<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                  FORM 10-Q
    
                  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended           Commission file number:  0-15895
September 30, 1997
------------------

                        DIGITAL MICROWAVE CORPORATION
             (Exact name of registrant specified in its charter)
                                         
           Delaware                           77-0016028 
--------------------------------        ------------------------
  (State or other jurisdiction               (IRS employer
of incorporation or organization)        identification number)

         170 Rose Orchard Way                                
             San Jose, CA                       95134
----------------------------------           ----------
(Address of Principal Executive Offices)     (Zip Code)


Registrant's telephone number, including area code:      (408) 943-0777
                                                         ---------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

              Yes    X            No  
                   ------             ------

The number of  outstanding shares of  the Registrant's Common Stock, par value
$.01 per share, was 19,046,706  on October 31, 1997.

                                                                  Page 1 of 17
<PAGE>

                                   INDEX
                                                               PAGE
COVER PAGE                                                         1

INDEX                                                              2

PART I - FINANCIAL INFORMATION

    Item 1 - Financial Statements

         Condensed Consolidated Balance Sheets                     3

         Condensed Consolidated Statements of Operations           4

         Condensed Consolidated Statements of Cash Flows           5

         Notes to Condensed Consolidated Financial Statements      6-8

    Item 2 - Management's Discussion and Analysis of  
             Financial Condition and Results of Operations         9-13


PART II - OTHER INFORMATION

    Item 4 - Submission of Matters to a Vote of Security Holders   14

Item 6 - Exhibits and Reports on Form 8-K                          15 & 17

SIGNATURE                                                          16
















                                                                  Page 2 of 17


<PAGE>

                            PART I - FINANCIAL INFORMATION

                            ITEM I - FINANCIAL STATEMENTS
                                           
                            DIGITAL MICROWAVE CORPORATION
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (In Thousands)

ASSETS                                           9/30/97       03/31/97
                                               -----------     ---------
                                               (Unaudited)
 CURRENT ASSETS:
    Cash and cash equivalents                  $  20,098       $  40,367
    Short-term investments                        13,206          17,947
    Accounts receivable, net                      57,250          44,623
    Inventories                                   48,014          45,900
    Other current assets                           4,858           3,643
                                               -----------     ---------
         Total current assets                    143,426         152,480

PROPERTY AND EQUIPMENT, NET                       21,240          17,726
OTHER ASSETS                                      15,455             --
                                               -----------     ---------
    Total assets                                $180,121        $170,206
                                               -----------     ---------
                                               -----------     ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Line of credit                             $    --          $  2,016
    Current maturities of capital lease 
      obligations                                    490             681
    Accounts payable                              21,936          22,890
    Income taxes payable                           2,453           1,649
    Accrued liabilities                           18,597          25,284
                                               -----------     ---------
         Total current liabilities                43,476          52,520

LONG-TERM LIABILITIES:
    Capital lease obligations, net of 
      current maturities                             179             158
                                               -----------     ---------
    Total liabilities                             43,655          52,678

STOCKHOLDERS' EQUITY         
    Common stock and paid-in capital             127,367         121,676
    Other stockholders' equity                       (20)            (63)
    Retained earnings (accumulated deficit)        9,119          (4,085)
                                               -----------     ---------
    Total stockholders' equity                   136,466         117,528
    
    Total liabilities and stockholders' equity  $180,121        $170,206
                                               -----------     ---------
                                               -----------     ---------

   See accompanying Notes to Condensed Consolidated Financial Statements.


                                                                 Page 3 of 17
<PAGE>

                            DIGITAL MICROWAVE CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In thousands, except per share amounts)
                                     (Unaudited)
                                            
                                         Three Months Ended  Six Months Ended
                                            September 30,      September 30,
                                         ------------------  -----------------
                                           1997      1996      1997     1996
                                         --------  --------  --------  -------
Net sales                                 $67,106  $41,525   $123,839  $78,332
Cost of sales                              43,563   27,783     80,623   52,685
                                         --------  --------  --------  -------
Gross profit                               23,543   13,742     43,216   25,647
                                         --------  --------  --------  -------
Operating Expenses:
    Research and development                3,709    2,467      7,191    4,928
    Selling, general and administrative    11,539    8,702     21,670   16,629
                                         --------  --------  --------  -------
    Total operating expenses               15,248   11,169     28,861   21,557
                                         --------  --------  --------  -------
Operating income                            8,295    2,573     14,355    4,090

Other income (expense):
Interest and other income, net                 65       83        537       96
Interest expense                             (118)    (299)      (222)    (581)
                                         --------  --------  --------  -------
Income before provision for
     income taxes                           8,242    2,357     14,670    3,605

Provision for income taxes                    824      235      1,467      360
                                         --------  --------  --------  -------
Net income                                $ 7,418  $ 2,122   $ 13,203  $ 3,245
                                         --------  --------  --------  -------
                                         --------  --------  --------  -------
Net income per share                      $  0.37  $  0.13   $   0.67  $  0.20
                                         --------  --------  --------  -------
                                         --------  --------  --------  -------
Weighted average number of 
    common  & common equivalent shares 
    outstanding                            19,969   16,611     19,751   16,436
                                         --------  --------  --------  -------
                                         --------  --------  --------  -------

         See accompanying Notes to Condensed Consolidated Financial Statements.

                                                                   Page 4 of 17
<PAGE>

                            DIGITAL MICROWAVE CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (In thousands)
                                     (Unaudited)

                                                          Six Months Ended
                                                            September 30,
                                                         ------------------
                                                            1997     1996
                                                         --------  --------
Cash flows from operating activities:
Net income                                               $ 13,203  $  3,245
    Adjustments to reconcile net income to net cash 
    used for operating activities:

    Depreciation and amortization                           4,436     2,716
    Provision for valuation reserves                        3,073     2,383
    Provision for warranty reserves                         2,072       915
    Changes in assets and liabilities:
         Increase in accounts receivable                  (11,199)   (2,611)
         Increase in inventories                           (3,602)  (13,648)
         Increase in other current assets                  (1,074)     (737)
         (Decrease) increase in accounts payable           (1,408)      265
         Increase in income taxes payable                     787        --
         (Decrease) increase in other accrued liabilities  (9,133)    1,433
                                                         --------  --------
Net cash used for operating activities                     (2,845)   (6,039)
                                                         --------  --------
Cash flows from investing activities:
    Purchases of available-for-sale securities             (3,193)       --
    Proceeds from available-for-sale securities             7,933        --
    Purchase of Granger, Inc., net of cash acquired       (11,383)       --
    Investment in Granger Associates, Ltd.                 (4,000)       --
    Purchases of property and equipment                    (6,808)   (2,531)
                                                         --------  --------
Net cash used for investing activities                    (17,451)   (2,531)
Cash flows from financing activities:
    (Repayments to) borrowings from bank                   (2,016)    2,889
    Payment of capital lease obligations                     (583)     (553)
    Payment of assumed Granger, Inc. debt                  (3,286)       --
    Sale of common stock                                    5,689     1,613
                                                         --------  --------
Net cash provided by financing activities                    (196)    3,949
                                                         --------  --------
    Effect of exchange rate changes on cash                   223       149
                                                         --------  --------
Net increase (decrease) in cash and cash equivalents      (20,269)   (4,472)
Cash and cash equivalents at beginning of year             40,367     9,018
                                                         --------  --------
Cash and cash equivalents at end of period                $20,098    $4,546
                                                         --------  --------
                                                         --------  --------
SUPPLEMENTAL DATA
    Interest paid                                              230      573
    Income tax paid                                            540       --


      See accompanying Notes to Condensed Consolidated Financial Statements.

                                                                   Page 5 of 17

<PAGE>

                            DIGITAL MICROWAVE CORPORATION
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)



BASIS OF PRESENTATION

    The condensed consolidated financial statements include the accounts of
    Digital Microwave Corporation and its wholly owned subsidiaries. 
    Intercompany accounts and transactions have been eliminated.
    
    While the financial information furnished is unaudited, the financial
    statements included in this report reflect all adjustments (consisting only
    of normal recurring adjustments) which the Company considers necessary for
    a fair presentation of the results of operations for the interim periods
    covered and of the financial condition of the Company at the date of the
    interim balance sheet.  The results for interim periods are not necessarily
    indicative of the results for the entire year.  The condensed consolidated
    financial statements should be read in connection with the Digital
    Microwave Corporation financial statements included in the Company's annual
    report and Form 10-K for the year ended March 31, 1997.
    
CASH AND CASH EQUIVALENTS

    For purposes of the condensed consolidated statements of cash flows, the
    Company considers all highly liquid debt instruments with an original 
    maturity of three months or less to be cash equivalents.  
         
INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out) or
    market where cost includes material, labor and manufacturing overhead. 
    Inventories consist of: 

                                (In thousands) 
                     September 30, 1997  March 31, 1997
                     ------------------  --------------
                         (Unaudited)
                    
    Raw materials          18,439        $  16,594
    Work in process        15,610           15,122
    Finished goods         13,965           14,184
                     ------------------  --------------
                        $  48,014        $  45,900
                     ------------------  --------------
                     ------------------  --------------

OTHER ASSETS

Included in other assets are goodwill and other intangibles which are being
amortized on a straight line basis over their useful lives ranging from 5 to 10
years.

                                                                   Page 6 of 17

<PAGE>

CURRENCY TRANSLATION

    In April 1997, the Company changed the functional currency of its
    subsidiaries from the U.S. dollar to the local currency of each subsidiary
    except for its Latin American subsidiaries.  Accordingly, all the assets
    and liabilities of these subsidiaries, except for the Latin American
    subsidiaries, are remeasured into U.S. dollars at current exchange rates.  
    Sales and expenses are remeasured at the average exchange rate prevailing
    during the period.  Gains and losses resulting from the remeasurement of
    the subsidiaries' financial statements are included as a component of
    stockholders' equity, except for the Latin American subsidiaries which are
    included in the Consolidated Statement of Operations.  

FINANCIAL INSTRUMENTS

    In April 1997, the Company began entering into forward foreign
    exchange contracts to hedge some of its backlog, as well as certain
    assets and liabilities denominated in foreign currencies.  At
    September 30, 1997, the Company had forward foreign exchange contracts
    to exchange various foreign currencies for U.S. dollars in the gross
    amount of $40.1 million.  Market value gains and losses on forward
    foreign exchange contracts are recognized as offsets to the exchange
    gains or losses on the hedged transactions.

NET INCOME PER SHARE

    Net income per share is computed using the weighted average number of
    common and common equivalent shares outstanding during the period. 
    
    In February 1997, the Financial Accounting Standards Board issued Statement
    on Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share,"
    which is required to be adopted by the Company in its third quarter of
    Fiscal 1998.   At that time the Company will be required to change the
    method currently used to compute earnings per share and to restate all
    prior periods.  Under the new requirements, primary earnings per share will
    be replaced with basic earnings per share and fully diluted earnings per
    share will be replaced with diluted earnings per share.  Under SFAS 128,
    basic earnings per share for the second quarters of Fiscal 1998 and 1997
    would have been $.39 and $.13, respectively.  Diluted earnings per share
    would be substantially the same as the reported primary earnings per share. 


                                                                   Page 7 of 17

<PAGE>

      PURCHASE OF GRANGER, INC AND INVESTMENT IN GRANGER ASSOCIATES

    On May 14, 1997, the Company acquired all of the outstanding shares of
    Granger, Inc., a U.S. manufacturer of wireless products and provider of
    installation services.  The purchase price of Granger, Inc. and the
    purchase of certain rights, totaled $14.7 million.  In May 1997, the
    Company paid  $3.3  million of  Granger, Inc. debt assumed in the
    acquisition.  The purchase price and repayment of debt was funded with
    existing cash.  The acquisition has been accounted for using the purchase
    method of accounting.  
    
    Accordingly, the results of the operations of Granger, Inc. have been
    combined with those of the Company since the date of  the acquisition.  In
    addition, a portion of the purchase price was allocated to the net assets
    acquired based on their estimated fair values.  The fair value of tangible
    assets acquired and liabilities assumed was $5.8 million and $1.9 million,
    respectively.
    
    Concurrent with the acquisition of Granger, Inc., the Company made a
    minority investment in Granger Associates, Ltd., a privately held company
    based in the United Kingdom, for $4.0 million.  This minority investment
    has been accounted for using the cost method of accounting. 

LITIGATION AND CONTINGENCIES

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

CONCENTRATION OF CREDIT RISK

    Trade receivables concentrated with certain customers primarily in the
    telecommunications industry and in certain geographic locations potentially
    subject the Company to concentration of credit risk.  In addition to sales 
    in Western Europe and North America, the Company actively markets and sells
    products in Asia, Eastern Europe, South America, the Middle East and Africa.
    The Company performs on-going credit evaluations of its customers' financial
    conditions and generally requires no collateral.

                                                                   Page 8 of 17

<PAGE>

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

The following table sets forth items from the Condensed Consolidated Statements
of Operations as percentages of net sales:

                                   Three Months Ended  Six Months Ended
                                      September 30       September 30,
                                   ------------------  ----------------
                                    1997      1996      1997      1996
                                   -----     -----     -----     -----
Net sales                          100.0%    100.0%    100.0%    100.0%
Cost of sales                       64.9      66.9      65.1      67.3
                                   -----     -----     -----     -----
Gross profit                        35.1      33.1      34.9      32.7

Research & development               5.5       5.9       5.8       6.3
Selling, general & administrative   17.2      21.0      17.5      21.2
                                   -----     -----     -----     -----
Operating income                    12.4       6.2      11.6       5.2

Other expense, net                  (0.1)     (0.5)      0.2      (0.6)
                                   -----     -----     -----     -----
Income before provision 
     for income taxes               12.3       5.7      11.8       4.6

Provision for income taxes           1.2       0.6       1.2       0.5
                                   -----     -----     -----     -----
          Net income                11.1%      5.1%     10.6%      4.1%
                                   -----     -----     -----     -----
                                   -----     -----     -----     -----

Net sales for the second quarter of fiscal year 1998 were $67.1 million,
compared to $41.5 million reported in the same quarter of fiscal year 1997.  Net
sales for the first six months of fiscal 1998 were $123.8 million, compared to
net sales of $78.3 million for the similar period in fiscal 1997.  The increase
in net sales in the first half of fiscal 1998 as compared to the first half of
fiscal 1997 was primarily due to higher sales in all major geographic areas. 

During the second quarter of fiscal 1998, the Company received $66 million in
new orders shippable over the next twelve months, compared to $48 million in the
second quarter of fiscal 1997. Backlog at September 30, 1997 was $103.5 million,
compared to $106 million at June 30, 1997.

                                                                   Page 9 of 17

<PAGE>

The Company includes in its backlog purchase orders with respect to which a
delivery schedule has been specified for product shipment within one year. 
Orders in the Company's current backlog are subject to changes in delivery
schedules or to cancellation at the option of the purchaser without significant
penalty.  Accordingly, although useful for scheduling production, backlog as of
any particular date may not be a reliable measure of sales for any future
period.

Gross profits in the second quarter and first half of fiscal 1998 were 2% 
higher compared to the same periods in fiscal 1997 primarily due to improved 
manufacturing efficiency, lower component material costs, less overtime and 
lower expediting costs. In addition, net sales for the first six months of 
fiscal 1998 of SPECTRUM II-TM- increased to $77.7 million or 156% from $30.3 
million for the similar period of fiscal 1997, while net sales for the 
M-Series product line decreased from $20.1 million to $7.8 million for the 
same periods. The Company has seen its gross profit continue to improve; 
however, there can be no assurance that the Company will be able to maintain 
its gross profit at current levels. Of particular concern is the intense 
competitive price pressure of the telecommunications market, which results in 
downward pricing pressure on the Company's products.  See "Factors That May 
Affect Future Financial Results."  

Research and development expenses increased by $1.2 million, from $2.5 million
in the second quarter of fiscal 1997 to $3.7 million in the same period in
fiscal 1998.  For the first half of fiscal 1998, research and development
expenses of $7.2 million were $2.3 million higher than the $4.9 million reported
in the comparable period of fiscal 1997. The increase in research and 
development expenses was primarily attributable to the Company's development 
of its new Altium-TM- high-capacity wireless platform. The Company will 
continue to invest in the development of new products and features in order 
to maintain and enhance its competitive position and expects research and 
development spending to continue to increase in fiscal 1998.

Selling, general and administrative expenses of $11.5 million in the second
quarter of fiscal 1998 were higher by $2.8 million compared to $8.7 million in
the second quarter of fiscal 1997.  For the first six months of fiscal 1998,
selling, general and administrative expenses increased by $5.1 million to $21.7
million from $16.6 million in the similar period of fiscal 1997.  The increase
was mostly attributable to an increase in personnel and related travel expense,
as well as increased sales office costs, as the Company continued to increase
its sales and worldwide support capability. In addition, Goodwill amortization
related to the acquisition of Granger, Inc. on May 14, 1997, as well as the
selling and administrative expenses of Granger, Inc., partially contributed to
the increase.  There also was an increase in sales commission and bonus expense
in the first half of fiscal 1998 compared to the similar period of fiscal 1997
due to the increased sales and improved profitability of the Company during that
period.  

Interest and other income, net was $65,000 in the second quarter of fiscal 1998
compared to $83,000 in the similar quarter of fiscal 1997.  Interest income for
the 

                                                                   Page 10 of 17

<PAGE>

second quarter of fiscal 1998 increased by $395,000 but was partially offset 
by higher losses on foreign exchange as compared to the same period of the 
previous year.  For the first half of fiscal 1998, interest and other income, 
net was $537,000 compared to $96,000 in the same period of fiscal 1997.  This 
increase was primarily due to higher interest income of $965,000 on higher 
average cash balances but was partially offset by higher losses on foreign 
exchange as compared to the similar period of fiscal 1997.  Interest expense 
in the second quarter of fiscal 1998 decreased to $118,000 from $299,000 in 
the second quarter of fiscal 1997.  For the first six months of fiscal 1998, 
interest expense was $222,000 compared to $581,000 in the comparable period 
in fiscal 1997.  The decrease in interest expense for both periods was 
primarily attributable to the Company's lower debt balances during the 
comparable periods.

The Company recorded an income tax provision in the second quarter and first
half of both fiscal years 1998 and 1997 at an effective rate of 10%. This was
less than the statutory rate primarily due to the utilization of  net operating
loss carry forwards and the deferred tax asset originated from warranty and
asset valuation reserves.  The Company expects, assuming continued operating
profitability, that the effective tax rate will reflect a benefit in future
periods as the Company continues to utilize its deferred tax asset.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

The statements in this Form 10-Q concerning the Company's expenses, revenue,
liquidity and cash needs contain forward-looking statements concerning the
Company's future operations and financial results within the meaning of 27A of
the Securities Act and section 21E of the Exchange Act.  These forward-looking
statements are based on current expectations and the Company assumes no
obligation to update this information.  Numerous factors, such as economic and
competitive conditions, timing and volume of incoming orders, shipment volumes,
product margins, and foreign exchange rates, could cause actual results to
differ materially from those described in these statements, and prospective
investors and stockholders should carefully consider the factors set forth below
in evaluating these forward-looking statements.

Sales of the Company's products are concentrated in a small number of customers.
For the second quarter and first half of fiscal 1998, the top three customers
accounted for 21% of the net sales.   As of September 30, 1997, three of the
Company's customers accounted for 23% of the backlog. The worldwide
telecommunications industry is dominated by a small number of large
corporations, and the Company expects that a significant portion of its future
product sales will continue to be concentrated in a limited number of customers.
The loss of any existing customer, a significant reduction in the level of sales
to any existing customer, or the failure of the Company to gain additional
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.  In addition, a substantial
portion of shipments may occur near the end of each quarter.  Accordingly, 

                                                                   Page 11 of 17

<PAGE>

the Company's results are difficult to predict and delays in product delivery 
or closing of a sale can cause revenues and net income to fluctuate 
significantly from anticipated levels and from quarter to quarter.

The markets for the Company's products are extremely competitive and the 
Company expects that competition will increase. The Company's existing and 
potential competitors include established and emerging companies, such as 
California Microwave Corporation, L.M. Ericsson, Siemens AG, Farinon Division 
of Harris Corporation, P-COM, Alcatel, Nokia, NERA, NEC, and SIAE, many of 
which have more extensive engineering, manufacturing, and marketing 
capabilities and significantly greater financial, technical, and personnel 
resources than the Company.  The Company believes that its ability to compete 
successfully will depend on a number of factors both within and outside its 
control, including price, quality, availability, product performance and 
features; timing of new product introductions by the Company, its customers 
and its competitors; the ability of its customers to obtain financing; and 
customer service and technical support. The Company continues to experience 
customer demands for shorter delivery cycles.  The Company increased its 
inventory levels in order to respond to this demand, which in turn, may 
increase the risk of obsolescence of its inventories.

The Company expects that international sales will continue to account for the
majority of its net product sales for the foreseeable future.  As a result, the
Company is subject to the risks of doing business internationally, including
unexpected changes in regulatory requirements; fluctuations in foreign currency
exchange rates; imposition of tariffs and other barriers and restrictions; the
burdens of complying with a variety of foreign laws and general economic and
geopolitical conditions, including inflation and trade relationships.

Manufacturers of digital microwave telecommunications equipment are
experiencing, and are likely to continue to experience, intense price pressure,
which has resulted, and is expected to continue to result, in downward pricing
pressure on the Company's products.  As a result, the Company has experienced,
and expects to continue to experience, declining average sales prices for its
products.  The Company's future profitability is dependent upon its ability to
reduce costs, improve manufacturing efficiencies and introduce new products and
product enhancements.

The Company's manufacturing operations are highly dependent upon the delivery of
materials by outside suppliers in a timely manner. In addition, the Company
depends in part upon subcontractors to assemble major components and subsystems
used in its products in a timely and satisfactory manner.  From time to time the
Company has experienced delivery delays from key suppliers, which impacted
sales.  There can be no assurance that the Company will not experience material
supply problems or component or subsystem delays in the future.

The Company has pursued, and will continue to pursue, growth opportunities
through internal development and acquisitions of complementary business and
technologies.  

                                                                   Page 12 of 17

<PAGE>

Acquisitions may involve difficulties in the retention of personnel, 
diversion of management's attention, unexpected legal liabilities, and tax 
and accounting issues.  There can be no assurance that the Company will be 
able to successfully identify suitable acquisition candidates, complete 
acquisitions, integrate acquired businesses into its operations, or expand 
into new markets.  Once integrated, acquired businesses may not achieve 
comparable levels of revenues, profitability, or productivity as the existing 
business of the Company or otherwise perform as expected.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used for operating activities in the first half of fiscal 1998 was $2.8
million, compared to $6.0 million used for operating activities in the similar
period of fiscal 1997.  The use of cash in the first six months of fiscal 1998
was primarily due to the increased level of accounts receivable and inventory
and reduction of accrued liabilities.  Accounts receivable increased due to the
higher sales activity.  Inventories increased primarily as a result the need to
raise inventory levels to respond to customer demands for shorter delivery
cycles. Other accrued liabilities decreased primarily due to a decrease in
customer deposits and the payments of annual profit sharing and bonus payments. 

In May 1997, the Company completed the acquisition of Granger, Inc. for total
consideration of $14.7 million and purchased a minority interest in Granger
Associates, Ltd., a UK company, for $4.0 million.  At September 30, 1997, other
assets included the minority interest mentioned above and the excess of cost
over net assets acquired (goodwill), net of accumulated amortization of $10.6
million related to the acquisition of Granger, Inc.  Other changes to cash from
investing activities during the first half of fiscal 1998 included the sale of
some short-term investments to fund operations and an increase in property plant
and equipment of $6.3 million primarily due to purchases of additional test
equipment as a result of the higher sales volume and purchases of equipment for
the increased headcount.

At September 30, 1997, the Company's principal sources of liquidity consisted of
$33.3 million in cash and cash equivalents and short-term investments and a
revolving bank credit facility that provides up to $20.0 million in credit, of
which $18.1 million was available.  This credit facility expires in June 1998.

The Company's line of credit requires the Company to meet certain financial
covenants, including minimum liquidity, tangible net worth and profitability
requirements.  As of September 30, 1997, the Company was in compliance with the
covenants.

The Company believes that the liquidity provided by existing cash balances,
anticipated future cash flows from operations, and the Company's existing
borrowing arrangements will be sufficient to meet both working capital and
capital expenditure requirements through fiscal 1998.


                                                                   Page 13 of 17

<PAGE>

PART II - OTHER INFORMATION

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    (a)  The Company held an Annual Meeting of Stockholders on August 5, 1997.
    
    (b)  At the Annual Meeting of Stockholders, the following directors were
         elected:
    
                                          Votes
                                          -----
                                    For        Withheld
                                 ----------    ---------
         Charles D. Kissner      16,359,903     73,252
         Richard C. Alberding    16,356,374     76,781
         John W. Combs           16,357,613     75,542
         Clifford H. Higgerson   16,359,403     73,752
         James D. Meindl         16,359,273     73,882
         Billy B. Oliver         16,356,647     76,508
    
    (c)  At the Annual Meeting of Stockholders, the following additional
         matters were voted upon:
    
         1.   A proposal to ratify and approve certain amendments to the 
              Company's 1994 Stock Incentive Plan to increase the number of 
              shares of Common Stock granted to non-employee Directors of the 
              Company for their service as members of the Board of Directors, 
              and to clarify the timing of certain grants to non-employee 
              Directors of the Company.
    
                  Affirmative votes:  9,962,750
                  Negative votes:     6,284,572
                  Abstain:               40,526
                  Non-votes:            145,307
    
         2.   A proposal to ratify the selection of Arthur Andersen LLP as
              independent public accountants for fiscal year 1998.
        
                  Affirmative votes: 16,379,559
                  Negative votes:        27,535
                  Abstain                26,061
                  Non-votes                  --

                                                                   Page 14 of 17

<PAGE>


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits
    
         For a list of exhibits to this Form 10-Q, see the exhibit index
         located on page 17.
    
    (b)  Reports on Form 8-K.
    
         The Company did not file any reports on Form 8-K for the three-month 
         period ended September 30, 1997.

                                                                   Page 15 of 17

<PAGE>

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



                                          DIGITAL MICROWAVE CORPORATION



Date: November 14, 1997                    By    /s/ Carl A. Thomsen
      -------------------                    --------------------------
                                                 Carl A. Thomsen
                                                 Vice President, Chief 
                                                 Financial Officer and Secretary

















                                                                   Page 16 of 17

<PAGE>

                                    EXHIBIT INDEX
                                           
EXHIBIT             
NUMBER   DESCRIPTION     


10.1     Sublease Agreement, dated August 29, 1997, by and between Wyse 
         Technology Inc., Digital Microwave Corporation and Wyse Technology 
         Investments, Inc., relating to 3475 North First Street, 
         San Jose, California.                                       

11.1     Statement Re: Computation of per share earnings.
         
27.1     Financial data schedule.






















                                                                   Page 17 of 17