7 million, $2.5 million and $2.1 million during the years
ended December 29, 2007, December 30, 2006 and during the period from inception
(April 13, 2005) to December 31, 2005, respectively.  At December 29,
2007, estimated future minimum payments due under the terms of these agreements
are as follows:
  (in
      thousands)Fiscal
      Years:2008
                
                $
                12,7672009
                
                
                4,8902010
                
                
                2,8672011
                
                
                4,361Total
                
                $
                24,885
 
  Operating
Leases
  We lease
office and research facilities, cell sites and certain office equipment under
non-cancelable operating leases expiring on various dates through 2015. We
recognize rent expense on a straight-line basis over the respective lease terms.
As a result, any differences between recognized rent expense and required
upfront rental payments upon execution that reduce future rental payments is
recorded as unapplied prepaid rent and any difference between rent expense and
rent payments that are reduced by cash or rent abatements is recognized as
deferred rent. At December 29, 2007, unapplied prepaid rent totaled $0.6 million
and is included in prepaid expenses and other current assets in the consolidated
balance sheet and deferred rent totaled $1.6 million, of which $0.2 million is
included in other current liabilities and $1.4 million is included in long-term
deferred credits and reserves in the consolidated balance sheet.
  Certain
commitments have renewal options extending through the year 2031. One of the
facility lease agreements requires a $2.5 million letter of credit which will be
reduced gradually until termination of the lease in 2012.  Rent
expense under these operating leases was $11.2 million, $6.9 million and $2.7
million for the years ended December 29, 2007, December 30, 2006 and for the
period from inception (April 13, 2005) through December 31, 2005, respectively.
Sublease income totaled $0.3 million, $1.7 million and $0.7 million for the
years ended December 29, 2007 and December 30, 2006 and for the period from
inception (April 13, 2005) through December 31, 2005, respectively.
  96
  Future
minimum lease payments under non-cancelable operating leases, net of sublease
rentals at December 29, 2007, are as follows:
  (in
      thousands)
                
                Lease
                    Commitments
                
                
                Sublease
                    Rentals
                
                
                NetFiscal
      Years:2008
                
                $
                11,306
                
                
                $
                (198
                )
                
                $
                11,1082009
                
                
                8,674
                
                
                
                -
                
                
                
                8,6742010
                
                
                7,178
                
                
                
                -
                
                
                
                7,1782011
                
                
                4,997
                
                
                
                -
                
                
                
                4,9972012
                
                
                2,239
                
                
                
                -
                
                
                
                2,239Thereafter
                
                
                140
                
                
                
                -
                
                
                
                140$
                34,534
                
                
                $
                (198
                )
                
                $
                34,336
 
 Legal
Proceedings
  On June
8, 1998, NextWave Personal Communications Inc., NextWave Power Partners Inc. and
the predecessor to NextWave Wireless Inc., all direct and indirect wholly owned
subsidiaries of NextWave Telecom Inc., filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the southern District of New York. On December 23, 1998, NextWave Telecom
Inc. filed its voluntary petition, in order to implement an overall corporate
restructuring. On March 1, 2005, the Bankruptcy Court confirmed the Third Joint
Plan of Reorganization, dated January 21, 2005. The cornerstone of the Plan of
Reorganization was the sale of NextWave Telecom and its subsidiaries, excluding
the predecessor to NextWave Wireless inc., to Verizon Wireless for approximately
$3.0 billion. Pursuant to the Plan of Reorganization, on April 13, 2005, all
non-PCS assets and liabilities of the NextWave Telecom group were contributed to
the predecessor to NextWave Wireless Inc., and the predecessor to NextWave
Wireless Inc. was capitalized with $550.0 million in cash. Through this process,
the predecessor to NextWave Wireless Inc. was reconstituted as a company with a
new capitalization and a new wireless technology business plan. All claims made
in connection with the Chapter 11 case have been resolved, and we received a
decree of final judgment closing the Chapter 11 case.
  Other
Guarantees and Indemnifications
  We
provide indemnifications of varying scope and size to certain customers against
claims of intellectual property infringement made by third parties arising from
the use of our products. We have also entered into indemnification agreements
with our officers and directors. Although the maximum potential amount of future
payments we could be required to make under these indemnifications is unlimited,
to date we have not incurred material costs to defend lawsuits or settle claims
related to these indemnification provisions. Additionally, we have insurance
policies that, in most cases, would limit our exposure and enable us to recover
a portion of any amounts paid. Therefore, we believe the estimated fair value of
these agreements is minimal and likelihood of incurring an obligation is remote.
Accordingly, we have not accrued any liabilities in connection with these
indemnification obligations as of December 29, 2007.
  8.
                Series
      A Senior Convertible Preferred Stock and Stockholders’
    Equity
  Preferred
and Common Stock
  We have
authorized 25 million shares of preferred stock, of which 355,000 shares have
been designated as Series A Senior Convertible Preferred Stock. Shares of the
preferred stock may be issued in any number of series as determined by the board
of directors. The board of directors is also authorized to define the terms of
the preferred shares, including voting rights, liquidation preferences,
conversion and redemption provisions and dividend rates.
  We have
authorized 400 million shares of common stock, of which 92.7 million shares were
issued and outstanding at December 29, 2007. At December 29, 2007, we had the
following common shares reserved for future issuance upon the exercise or
issuance of the respective equity instruments:
  (in
      thousands)Series
      A Senior Convertible Preferred Stock
                
                
                34,010Stock
      options:Granted
      and outstanding
                
                
                20,842Available
      for future grants
                
                
                13,042Warrants
                
                
                2,436Contingently
      issuable shares under advisory contract
                
                
                83371,163
 
 97
  At
December 29, 2007, we accrued $51.6 million in additional purchase consideration
payable to the selling shareholders of IPWireless as a result of the achievement
of certain revenue milestones in 2007 as specified in the acquisition
agreement.  Of the total amount accrued, $1.3 million is expected to
be paid in cash and $50.3 million is expected to be paid through the issuance of
shares of our common stock.  The actual number of shares to be issued
will be based on the average closing price of our common stock for the 30
consecutive trading days ending with the third trading day immediately preceding
the actual payment date.  We anticipate that the substantial majority
of the amount due will be paid in March 2008.
  Additional
purchase consideration of up to $77.5 million may be paid to the selling
shareholders of IPWireless based upon the achievement of certain revenue
milestones in 2008 and 2009, inclusive, as specified in the acquisition
agreement, with potential payments of up to $24.2 million in 2009 and up to
$53.3 million in 2010. If earned, up to $56.3 million of such additional
consideration will be payable in cash or shares of common stock at our election,
up to $18.7 million of such amounts will be payable in cash or shares of common
stock at the election of the representative of IPWireless shareholders and up to
$2.5 million is required to be paid in cash.
  The
acquisition of GO Networks provided for additional purchase consideration of up
to $25.6 million and $0.1 million to be paid to the selling shareholders of GO
Networks in shares of our common stock and cash, respectively, subject to the
achievement of specified operational milestones in February and August 2008,
which include customer acceptance of certain product units and the continued
employment of certain key employees. We expect to complete our analysis of the
achievement of the February 2008 milestone by the end of the first quarter of
2008.
  Series
A Senior Convertible Preferred Stock
  On March
28, 2007, we issued and sold 355,000 shares of our Series A Senior Convertible
Preferred Stock (the "Series A Preferred Stock") at a price of $1,000 per share.
The Series A Preferred Stock was issued in a private placement transaction
exempt from the registration requirements of the Securities Act of 1933. We
received $351.1 million in net proceeds from the sale of the Series A Preferred
Stock. Costs incurred to issue the shares totaled $3.9 million. The net proceeds
are used to fund operations, accelerate the development of new wireless
technologies, expand our business and enable strategic
acquisitions.
  Dividend Rights.Holders of the Series A Preferred Stock are entitled to receive quarterly
dividends on the liquidation preference at a rate of 7.5% per annum. Until March
2011, we can elect whether to declare dividends in cash or to not declare and
pay dividends, in which case the per share dividend amount will be added to the
liquidation preference. From and after March 2011, we must declare dividends in
cash each quarter, subject to applicable law. The terms of our 7% Senior Secured
Notes due 2010 currently prevent the payment of cash dividends on the Series A
Preferred Stock. The dividend rate is subject to adjustment to 10% per annum if
we default on our dividend payment obligations. The dividend rate is also
subject to adjustment to 15% per annum if we fail to comply with the protective
covenants of the Series A Preferred Stock described below and to 18% per annum
if we fail to convert or redeem the Series A Preferred Stock when required to do
so, as described below.
  We
accrued for $20.8 million in undeclared dividends during the year ended December
29, 2007.
  Voting
Rights. Pursuant to the terms of the Series A Preferred Stock, so long as
at least 25% of the issued shares of Series A Preferred Stock remain
outstanding, and until the date on which we elect to redeem all shares of Series
A Preferred Stock in connection with an asset sale, as described below, we must
receive the approval of the holders of shares representing at least 75% of the
Series A Preferred Stock then outstanding to (i) incur indebtedness in excess of
$500 million, subject to certain adjustments and exceptions, (ii) create any
capital stock that is senior to or on a parity with the Series A Preferred Stock
in terms of dividends, distributions or other rights, or (iii) consummate asset
sales involving the receipt of gross proceeds of, or the disposition of assets
worth, $500 million or more based on their fair market value. In addition, so
long as at least 25% of the issued shares of Series A Preferred Stock remain
outstanding, we may not distribute rights or warrants to all holders of our
common stock entitling them to purchase shares of our common stock, or
consummate any sale of our common stock, for an amount less than the fair market
value on the date of issuance, with certain exceptions. With respect to other
matters requiring stockholder approval, the shares of Series A Preferred Stock
will be entitled to vote as one class with the common stock on an as-converted
basis.
  Conversion Rights
and Redemption Rights. Each share of Series A Preferred Stock is
convertible into a number of shares of our common stock equal to the liquidation
preference then in effect divided by $11.05. The Series A Preferred Stock is
convertible at any time at the option of the holder, or at our election after
September 28, 2008, subject to the trading price of our common stock reaching
$22.10 for a specified period of time, except that such threshold price will be
reduced to $16.575 on the earlier of March 28, 2010, or our consummation of a
qualified public offering. We will not be entitled to convert the Series A
Preferred Stock at our election unless a shelf registration statement covering
the shares of common stock to be issued upon conversion is then effective or the
shares are no longer considered restricted securities under the Securities Act.
At December 29, 2007, the liquidation preference totaled $375.8 million. If all
shares of Series A Preferred Stock were converted at December 29, 2007, we would
be obligated to issue 34.0 million shares of our common stock.
  98
  We will
be required to redeem all outstanding shares of Series A Preferred Stock, if
any, on March 28, 2017, at a price equal to the liquidation preference plus
unpaid dividends. If we elect to convert the Series A Preferred Stock after our
common stock price has reached the qualifying threshold, we must redeem the
shares of holders of Series A Preferred Stock who elect not to convert into
common stock at a price equal to 130% of the liquidation preference. However, we
are not required to redeem more than 50% of the shares of Series A Preferred
Stock subject to any particular conversion notice. In the event that we fail to
obtain approval of the holders of Series A Preferred Stock to an asset sale
transaction, we must either not consummate such asset sale or elect to redeem
all shares of Series A Preferred Stock at a redemption price equal to 120% of
the liquidation preference. Holders will be entitled to opt-out of such a
redemption.
  Right to Receive
Liquidation Distributions. The Series A Preferred Stock has an initial
liquidation preference of $1,000 per share, subject to increase for accrued
dividends as described above. The liquidation preference would become payable
upon redemption, as described above, upon a liquidation or dissolution of our
company, or upon deemed liquidation events including a change in control, merger
or sale of all or substantially all of our assets, unless the holders of Series
A Preferred Stock provide a 75% vote to not treat a covered event as a deemed
liquidation. Upon a deemed liquidation event, the Series A Preferred Stock will
be entitled to receive an amount per share equal to the greater of 120% of the
liquidation preference or the amount that would have been received if such share
had converted into common stock in connection with such event.
  Our
obligations to pay contingent cash dividends and cash premiums upon redemption
or liquidation of the preferred shares constitute embedded derivatives, the
initial estimated fair values of which aggregated $0.2 million, and were
recorded as long-term liabilities in the consolidated balance sheet, reducing
the carrying value of the Series A Preferred Stock. At December 29, 2007, the
estimated fair values of the embedded derivatives totaled $1.0 million. A change
in the estimated fair value of the embedded derivatives of $0.8 million during
the year ended December 29, 2007, was recorded as a charge to other income
(expense) in the consolidated statements of operations.
  9.
                Equity
      Compensation Plans
  During
the year ended December 29, 2007, we added four share-based compensation plans
that provide for awards to acquire shares of our common stock, increasing the
total number of plans from two to six: the PacketVideo 2005 Equity Incentive
Plan, the NextWave 2007 New Employee Stock Incentive Plan, the GO Networks
Employee Stock Bonus Plan and the IPWireless, Inc. Employee Stock Bonus
Plan.
  On
January 3, 2007, concurrent with the listing of our common stock on Nasdaq, an
option to purchase one share of our common stock with an exercise price of $6.00
per share was issued for every six options to purchase shares of common stock of
our wholly-owned subsidiary, PacketVideo, outstanding under the PacketVideo 2005
Equity Incentive Plan, resulting in the issuance of options to 156 employees to
purchase approximately 1.6 million shares of our common stock. The exchange of
options was accounted for as a modification of the cancelled stock options under
SFAS No. 123(R). Accordingly, because the grant-date fair value of the NextWave
options issued in the exchange was less than the fair value of the exchanged
PacketVideo options measured immediately before the exchange, no incremental
share-based compensation expense resulted from the exchange.
  In
February 2007, our board of directors adopted the NextWave 2007 New Employee
Stock Incentive Plan. The plan, as amended in June 2007, provides for an
aggregate of 5.0 million shares of common stock to be available for future
grants of nonqualified stock options, or restricted, bonus, phantom or other
share-based awards to our employees or directors.
  In
February 2007, concurrent with our acquisition of GO Networks Inc., we
established the GO Networks Employee Stock Bonus Plan whereby a select group of
employees may receive up to an aggregate of $5.0 million payable in shares of
our common stock, valued at the time of issuance, upon the achievement of
specified operational milestones in February and August 2008, which include
customer acceptance of certain product units and the continued employment of the
employee in addition to certain key employees.  At December 29, 2007,
we assessed the probability of achievement of the milestones under the plan and
determined that a stock bonus was probable of payment.  Accordingly,
during the year ended December 29, 2007, we recognized $3.5 million of
share-based compensation expense based on the portion of the requisite service
period elapsed through December 29, 2007.  This amount has been
reported in other long-term liabilities  in the consolidated balance
sheet at December 29, 2007.  We anticipate issuing the shares in
payment of the bonus related to achievement of the first milestone in the first
quarter of 2008.
  In May
2007, concurrent with our acquisition of IPWireless, Inc., we established the
IPWireless, Inc. Employee Stock Bonus Plan whereby employees and consultants may
receive up to an aggregate of $7.0 million in shares of our common stock, valued
at the time of issuance, payable upon the achievement of certain revenue
milestones in 2007 through 2009. At December 29, 2007, we assessed the
probability of achievement of the milestones under the plan and determined that
a stock bonus was probable of payment.  Accordingly, during the year
ended December 29, 2007, we recognized $3.1 million of share-based compensation
expense based on the portion of the requisite service period elapsed through
December 29, 2007.  This amount has been reported in other long-term
liabilities in the consolidated balance sheet at December 29,
2007.  We anticipate issuing approximately 0.5 million shares in
payment of the bonus related to achievement of the 2007 milestone in March
2008.
  99
  In May
2007, NextWave stockholders approved an amendment to the NextWave Wireless Inc.
2005 Stock Incentive Plan to provide for an additional 15.0 million common
shares for awards under the plan.
  At
December 29, 2007, we may issue up to an aggregate of 33,884,000 shares of
common stock under our equity compensation plans, excluding the IPWireless and
GO Networks Employee Stock Bonus Plans, of which 20,842,000 shares are reserved
for issuance upon exercise of granted and outstanding options and 13,042,000
shares are available for future grants.
  The
following table summarizes the status of the stock option plans at December 29,
2007 and stock option activity during the year ended December 29,
2007:
  Number
      of Shares
                    (in
      thousands)
                
                
                Weighted
      Average Exercise Price per Share
                
                
                Weighted
      Average Remaining Contractual Term
                    (in
      years)
                
                
                Aggregate
                    Intrinsic
      Value
                    (in
      thousands)Outstanding
      at December 30, 2006
                
                
                10,934
                
                
                $
                6.20PacketVideo
      options exchanged
                
                
                1,566
                
                
                $
                6.00Granted
                
                
                9,628
                
                
                $
                8.25Exercised
                
                
                (379
                )
                
                $
                5.74Canceled
                
                
                (907
                )
                
                $
                7.13Outstanding
      at December 29, 2007
                
                
                20,842
                
                
                $
                7.10
                
                
                
                8.3
                
                
                $
                856Exercisable
      at December 29, 2007
                
                
                10,491
                (1)
                
                $
                6.07
                
                
                
                7.5
                
                
                $
                778
 
 (1)
                Options
      issued under the NextWave Wireless Inc. 2005 Stock Incentive Plan are
      exercisable prior to the vesting
date.
 
 The
following table summarizes the status of unvested options under these plans at
December 29, 2007 and changes during the year ended December 29,
2007:
  Number
      of Shares
                    (in
      thousands)
                
                
                Weighted
      Average Grant Date Fair
                    Value
      per ShareUnvested
      at December 30, 2006
                
                
                7,351
                
                
                $
                1.82
                (2)Unvested
      PacketVideo options exchanged
                
                
                1,098
                
                
                $
                0.55
                (2)Granted
                
                
                9,628
                
                
                $
                3.37Vested
                
                
                (3,285
                )
                
                $
                1.44
                (2)Canceled
                
                
                (763
                )
                
                $
                2.16
                (2)Unvested
      at December 29, 2007
                
                
                14,029
                
                
                $
                2.79
                (2)
 
 (2)
                The
      weighted average grant date fair value per share includes options granted
      prior to January 1, 2006 which have no grant date fair value assigned as
      we adopted the provision of SFAS No. 123(R) using the prospective
      transition method, whereby we continue to account for unvested equity
      awards to employees outstanding at December 31, 2005 using APB 25, and
      apply SFAS No. 123(R) to all awards granted or modified after that
      date.
 
 We
received cash from the exercise of stock option under these plans of $2.2
million, $1.5 million and $0.1 million, with no related tax benefits, during the
years ended December 29, 2007 and December 30, 2006, and during the period from
inception (April 13, 2005) to December 31, 2005, respectively.  The
intrinsic value of options exercised during the years ended December 29, 2007
and December 30, 2006, and during the period from inception (April 13, 2005) to
December 31, 2005, totaled $1.4 million, $53,000 and $105,000,
respectively.
  Employee
Share-Based Compensation
  We
utilized the Black-Scholes valuation model for estimating the fair value of
stock awards to employees during the years ended December 29, 2007 and December
30, 2006, at the date of grant or modification, with the following assumptions
for the NextWave Wireless Inc. 2005 Stock Incentive Plan, the CYGNUS
Communications, Inc. 2004 Stock Option Plan, which options were exercisable for
shares of common stock of CYGNUS Communications, Inc. prior to the Corporate
Conversion and were converted into options exercisable for common shares of
NextWave at the date of the Corporate Conversion, and the PacketVideo
Corporation 2005 Equity Incentive Plan, which options were exercisable for
common shares of PacketVideo Corporation prior to January 3, 2007 and were
converted into options exercisable for common shares of NextWave on that
date:
  100
  Year
      Ended December 29, 2007
                
                
                Year
      Ended December 30, 2006Options
      for
                    NextWave
                    Wireless
      Inc. Common Stock
                
                
                Options
      for
                    NextWave
                    Wireless
      Inc. Common Stock
                    Issued
      upon Conversion of PacketVideo
                    Plan(1)
                
                
                Options
      for
                    NextWave
                    Wireless
      Inc. Common Stock
                
                
                Options
      for
                    NextWave
                    Wireless,
      Inc. Common Stock
                    Issued
      upon Conversion of CYGNUS
                    Plan
      (2)
                
                
                Options
      for
                    CYGNUS
                    Communi-
                    cations,
      Inc.
                    Common
                    Stock(3)
                
                
                Options
      for PacketVideo
                    Common
      StockRisk-free
      interest rate
                
                
                3.09%-4.99
                %
                
                
                4.65%-4.98
                %
                
                
                4.36%-5.11
                %
                
                
                4.62%-5.03
                %
                
                
                4.35%-4.39
                %
                
                
                4.36%-5.11
                %Expected
      term (in years)
                
                
                3.5-5.5
                
                
                
                0-3.8
                
                
                
                1.5-5.5
                
                
                
                0-4.7
                
                
                
                2.5-5.9
                
                
                
                2.5-5.5Weighted
      average expected stock price volatility
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %Expected
      dividend yield
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %Weighted
      average grant-date fair value of options granted
                
                $
                3.37
                
                
                $
                6.12
                
                
                $
                2.59
                
                
                $
                7.51
                
                
                $
                2.61
                
                
                $
                0.42
 
 (1)
                Represents
      assumptions used as of the conversion date to value options to purchase
      common stock of NextWave Wireless Inc. that were issued to holders of
      options to purchase common stock of PacketVideo
    Corporation.(2)
                Represents
      assumptions used as of the conversion date to value options to purchase
      common stock of NextWave Wireless Inc. that were issued to holders of
      options to purchase common stock of CYGNUS Communications,
      Inc.(3)
                Represents
      assumptions used to value options to purchase common stock of CYGNUS
      Communications, Inc. prior to the Corporate Conversion Merger, at
      converted values.
  The
risk-free interest rates are based on the implied yield available on U.S.
Treasury constant maturities in effect at the time of the grant with remaining
terms equivalent to the respective expected terms of the options. As none of the
plans have sufficient history for estimating the term from grant date to full
exercise of the option, we have considered expected terms applied, in part, by
peer companies to determine the expected life of each grant.  Expected
volatility is based on an average of peer companies’ expected volatilities due
to lack of trading history of our common stock or our subsidiaries’ shares. The
dividend yield of zero is based on the fact that we have never paid cash
dividends and have no present intention to pay cash dividends on our common
stock.
  We
assumed annualized forfeiture rates of 14% and 10% for our options granted
during the years ended December 29, 2007 and December 30, 2006, respectively,
based on a combined review of industry and employee turnover data, as well as an
analytical review performed of historical pre-vesting forfeitures occurring over
the previous year. Under the true-up provisions of SFAS No. 123(R), we will
record additional expense if the actual forfeiture rate is lower than estimated,
and will record a recovery of prior expense if the actual forfeiture rate is
higher than estimated.
  We
recognized employee share-based compensation expense from stock options of $6.7
million and $2.8 million for the years ended December 29, 2007 and December 30,
2006, respectively, under the provisions of SFAS No. 123(R).
  Total
compensation cost of options granted to employees since January 1, 2006, but not
yet vested as of December 29, 2007, was $23.1 million, which is expected to be
recognized over a weighted average period of 3.2 years.
  In
addition to the employee share-based compensation expense resulting from stock
options, in May 2007, we recognized share-based compensation expense of $2.3
million from the issuance of approximately 251,000 shares of our common stock to
certain employees as additional compensation in lieu of annual cash
bonuses.
  Share-based
compensation expense of $9,000 and $0.6 million was recognized during the years
ended December 29, 2007 and December 30, 2006, respectively, for common stock
issued to employee shareholders of one of the CYGNUS subsidiaries, stemming from
a prior acquisition by CYGNUS, for the attainment of certain product development
milestones. The share based payments were recognized as compensation expense in
accordance with EITF Issue No. 95-8, Accounting for Contingent
Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase
Business Combination.
  Non-Employee
Share-Based Compensation
  We issue
options from our 2005 Stock Incentive Plan, warrants and restricted stock to
members of our Technical Developments Steering Committee and other strategic
advisors.  The following table summarizes the status of non-employee
options and warrants at December 29, 2007 and activity during the year ended
December 29, 2007 and are excluded from the tables above:
  101
  Number
      of Shares
                    (in
      thousands)
                
                
                Weighted
      Average Exercise Price per Share
                
                
                Weighted
      Average Remaining Contractual Term
                    (in
      Years)
                
                
                Aggregate
                    Intrinsic
      Value
                    (in
      Thousands)Outstanding
      at December 30, 2006
                
                
                787
                
                
                $
                6.72Granted
                
                
                60
                
                
                $
                9.81Outstanding
      at December 29, 2007
                
                
                847
                
                
                $
                6.94
                
                
                
                5.2
                
                
                $
                —Exercisable
      at December 29, 2007
                
                
                746
                
                
                $
                6.51
                
                
                
                4.7
                
                
                $
                —
 
 The
following table summarizes the status of unvested non-employee options and
warrants at December 29, 2007 and changes during the year ended December 29,
2007:
  Number
      of Shares
                    (in
      thousands)Unvested
      at December 30, 2006
                
                
                436Granted
                
                
                60Vested
                
                
                (288
                )Unvested
      at December 29, 2007
                
                
                208
 
 Under a
related subscription agreement, the chairman of the Steering Committee purchased
167,000 restricted common shares in July 2006 for $6.00 per share.  We
have the right to repurchase these shares at $6.00 per share.  This
right lapses in equal monthly amounts through July 2010 while the technical
advisor continues to provide services under the Steering Committee
Agreement.  In December 2007, we eliminated the repurchase right
associated with the remaining 108,000 restricted common shares where the
repurchase right had not yet lapsed.  No restricted shares were
repurchased during the years ended December 29, 2007 or December 30,
2006.
  Share-based
compensation expense from non-employee stock options, warrants and restricted
shares totaled $1.8 million, $0.8 million and $0.7 million during the years
ended December 29, 2007, December 30, 2006 and during the period from inception
(April 13, 2005) to December 31, 2005, respectively. The fair value assigned to
the vested increments of these awards was estimated at the date of vesting and,
for the unvested increments, at the respective reporting date, using the
Black-Scholes option-pricing model with the following assumptions:
  Options
                
                
                Warrants
                
                
                Restricted
                    Common
      SharesYearendedDecember29,2007:Risk-free
      interest rate
                
                
                3.83%-5.14
                %
                
                
                4.16
                %
                
                
                3.21%-4.95
                %Contractual
      term (in years)
                
                
                6.0-9.9
                
                
                
                3.0
                
                
                
                0.5-4.0Weighted
      average expected stock price volatility
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %Expected
      dividend yield
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %Weighted
      average fair value of awards
                
                $
                3.56
                
                
                $
                4.33
                
                
                $
                1.96Year ended December
      30, 2006:Risk-free
      interest rate
                
                
                4.54%-4.79
                %
                
                
                4.58%-4.68
                %
                
                
                4.57%-4.78
                %Contractual
      term (in years)
                
                
                6.0-9.9
                
                
                
                3.0-4.0
                
                
                
                0.1-3.9Expected
      stock price volatility
                
                
                50
                %
                
                
                50
                %
                
                
                50
                %Expected
      dividend yield
                
                
                0
                %
                
                
                0
                %
                
                
                0
                %Weighted
      average fair value of awards
                
                $
                7.24
                
                
                $
                4.42
                
                
                $
                5.42Inception
      (April 13, 2005) to December 31, 2005:Risk-free
      interest rate
                
                
                N/A
                
                
                
                3.96%-4.39
                %
                
                
                N/AContractual
      term (in years)
                
                
                N/A
                
                
                
                3.0-5.0
                
                
                
                N/AExpected
      stock price volatility
                
                
                N/A
                
                
                
                50.8
                %
                
                
                N/AExpected
      dividend yield
                
                
                N/A
                
                
                
                0
                %
                
                
                N/AWeighted
      average fair value of awards
                
                
                N/A
                
                
                $
                2.63
                
                
                
                N/A
 
  The fair
value of the unvested increments will be remeasured at the end of each reporting
period until vested, when the final fair value of the vesting increment is
determined. Unamortized estimated share-based compensation totaled $1.4 million
at December 29, 2007, which is expected to be recognized over a weighted average
period of 1.4 years.
  In
connection with the warrants issued, under a related advisory services
agreement, the advisor earned warrant exercise credits of $1.0 million and $1.3
million during the years ended December 29, 2007 and December 30, 2006,
respectively, and continues to earn $83,333 in exercise credits monthly through
the date of expiration of the agreement in September 2008.  The
warrant exercise credits may be used only as credits against the exercise price
of the warrants.  Expense related to the warrant exercise credits
totaled $1.0 million, $1.0 million and $0.3 million during the years ended
December 29, 2007 and December 30, 2006, and during the period from inception
(April 13, 2005) to December 31, 2005, respectively.  Unamortized
expense totaled $0.7 million at December 29, 2007, and will be charged to the
results of operations with an offsetting increase to additional paid in capital
in the consolidated balance sheet over the remaining vesting
periods.  Under the agreement, in the event that the advisor makes a
significant contribution to a transaction in which we acquire the use of
substantial amount of certain types of spectrum as specified in the agreement,
we would issue to the advisor 833,333 shares of common stock upon the completion
of such transaction.
  102
  10.
                Supplemental
      Cash Flow Information
  Supplemental
disclosure of cash flow information is as follows:
  Years
      Ended
                
                
                Inception
                  (April
      13,
                  2005)
      to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Cash
      paid for income taxes
                
                $
                602
                
                
                $
                124
                
                
                $
                152Cash
      paid for interest
                
                
                25,291
                
                
                
                —
                
                
                
                —Noncash
      investing and financing activities:
                
                
                
                
                
                
                
                
                
                
                —Equity
      interests issued for business acquisitions
                
                
                74,522
                
                
                
                —
                
                
                
                —Fair
      value of warrants issued in connection with the issuance of 7% Senior
      Secured Notes
                
                
                —
                
                
                
                24,626
                
                
                
                —Wireless
      spectrum licenses acquired with lease obligations
                
                
                5,569
                
                
                
                4,039
                
                
                
                —Membership
      interests issued for business acquisition
                
                
                —
                
                
                
                1,558
                
                
                
                —
 
  11.
                Segment
      and Geographic Information
  During
the fourth quarter of 2007, after a series of acquisitions, we reorganized our
businesses into four reportable segments on the basis of products, services and
strategic initiatives. Reportable segments are as follows:
  ·
                Semiconductor
      - WiMAX and LTE baseband chipsets and multi-band RFICs.·
                Multimedia–
      Device-embedded multimedia software, media content management platforms,
      and content delivery services delivered through our PacketVideo
      subsidiary.·
                Networks–
      3GPP UMTS and WiMAX based wireless broadband and mobile broadcast products
      and services and carrier-grade mobile Wi-Fi products and
      services.·
                Strategic
      Initiatives– manages our portfolio of licensed wireless spectrum and leads
      efforts to acquire additional spectrum assets, both domestically and
      internationally.
  Prior to
the fourth quarter of 2007, we operated in one reportable segment, a wireless
technology business focused on developing, acquiring and marketing
next-generation mobile broadband and wireless multimedia products and
technologies.  Prior period segment information has not been provided
as it would be impracticable to do so.
  We
evaluate the performance of our segments based on revenues and loss from
operations excluding depreciation and amortization.  Operating
expenses include research and development, and selling, general and
administrative expenses that are specific to the particular segment and an
allocation of certain corporate overhead expenses. Certain income and charges
are not allocated to segments in our internal management reports because they
are not considered in evaluating the segments’ operating performance.
Unallocated income and charges include investment income on corporate
investments and interest expense related to the  Notes and the change
in the fair value of the embedded derivatives on the Series A Preferred Stock,
all of which were deemed not to be directly related to the businesses of the
segments. We have no intersegment revenues.
  Financial
information for our reportable segments for the year ended December 29, 2007 is
as follows:
  (in
      thousands)
                
                Semi-
                    conductor
                
                
                Multimedia
                
                
                Networks
                
                
                Strategic
                    Initiatives
                
                
                Other
      or
                    Unallocated
                
                
                ConsolidatedRevenues
      from external customers
                
                $
                —
                
                
                $
                36,328
                
                
                $
                20,861
                
                
                $
                1,918
                
                
                $
                —
                
                
                $
                59,107Loss
      from operations
                
                
                (67,860
                )
                
                
                (24,779
                )
                
                
                (142,314
                )
                
                
                (13,314
                )
                
                
                (40,147
                )
                
                
                (288,414
                )Significant
      non-cash items included in loss from operations above:Depreciation
      and amortization expense
                
                
                1,092
                
                
                
                4,983
                
                
                
                18,102
                
                
                
                4,167
                
                
                
                7,933
                
                
                
                36,277Purchased
      in-process research and development costs
                
                
                —
                
                
                
                860
                
                
                
                11,200
                
                
                
                —
                
                
                
                —
                
                
                
                12,060Total
      assets
                
                
                4,766
                
                
                
                76,287
                
                
                
                242,190
                
                
                
                666,618
                
                
                
                268,877
                
                
                
                1,258,738Intangible
      assets, goodwill and spectrum deposits included in total
      assets
                
                
                —
                
                
                
                63,479
                
                
                
                186,115
                
                
                
                657,680
                
                
                
                92
                
                
                
                907,366
 
 103
  Geographic
Information
  Revenues
by geographic area are as follows:
  Years
      Ended
                
                
                Inception
                  (April
      13,
                  2005)
      to(in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006
                
                
                December
      31,
                    2005Revenues
      from customers located in:United
      States
                
                $
                31,762
                
                
                $
                16,511
                
                
                $
                1,858Asia
      Pacific
                
                
                10,231
                
                
                
                4,657
                
                
                
                1,324Europe
                
                
                16,829
                
                
                
                2,459
                
                
                
                552Rest
      of the world
                
                
                285
                
                
                
                657
                
                
                
                410Total
      revenues
                
                $
                59,107
                
                
                $
                24,284
                
                
                $
                4,144
 
  Long-lived
assets, which consist of property and equipment, non current deposits and
prepaid assets, and an investment in an unconsolidated business, by country are
as follows:
  (in
      thousands)
                
                December
      29,
                    2007
                
                
                December
      30,
                    2006United
      States
                
                $
                34,235
                
                
                $
                19,581Europe
                
                
                11,465
                
                
                
                252Asia-Pacific
                
                
                3,844
                
                
                
                3,711Rest
      of the world
                
                
                304
                
                
                
                154Total
      long-lived assets
                
                $
                49,848
                
                
                $
                23,698
 
  Concentration
of Risks
  A
significant portion of our revenues are concentrated with a limited number of
customers within the wireless telecommunications market.  For the year
ended December 29, 2007, revenues from one customers accounted for 39%, from the
Multimedia segment of our consolidated revenues, and two customers accounted for
18% and 11% from the Networks segment of our consolidated
revenues.  For the year ended December 30, 2006, revenues from one
customer accounted for 64% from the Multimedia segment of our consolidated
revenues  For the period from inception (April 13, 2005) to December
31, 2005, revenues from three customers accounted for 22%, 14% and 11% of our
consolidated revenues, all of which came from the Multimedia
segment.  Aggregated accounts receivable from three customers
accounted for 25%, 16% and 11% of total gross accounts receivable at December
29, 2007 and two customers accounted for 42% and 11% of total gross accounts
receivable at December 30, 2006.  No other single customer accounted
for 10% or more of revenues during years ended December 29, 2007, December 30,
2006 or during the period from inception (April 13, 2005) to December 31, 2005
or gross accounts receivable at December 29, 2007 or December 30,
2006.
  We
maintain our cash and cash equivalents in accounts which, at times, exceed
federally insured deposit limits.  We have not experienced any losses
in these accounts and believe we are not exposed to any significant credit risk
on these accounts.
  In
addition to our U.S. operations, we conduct business in Europe, Israel, South
America and in the Asia/Pacific region, primarily in Japan and Korea. Any
significant decline in the economies or the value of the currencies in these
regions could have a material adverse impact on us.
  12.
                Quarterly
      Financial Data (unaudited)
  The
following table summarizes our operating results by quarter for the years ended
December 29, 2007 and December 30, 2006:
  104
  (in
      thousands, except per share data)
                
                First
                    Quarter
                
                
                Second
                    Quarter
                
                
                Third
                    Quarter
                
                
                Fourth
                    Quarter
                
                
                TotalYear
      Ended December 29, 2007(1)(2):Revenues
                
                $
                7,746
                
                
                $
                12,832
                
                
                $
                17,752
                
                
                $
                20,777
                
                
                $
                59,107Cost
      of revenues
                
                $
                3,665
                
                
                $
                12,065
                (3)
                
                $
                22,036
                (3)
                
                $
                25,331
                
                
                $
                63,097Net
      loss
                
                $
                (49,395
                )
                
                $
                (65,265
                )
                
                $
                (100,852
                )
                
                $
                (104,598
                )
                
                $
                (320,110
                )Net
      loss applicable to common shares
                
                $
                (49,619
                )
                
                $
                (72,063
                )
                
                $
                (107,783
                )
                
                $
                (111,665
                )
                
                $
                (341,130
                )Basic
      and diluted net loss per common share
                
                $
                (0.59
                )
                
                $
                (0.81
                )
                
                $
                (1.17
                )
                
                $
                (1.21
                )
                
                $
                (3.81
                )Year
      Ended December 30, 2006(1)(2):Revenues
                
                $
                3,905
                
                
                $
                6,293
                
                
                $
                6,670
                
                
                $
                7,416
                
                
                $
                24,284Cost
      of revenues
                
                $
                1,807
                
                
                $
                2,638
                
                
                $
                3,506
                
                
                $
                4,103
                
                
                $
                12,054Net
      loss
                
                $
                (15,443
                )
                
                $
                (22,705
                )
                
                $
                (31,803
                )
                
                $
                (35,069
                )
                
                $
                (105,020
                )Basic
      and diluted net loss per common share
                
                $
                (0.19
                )
                
                $
                (0.28
                )
                
                $
                (0.39
                )
                
                $
                (0.43
                )
                
                $
                (1.28
                )
 
 (1)
                We
      operate on a 52-53 week fiscal year ending on the Saturday nearest to
      December 31 of the current calendar year or the following calendar year.
      Fiscal years 2007 and 2006 are 52-week years ending on December 29, 2007
      and December 30, 2006, respectively, and each of the four quarters in 2007
      and 2006 include 13 weeks.(2)
                The
      results of operations of acquired companies are included from the
      respective dates of the acquisitions, which affects the comparability of
      the Quarterly Financial Data.  .(3)
                During
      the fourth quarter of 2007, we reclassified intangible asset amortization
      expense recognized during the three months ended June 30, 2007 and
      September 29, 2007 from general and administrative expense and
      engineering, research and development expense to cost of revenues,
      engineering, research and development, and sales and marketing
      expenses.  The change in the allocation of the amortization
      expense, which relates to the intangible assets acquired with IPWireless
      and GO Networks, was made to more accurately classify the amortization
      expense with the operational function that benefits the most from the
      respective assets.  The reclassification had no effect on total
      operating expenses, loss from operations, net loss, loss per common share
      or the consolidated balance sheets.  The following table
      presents the impact of the reclassifications on our previously reported
      consolidated operating expenses for the three months ended June 30, 2007
      and September 29, 2007,
respectively:
 
  Three
      Months EndedJune
      30, 2007
                
                
                September
      29, 2007(in
      thousands)
                
                As
                    Reported
                
                
                Reclasses
                
                
                As
                    Adjusted
                
                
                As
                    Reported
                
                
                Reclasses
                
                
                As
      AdjustedOperating
      expenses:Cost
      of revenues
                
                $
                10,549
                
                
                $
                1,516
                
                
                $
                12,065
                
                
                $
                17,324
                
                
                $
                4,712
                
                
                $
                22,036Engineering,
      research and development
                
                
                34,350
                
                
                
                87
                
                
                
                34,437
                
                
                
                42,556
                
                
                
                (187
                )
                
                
                42,369Sales
      and marketing
                
                
                5,562
                
                
                
                50
                
                
                
                5,612
                
                
                
                7,449
                
                
                
                297
                
                
                
                7,746General
      and administrative
                
                
                21,845
                
                
                
                (1,653
                )
                
                
                20,192
                
                
                
                30,939
                
                
                
                (4,822
                )
                
                
                26,117Purchased
      in-process research and development costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                11,200
                
                
                
                —
                
                
                
                11,200Total
      operating expenses
                
                $
                72,306
                
                
                $
                —
                
                
                $
                72,306
                
                
                $
                109,468
                
                
                $
                —
                
                
                $
                109,468
 
  13.
                Subsequent
      Events (Unaudited)
  On March
3, 2008, we entered into an agreement to acquire all of the outstanding equity
interests of Southam Chile SA, a Chilean corporation, and Sociedad Televisora
CBC Limitada, a Chilean limited liability company, for an initial cash payment
of $4.5 million and additional cash payments of up to $1.7 million upon the
occurrence of certain specified events prior to the third anniversary of the
acquisition date. We anticipate that the acquisition will close in late March
2008.
  As a
result, we continue to hold these securities and the issuers are required pay
interest on the securities at the maximum contractual rates.  We
reduced our total ARS investments principally by investing in other short-term
marketable securities, as individual ARS reset periods came
due.  Unsuccessful auctions have caused us to hold these securities
beyond their scheduled auction reset dates, limiting the short-term liquidity of
these investments. Such developments may result in the classification of some or
all of these securities as long-term in our consolidated balance sheets in 2008
or future periods. In addition, if the issuers are unable to successfully close
future auctions and their credit ratings deteriorate, we may, in the future, be
required to adjust the carrying value of these investments which would result in
a charge to our consolidated statement of operations.
  105
   NEXTWAVE
WIRELESS INC.
  Schedule
II—Valuation and Qualifying Accounts
 
 
 (in
      thousands)
                
                Balance
      at
                    Beginning
                    ofPeriod
                
                
                Additions
                    Acquired
                    from
      Business
                    Combinations
                
                
                Net
                    Additions
                    Charged
                    (Credited)
                    to
      Expense
                
                
                Deductions(1)
                
                
                Balance
      at
                    End
      of
                    PeriodYear
      Ended December 29, 2007:Allowance
      for doubtful accounts
                
                $
                321
                
                
                $
                —
                
                
                $
                1,121
                
                
                $
                (23
                )
                
                $
                1,419Reserve
      for contract losses
                
                $
                528
                
                
                $
                13,440
                
                
                $
                252
                
                
                $
                —
                
                
                $
                14,220Reserve
      for warrants costs
                
                $
                0
                
                
                $
                178
                
                
                $
                1,107
                
                
                $
                (447
                )
                
                $
                838Unfavorable
      lease liability
                
                $
                988
                
                
                $
                —
                
                
                $
                60
                
                
                $
                (588
                )
                
                $
                460Year
      Ended December 30, 2006:Allowance
      for doubtful accounts
                
                $
                391
                
                
                $
                —
                
                
                $
                236
                
                
                $
                (306
                )
                
                $
                321Reserve
      for contract losses
                
                $
                —
                
                
                $
                —
                
                
                $
                528
                
                
                $
                —
                
                
                $
                528Reserve
      for contract termination fee
                
                $
                7,121
                
                
                $
                —
                
                
                $
                (7,121
                )
                
                $
                —
                
                
                $
                —Unfavorable
      lease liability
                
                $
                1,037
                
                
                $
                318
                
                
                $
                75
                
                
                $
                (442
                )
                
                $
                988Period
      from Inception (April 13, 2005) to December 31, 2005:Allowance
      for doubtful accounts
                
                $
                —
                
                
                $
                195
                
                
                $
                218
                
                
                $
                (22
                )
                
                $
                391Reserve
      for contract termination fee
                
                $
                —
                
                
                $
                —
                
                
                $
                7,121
                
                
                $
                —
                
                
                $
                7,121Unfavorable
      lease liability
                
                $
                1,260
                
                
                $
                —
                
                
                $
                67
                
                
                $
                (290
                )
                
                $
                1,037
 
  (1)
                Deduction
      for allowance for doubtful accounts is for accounts receivable
      written-off.  Deduction for the unfavorable lease liability
      represents amounts paid in cash. Deduction for reserve for warrants costs
      represent reserves for warrants costs incurred and
  paid.
  106
  Item 9.    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
    Item 9A.  Controls and
Procedures
  Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures
  We
maintain disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are designed to provide reasonable assurance that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required financial disclosures. Because of inherent
limitations, our disclosure controls and procedures, no matter how well designed
and operated, can provide only reasonable, and not absolute, assurance that the
objectives of such disclosure controls and procedures are met.
  As of the
end of the period covered by this Annual Report on Form 10-K, we conducted an
evaluation, under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were effective as of
December 29, 2007. However, in connection with our financial statement close
process and our acquisition integration efforts, we identified several control
deficiencies at a company we acquired in 2007 whose operations are primarily
foreign. Specifically, there were deficiencies in information technology general
controls and the availability of a sufficiently trained workforce in the
accounting organization. Ernst & Young LLP, in connection with their audit
for the year ended December 29, 2007, also identified control deficiencies in
the revenue recognition and financial statement close processes at this same
acquired company.  These deficiencies could rise to the level of one
or more material weaknesses once the evaluation of these controls has been
completed. We are in the process of implementing a number of measures to remedy
these deficiencies including the implementation of our accounting and enterprise
resource planning system. We believe the new controls and procedures will
address the deficiencies identified. The evaluation of these controls is
expected to be completed subsequent to the date of this report and will be
included in our report on internal control over financial reporting for the year
ending December 27, 2008. We plan to continue to monitor the effectiveness of
the acquired company’s controls, including the operating effectiveness of the
newly implemented measures and plan to take further action, as
appropriate.
  Management’s
Report on Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the financial
statements for external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that internal controls may become inadequate because of changes in
conditions, or that the degree of compliance with policies and procedures may
deteriorate.
  Management’s
assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of the recent
acquisitions of SDC Secure Digital Container AG, acquired in January 2007, GO
Networks, Inc., acquired in February 2007, IPWireless, Inc., acquired in May
2007, WiMax Telecom AG, acquired in July 2007, Digital World Services AG,
acquired in September 2007, and Websky Argentina SA, acquired in October 2007,
which are included in the 2007 consolidated financial statements of NextWave
Wireless Inc. and constituted $64.3 million and $97.9 million of total assets
and total liabilities, respectively, as of December 29, 2007 and $24.7 million
and $94.1 million of total revenues and operating loss, respectively, for the
fiscal year then ended. Management did not assess the effectiveness of internal
control over financial reporting at the entities listed above because NextWave
Wireless Inc. did not have the ability to assess those controls due to the
timing of the acquisitions.
  107
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting
based on the framework set forth in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated
Framework, our management concluded that our internal control over
financial reporting was effective as of December 29, 2007.
  Ernst
& Young LLP, the independent registered public accounting firm that audited
the consolidated financial statements included in this Annual Report on Form
10-K, has also audited the effectiveness of our internal control over financial
reporting as of December 29, 2007, as stated in their report which is included
herein.
  Changes
in Internal Control Over Financial Reporting
  During
the three months ended December 29, 2007, there have been no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  
 Report
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
 
 The
Board of Directors and Shareholders of NextWave Wireless Inc.
 
 We have
audited NextWave Wireless Inc.’s internal control over financial reporting as of
December 29, 2007, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). NextWave Wireless Inc.’s management is
responsible for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report on
Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the company’s internal control over financial reporting
based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 As
indicated in the accompanying Management’s Report on Internal Control Over
Financial Reporting, management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the
internal controls of SDC Secure Digital Container AG, GO Networks, Inc.,
IPWireless, Inc., WiMax Telecom AG, Digital World Services AG and Websky
Argentina SA, which are included in the 2007 consolidated financial statements
of NextWave Wireless Inc. and constituted $64.3 million and $97.9 million of
total assets and total liabilities, respectively, as of December 29, 2007 and
$24.7 million and $94.1 million of total revenues and operating loss,
respectively, for the fiscal year then ended. Our audit of internal control over
financial reporting of NextWave Wireless Inc. also did not include an evaluation
of the internal control over financial reporting of the entities listed
above.
 
 108
 In our
opinion, NextWave Wireless Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 29, 2007, based onthe COSO criteria.
 
 We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets as of December
29, 2007 and December 30, 2006, and the related consolidated statements of
operations, equity and cash flows for the years then ended and for the period
from April 13, 2005 (date of inception) through December 31, 2005 of NextWave
Wireless Inc. and our report dated March 11, 2008 expressed an unqualified
opinion thereon.
 
 /s/ ERNST
& YOUNG LLP
 
 San
Diego, California
 March 11,
2008
 
 Item 9B.Other
Information
 
 The Company entered into an amendment to
the Purchase Agreement, dated as of March 10, 2008 (the “First Amendment”), by
and among NextWave Wireless LLC, NextWave Wireless Inc., certain guarantors set
forth on the signature pages thereto and certain holders set forth on the
signature pages thereto, relating to the Company’s 7% Senior Secured Noted due
2010 (the “Senior Notes”).  Pursuant to the First Amendment, the
Company obtained the ability to withdraw up to the full amount of a cash reserve
account established as collateral for the Senior Notes ($75 million plus
interest) for use in funding its business plan.  The Company will be
entitled to withdraw such amount subject to the payment of a consent fee equal
to up to $10.5 million in the aggregate.  The initial $3.5 million
consent fee paid upon effectiveness of the First Amendment entitles the Company
to immediately withdraw $25 million  from the cash reserve account, a
subsequent $3.5 million consent fee, if paid, would entitle the Company to
withdraw an additional $25 million and a final $3.5 million consent fee, if
paid, would entitle the Company to withdraw the remainder of the $75 million
plus interest.   The First Amendment also permits the Company to
incur an additional $25 million of indebtedness for the purposes of funding a
working capital line of credit subject to specified subordination terms, and an
additional $100 million of second lien indebtedness related to working capital
that remains subject to an intercreditor agreement with a party that is
reasonably satisfactory to the holders of a majority in aggregate principal
amount of the Senior Notes and intercreditor terms that are reasonably
satisfactory to the holders of at least two-thirds in aggregate principal amount
of the Senior Notes.  In addition, the First Amendment restricts the
types of investments that can be held in the cash reserve account to exclude
auction rate or similar securities.
 
 PART III
 
 Item 10.Directors, Executive Officers
and Corporate Governance
 
 EXECUTIVE
OFFICERS AND DIRECTORS
  Our Board
of Directors has adopted a Code of Business Conduct and Ethics that applies to
our directors, officers and employees. A copy of our Code of Business Conduct
and Ethics is available on our website at www.nextwave.com. We will also provide
a copy of our Code of Business Conduct and Ethics, without charge, to any
stockholder who so requests in writing.
 
 Except
for the information regarding executive officers required by Item 401 of
Regulation S-K, which is included in Part I of this Annual Report on Form 10-K
under Item 10, we incorporate the information required by this by reference to
our definitive proxy statement for our annual meeting of shareholders presently
scheduled to be held in May 2008.  We refer to this proxy statement as the
“2007 Proxy Statement”.
  PART III
 
 Item 11.Executive
Compensation
 
 We
incorporate the information required by this item by reference to the section
entitled “Executive Compensation” in the Proxy Statement. Nothing in this report
shall be construed to incorporate by reference the Board Compensation Committee
Report on Executive Compensation or the Performance Graph, which are contained
in the Proxy Statement, but expressly not incorporated herein.
 
 Item 12.Security Ownership of Certain
Beneficial Owners and Management
 
 We
incorporate the information required by this item by reference to the section
entitled “Security Ownership of Certain Beneficial Owners and Management” and
“Securities Authorized for Issuance under Equity Compensation Plans” in the 2008
Proxy Statement.
 
 109
 Item 13.Certain Relationships and
Related Transactions, and Director Independence
 
 We incorporate the information required
by this item by reference to the section entitled “Corporate Governance and
Related Matters - Certain Relationships and Related Transactions” in the Proxy
Statement.
 
 Item 14.Principal Accountant Fees and
Services
 
 We
incorporate the information required by this item by reference to the section
entitled “Audit Fees” in the 2008 Proxy Statement.
 
 110
 PART IV
 
 Item 15.Exhibits and Financial
Statement Schedule
 
 (a) Financial
Statements and Supplementary Data, Financial Statement Schedules and
Exhibits.
 
 See Index
to Financial Statements under Item 8 of this report.
 
 (b) Exhibits
 No.2.1
                Third
      Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of
      NextWave Personal Communications Inc., NextWave Power Partners Inc.,
      NextWave Partners Inc., NextWave Wireless Inc. and NextWave Telecom Inc.,
      dated January 21, 2005 (incorporated by reference to Exhibit 2.1 to the
      Registration Statement on Form 10 of NextWave Wireless LLC filed May 1,
      2006 (the “Form 10”))3.1
                Amended
      and Restated Certificate of Incorporation of NextWave Wireless Inc., as
      restated on November 6, 2006 (incorporated by reference to Exhibit 3.1 to
      the Registration Statement on Form S-4/A of NextWave Wireless Inc. filed
      November 7, 2006)3.2
                Amended
      and Restated By-laws of NextWave Wireless Inc., adopted on October 30,
      2007 (incorporated by reference to Exhibit 3.2 to the Current Report on
      Form 8-K of NextWave Wireless Inc. filed November 2,
  2007)4.1
                Specimen
      common stock certificate (incorporated by reference to Exhibit 4.1 to the
      Company’s Registration Statement on Form S-4/A filed November 7,
      2006)4.2
                Form
      of Station 4, LLC Warrant (incorporated by reference to Exhibit 4.2 to the
      Registration Statement on Form 10 of NextWave Wireless LLC filed May 1,
      2006 (the “Form 10”))4.3
                Warrant
      Agreement, dated as of July 17, 2006, among NextWave Wireless Inc. and the
      Holders listed on Schedule I thereto (incorporated by reference to Exhibit
      4.2 to the Current Report on Form 8-K of NextWave Wireless LLC filed July
      21, 2006 (the "July 21, 2006 Form 8-K"))4.4
                Certificate
      of Designations for NextWave Wireless Inc.'s Series A Senior Convertible
      Preferred Stock. (incorporated by reference to Exhibit 4.4 to the Annual
      Report on Form 10-K of NextWave Wireless Inc. filed March 30,
      2007)4.5
                Securities
      Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
      Inc. and the Purchasers listed on Schedule I thereto (incorporated by
      reference to Exhibit 10.19 to the 2006 10-K)10.1
                Agreement
      and Plan of Merger, dated November 7, 2006, by and among NextWave Wireless
      Inc., NextWave Wireless LLC and NextWave Merger LLC (incorporated by
      reference to Exhibit 2.1 to the Current Report on Form 8-K of NextWave
      Wireless Inc. filed November 7, 2006)10.2
                Agreement
      and Plan of Merger, dated as of December 31, 2006, by and among NextWave
      Wireless Inc., Go Acquisition Corp., GO Networks, Inc. and Nechemia J.
      Peres, as Stockholder Representative (incorporated by reference to Exhibit
      2.1 to the Current Report on Form 8-K of NextWave Wireless Inc. filed
      January 3, 2007).10.3
                Agreement
      and Plan of Merger, dated as of May 24, 2005, by and among NextWave
      Wireless LLC, PVC Acquisition Corp., PacketVideo Corporation and William
      D. Cvengros, as the Stockholder Representative (incorporated by reference
      to Exhibit 2.2 to Amendment #1 to the Registration Statement on Form 10 of
      NextWave Wireless LLC filed June 29, 2006 (“Amendment #1 to Form
      10”)).10.4
                Purchase
      Agreement, dated as of July 17, 2006, among NextWave Wireless LLC, as
      issuer, NextWave Broadband Inc., NW Spectrum Co., AWS Wireless Inc., and
      PacketVideo Corporation, as subsidiary guarantors, the note purchasers
      party thereto and The Bank of New York, as collateral agent (incorporated
      by reference to Exhibit 4.1 to the Current Report on Form 8-K/A of
      NextWave Wireless LLC filed September 8, 2006)10.5
                Registration
      Rights Agreement, dated as of July 17, 2006, among NextWave Wireless Inc.
      and the Purchasers listed on Schedule I thereto (incorporated by reference
      to Exhibit 4.3 to the July 21, 2006 Form
8-K)
  111
  10.6
                NextWave
      Wireless Inc. 2005 Stock Incentive Plan (incorporated by reference to
      Exhibit 99.1 to the Company’s Post-Effective Amendment No. 1 on Form S-8
      filed January 19, 2007)10.7
                CYGNUS
      Communications, Inc. 2004 Stock Option Plan (incorporated by reference to
      Exhibit 10.3 to the Form 10)10.8
                PacketVideo
      Corporation 2005 Equity Incentive Plan (incorporated by reference to
      Exhibit 10.2 to the Company’s Registration Statement on Form 10 filed on
      May 1, 2006)10.9
                NextWave
      Wireless Inc. 2005 Stock Incentive Plan Award Agreement (incorporated by
      reference to Exhibit 99.3 to the Company’s Registration Statement on Form
      S-8 filed December 7, 2006)10.10
                Acquisition
      Agreement by and among NextWave Telecom Inc., Cellco Partnership D/B/A
      Verizon Wireless and VZW Corp., dated as of November 4, 2004 (incorporated
      by reference to Exhibit 10.4 to the Form 10)10.11
                Acquisition
      Agreement, dated as of May 9, 2006, by and among (i) NextWave Wireless
      LLC, (ii) NW Spectrum Co., (iii) WCS Wireless, Inc., (iv) Columbia WCS
      III, Inc., (v) TKH Corp., (vi) Columbia Capital Equity Partners III
      (Cayman), L.P., the sole stockholder of Columbia WCS III, Inc., (vii) each
      of the stockholders of TKH Corp., namely, Aspen Partners Series A, Series
      of Aspen Capital Partners, L.P., Oak Foundation USA, Inc., Enteraspen
      Limited, and The Reed Institute dba Reed College and (viii) Columbia
      Capital, LLC, as the Stockholder Representative (incorporated by reference
      to Exhibit 10.7 to Amendment #1 of the Form 10)10.12
                Spectrum
      Acquisition Agreement, dated as of October 13, 2005, between NextWave
      Broadband Inc. and Bal-Rivgam, LLC (incorporated by reference to Exhibit
      10.8 to Amendment #1 of the Form 10)10.13
                Guaranty,
      dated as of July 17, 2006, by and among NextWave Broadband, Inc., NW
      Spectrum Co., AWS Wireless Inc., PacketVideo Corporation and The Bank of
      New York, as Collateral Agent (incorporated by reference to Exhibit 10.1
      to the July 21, 2006 Form 8-K)10.14
                Parent
      Guaranty, dated as of July 17, 2006, between NextWave Wireless Inc. and
      The Bank of New York, as Collateral Agent (incorporated by reference to
      Exhibit 10.2 to the July 21, 2006 Form 8-K)10.16
                Pledge
      and Security Agreement, dated as of July 17, 2006, by and among NextWave
      Wireless LLC, the undersigned direct and indirect subsidiaries of NextWave
      Wireless LLC, each additional Grantor that may become a party thereto and
      The Bank of New York, as Collateral Agent (incorporated by reference to
      Exhibit 10.3 to the July 21, 2006 Form 8-K)10.17
                NextWave
      Wireless Inc. 2007 New Employee Stock Incentive Plan (incorporated by
      reference to Exhibit 10.17 to the Annual Report on Form 10-K of NextWave
      Wireless Inc. filed March 30, 2007)10.18
                GO
      Networks, Inc. Stock Bonus Plan (incorporated by reference to Exhibit
      10.18 to the Annual Report on Form 10-K of NextWave Wireless Inc. filed
      March 30, 2007)10.19
                Securities
      Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
      Inc. and the Purchasers listed on Schedule I (the “Purchasers”) thereto
      (incorporated by reference to Exhibit 10.19 to the Annual Report on Form
      10-K of NextWave Wireless Inc. filed March 30, 2007)10.20
                Registration
      Rights Agreement, dated March 28, 2007, among NextWave Wireless Inc. and
      the Purchasers (incorporated by reference to Exhibit 10.20 to the Annual
      Report on Form 10-K of NextWave Wireless Inc. filed March 30,
      2007)10.21
                Agreement
      and Plan of Merger, dated as of April 6, 2007, by and among NextWave
      Wireless Inc., IPW, LLC, IPWireless, Inc. and J. Taylor Crandall, as
      Stockholder Representative (incorporated by reference to Exhibit 2.1 to
      the Current Report on Form 8-K of NextWave Wireless Inc. filed April 12,
      2007)10.22
                IPWireless,
      Inc. Employee Stock Bonus Plan (incorporated by reference to Exhibit 99.1
      to the Registration Statement on Form S-8 of NextWave Wireless Inc. filed
      July 13, 2007)10.23
                First
      Amendment to the NextWave Wireless Inc. 2007 New Employee Stock Incentive
      Plan (incorporated by reference to Exhibit 99.1 to the Registration
      Statement on Form S-8 of NextWave Wireless Inc. filed July 13,
      2007)
  112
  10.24
                First
      Amendment to the Purchase Agreement, dated March 12, 2008, by and among
      NextWave Wireless Inc., NextWave Wireless LLC and the holders named
      therein and the guarantors named therein, relating to the Company’s 7%
      Senior Secured Noted due 2010(1)10.25
                Amendment
      to the IPWireless, Inc. Employee Stock Bonus Plan, dated as of March 10,
      2008(1)14.1
                NextWave
      Wireless Inc. Code of Business Conduct and Ethics (available on the
      Company’s website at http://www.nextwave.com)21.1
                Subsidiaries
      of the Registrant23.1
                Consent
      of Ernst & Young LLP, Independent Registered Public Accounting
      Firm(1)24.1
                Power
      of Attorney (included in signature page)31.1
                Rule
      13a-14(a)/15d-14(a) Certification of Allen Salmasi, Chief Executive
      Officer(1)31.2
                Rule
      13a-14(a)/15d-14(a) Certification of George C. Alex, Chief Financial
      Officer(1)32.1
                Section 1350
      Certification of Allen Salmasi, Chief Executive
  Officer(1)32.2
                Section
      1350 Certification of George C. Alex, Chief Financial
      Officer(1)
 
 ____________
 
 *
              These
      exhibits relate to management contracts or compensatory plans or
      arrangements.(1)
              Filed
      herewith
  113
 
 SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 13,
2008.
  NEXTWAVE
      WIRELESS INC.By:
                /s/ 
      Allen
      SalmasiAllen
      SalmasiChief Executive
      Officer and President
 POWER
OF ATTORNEY
  KNOW ALL MEN BY THESE PRESENTS, that
each of the undersigned constitutes and appoints each of Frank A. Cassou, George
C. Alex and Roseann Rustici, or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for such person and in his name, place and stead, in any and all
capacities, to sign this Annual Report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that any such attorney-in-fact and
agent, or his/her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
  Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
the dates indicated.
 
 Signature
              
              Title
              
              Date/s/
      Allen Salmasi
              
              Chairman
      of the Board of Directors, Chief Executive Officer and
      President
                (Principal
      Executive Officer)
              
              March
      13, 2008Allen
      Salmasi/s/
      George C. Alex
              
              Executive
      Vice President - Chief Financial Officer (Principal Financial
      Officer)
              
              March
      13, 2008George
      C. Alex/s/ Francis J.
      Harding
              
              Executive
      Vice President - Corporate Controller
                (Principal Accounting
      Officer)
              
              March
      13, 2008Francis
      J. Harding/s/
      James Brailean
              
              Director
              
              March
      13, 2008James
      Brailean/s/
      William Jones
              
              Director
              
              March
      13, 2008William
      Jones
 
 /s/ Douglas
      Manchester
              
              Director
              
              March
      13, 2008Douglas
      Manchester
  114
  /s/
      Jack Rosen
              
              Director
              
              March
      13, 2008Jack
      Rosen/s/
      Robert T. Symington
              
              Director
              
              March
      13, 2008Robert
      T. Symington/s/
      William H. Webster
              
              Director
              
              March
      13, 2008William
      H. Webster
  115
  No.2.1
                  Third
      Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of
      NextWave Personal Communications Inc., NextWave Power Partners Inc.,
      NextWave Partners Inc., NextWave Wireless Inc. and NextWave Telecom Inc.,
      dated January 21, 2005 (incorporated by reference to Exhibit 2.1 to the
      Registration Statement on Form 10 of NextWave Wireless LLC filed May 1,
      2006 (the “Form 10”))3.1
                  Amended
      and Restated Certificate of Incorporation of NextWave Wireless Inc., as
      restated on November 6, 2006 (incorporated by reference to Exhibit 3.1 to
      the Registration Statement on Form S-4/A of NextWave Wireless Inc. filed
      November 7, 2006)3.2
                  Amended
      and Restated By-laws of NextWave Wireless Inc., adopted on October 30,
      2007 (incorporated by reference to Exhibit 3.2 to the Current Report on
      Form 8-K of NextWave Wireless Inc. filed November 2,
  2007)4.1
                  Specimen
      common stock certificate (incorporated by reference to Exhibit 4.1 to the
      Company’s Registration Statement on Form S-4/A filed November 7,
      2006)4.2
                  Form
      of Station 4, LLC Warrant (incorporated by reference to Exhibit 4.2 to the
      Registration Statement on Form 10 of NextWave Wireless LLC filed May 1,
      2006 (the “Form 10”))4.3
                  Warrant
      Agreement, dated as of July 17, 2006, among NextWave Wireless Inc. and the
      Holders listed on Schedule I thereto (incorporated by reference to Exhibit
      4.2 to the Current Report on Form 8-K of NextWave Wireless LLC filed July
      21, 2006 (the "July 21, 2006 Form 8-K"))4.4
                  Certificate
      of Designations for NextWave Wireless Inc.'s Series A Senior Convertible
      Preferred Stock. (incorporated by reference to Exhibit 4.4 to the Annual
      Report on Form 10-K of NextWave Wireless Inc. filed March 30,
      2007)4.5
                  Securities
      Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
      Inc. and the Purchasers listed on Schedule I thereto (incorporated by
      reference to Exhibit 10.19 to the 2006 10-K)10.1
                  Agreement
      and Plan of Merger, dated November 7, 2006, by and among NextWave Wireless
      Inc., NextWave Wireless LLC and NextWave Merger LLC (incorporated by
      reference to Exhibit 2.1 to the Current Report on Form 8-K of NextWave
      Wireless Inc. filed November 7, 2006)10.2
                  Agreement
      and Plan of Merger, dated as of December 31, 2006, by and among NextWave
      Wireless Inc., Go Acquisition Corp., GO Networks, Inc. and Nechemia J.
      Peres, as Stockholder Representative (incorporated by reference to Exhibit
      2.1 to the Current Report on Form 8-K of NextWave Wireless Inc. filed
      January 3, 2007).10.3
                  Agreement
      and Plan of Merger, dated as of May 24, 2005, by and among NextWave
      Wireless LLC, PVC Acquisition Corp., PacketVideo Corporation and William
      D. Cvengros, as the Stockholder Representative (incorporated by reference
      to Exhibit 2.2 to Amendment #1 to the Registration Statement on Form 10 of
      NextWave Wireless LLC filed June 29, 2006 (“Amendment #1 to Form
      10”)).10.4
                  Purchase
      Agreement, dated as of July 17, 2006, among NextWave Wireless LLC, as
      issuer, NextWave Broadband Inc., NW Spectrum Co., AWS Wireless Inc., and
      PacketVideo Corporation, as subsidiary guarantors, the note purchasers
      party thereto and The Bank of New York, as collateral agent (incorporated
      by reference to Exhibit 4.1 to the Current Report on Form 8-K/A of
      NextWave Wireless LLC filed September 8, 2006)10.5
                  Registration
      Rights Agreement, dated as of July 17, 2006, among NextWave Wireless Inc.
      and the Purchasers listed on Schedule I thereto (incorporated by reference
      to Exhibit 4.3 to the July 21, 2006 Form 8-K)
 10.6
                  NextWave
      Wireless Inc. 2005 Stock Incentive Plan (incorporated by reference to
      Exhibit 99.1 to the Company’s Post-Effective Amendment No. 1 on Form S-8
      filed January 19, 2007)10.7
                  CYGNUS
      Communications, Inc. 2004 Stock Option Plan (incorporated by reference to
      Exhibit 10.3 to the Form 10)10.8
                  PacketVideo
      Corporation 2005 Equity Incentive Plan (incorporated by reference to
      Exhibit 10.2 to the Company’s Registration Statement on Form 10 filed on
      May 1, 2006)
  116
  10.9
                  NextWave
      Wireless Inc. 2005 Stock Incentive Plan Award Agreement (incorporated by
      reference to Exhibit 99.3 to the Company’s Registration Statement on Form
      S-8 filed December 7, 2006)10.10
                  Acquisition
      Agreement by and among NextWave Telecom Inc., Cellco Partnership D/B/A
      Verizon Wireless and VZW Corp., dated as of November 4, 2004 (incorporated
      by reference to Exhibit 10.4 to the Form 10)10.11
                  Acquisition
      Agreement, dated as of May 9, 2006, by and among (i) NextWave Wireless
      LLC, (ii) NW Spectrum Co., (iii) WCS Wireless, Inc., (iv) Columbia WCS
      III, Inc., (v) TKH Corp., (vi) Columbia Capital Equity Partners III
      (Cayman), L.P., the sole stockholder of Columbia WCS III, Inc., (vii) each
      of the stockholders of TKH Corp., namely, Aspen Partners Series A, Series
      of Aspen Capital Partners, L.P., Oak Foundation USA, Inc., Enteraspen
      Limited, and The Reed Institute dba Reed College and (viii) Columbia
      Capital, LLC, as the Stockholder Representative (incorporated by reference
      to Exhibit 10.7 to Amendment #1 of the Form 10)10.12
                  Spectrum
      Acquisition Agreement, dated as of October 13, 2005, between NextWave
      Broadband Inc. and Bal-Rivgam, LLC (incorporated by reference to Exhibit
      10.8 to Amendment #1 of the Form 10)10.13
                  Guaranty,
      dated as of July 17, 2006, by and among NextWave Broadband, Inc., NW
      Spectrum Co., AWS Wireless Inc., PacketVideo Corporation and The Bank of
      New York, as Collateral Agent (incorporated by reference to Exhibit 10.1
      to the July 21, 2006 Form 8-K)10.14
                  Parent
      Guaranty, dated as of July 17, 2006, between NextWave Wireless Inc. and
      The Bank of New York, as Collateral Agent (incorporated by reference to
      Exhibit 10.2 to the July 21, 2006 Form 8-K)10.16
                  Pledge
      and Security Agreement, dated as of July 17, 2006, by and among NextWave
      Wireless LLC, the undersigned direct and indirect subsidiaries of NextWave
      Wireless LLC, each additional Grantor that may become a party thereto and
      The Bank of New York, as Collateral Agent (incorporated by reference to
      Exhibit 10.3 to the July 21, 2006 Form 8-K)10.17
                  NextWave
      Wireless Inc. 2007 New Employee Stock Incentive Plan (incorporated by
      reference to Exhibit 10.17 to the Annual Report on Form 10-K of NextWave
      Wireless Inc. filed March 30, 2007)10.18
                  GO
      Networks, Inc. Stock Bonus Plan (incorporated by reference to Exhibit
      10.18 to the Annual Report on Form 10-K of NextWave Wireless Inc. filed
      March 30, 2007)10.19
                  Securities
      Purchase Agreement, dated March 28, 2007, by and among NextWave Wireless
      Inc. and the Purchasers listed on Schedule I (the “Purchasers”) thereto
      (incorporated by reference to Exhibit 10.19 to the Annual Report on Form
      10-K of NextWave Wireless Inc. filed March 30, 2007)10.20
                  Registration
      Rights Agreement, dated March 28, 2007, among NextWave Wireless Inc. and
      the Purchasers (incorporated by reference to Exhibit 10.20 to the Annual
      Report on Form 10-K of NextWave Wireless Inc. filed March 30,
      2007)10.21
                  Agreement
      and Plan of Merger, dated as of April 6, 2007, by and among NextWave
      Wireless Inc., IPW, LLC, IPWireless, Inc. and J. Taylor Crandall, as
      Stockholder Representative (incorporated by reference to Exhibit 2.1 to
      the Current Report on Form 8-K of NextWave Wireless Inc. filed April 12,
      2007)10.22
                  IPWireless,
      Inc. Employee Stock Bonus Plan (incorporated by reference to Exhibit 99.1
      to the Registration Statement on Form S-8 of NextWave Wireless Inc. filed
      July 13, 2007)10.23
                  First
      Amendment to the NextWave Wireless Inc. 2007 New Employee Stock Incentive
      Plan (incorporated by reference to Exhibit 99.1 to the Registration
      Statement on Form S-8 of NextWave Wireless Inc. filed July 13,
      2007)
 10.24
                  First
      Amendment to the Purchase Agreement, dated March 12,2008, by and among
      NextWave Wireless Inc., NextWave Wireless LLC and the holders named
      therein and the guarantors named therein, relating to the Company’s 7%
      Senior Secured Noted due 2010(1)10.25
                  Amendment
      to the IPWireless, Inc. Employee Stock Bonus Plan, dated as of March 10,
      2008(1)14.1
                  NextWave
      Wireless Inc. Code of Business Conduct and Ethics (available on the
      Company’s website at
http://www.nextwave.com)
  117
  21.1
                  Subsidiaries
      of the Registrant23.1
                  Consent
      of Ernst & Young LLP, Independent Registered Public Accounting
      Firm(1)24.1
                  Power
      of Attorney (included in signature page)31.1
                  Rule
      13a-14(a)/15d-14(a) Certification of Allen Salmasi, Chief Executive
      Officer(1)31.2
                  Rule
      13a-14(a)/15d-14(a) Certification of George C. Alex, Chief Financial
      Officer(1)32.1
                  Section 1350
      Certification of Allen Salmasi, Chief Executive
  Officer(1)32.2
                  Section
      1350 Certification of George C. Alex, Chief Financial
      Officer(1)
 ____________
 
 *
              These
      exhibits relate to management contracts or compensatory plans or
      arrangements.(1)
              Filed
      herewith