<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended                 Commission file number: 0-15895
DECEMBER 31, 2000
------------------


                           DMC STRATEX NETWORKS, INC.
                           --------------------------
               (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
                                                    ---------------

Registrant's former name: Digital Microwave Corporation

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 73,748,526 on February 06, 2001.



<PAGE>



                                      INDEX
                                      -----

<TABLE>
<CAPTION>


                                                                                                       PAGE

<S>                                                                                                   <C>

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                                 6-11

         Item 2 - Management's Discussion and Analysis of
                    Financial Condition and Results of Operations                                       12-19

         Item 3 - Quantitative and Qualitative Disclosures About Market Risk                            20

PART II - OTHER INFORMATION

         Item 6 - Exhibits and Reports on Form 8-K                                                      21


SIGNATURE                                                                                               23

</TABLE>


                                    2 of 23
<PAGE>


                         PART I - FINANCIAL INFORMATION
                          ITEM I - FINANCIAL STATEMENTS

                           DMC STRATEX NETWORKS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                           December 31, 2000           March 31, 2000
                                                                        ------------------------     --------------------
                                                                              (Unaudited)

<S>                                                                     <C>                      <C>

ASSETS
------

CURRENT ASSETS:
     Cash and cash equivalents                                                $       18,853     $        58,339
     Short-term investments                                                           30,672              65,603
     Accounts receivable, net                                                        138,209              98,520
     Inventories                                                                     110,877              48,547
     Deferred tax asset                                                                1,298               1,285
     Other current assets                                                             12,473               9,916
                                                                        --------------------     ---------------
         TOTAL CURRENT ASSETS                                                        312,382             282,210

PROPERTY AND EQUIPMENT, NET                                                           49,342              43,801
OTHER ASSETS                                                                          17,563              11,430
                                                                        --------------------     ---------------
         TOTAL ASSETS                                                         $      379,287             337,441
                                                                        ====================     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Current maturities of capital lease obligations                          $           22                 167
     Accounts payable                                                                 57,079              39,582
     Income taxes payable                                                              7,132               2,330
     Accrued liabilities                                                              19,985              30,970
                                                                        --------------------     ---------------
         TOTAL CURRENT LIABILITIES                                                    84,218              73,049


STOCKHOLDERS' EQUITY:
     Common stock and paid-in capital                                                382,066             373,477
     Accumulated deficit                                                             (71,098)           (103,288)
     Accumulated other comprehensive loss                                            (15,899)             (5,797)
                                                                        --------------------     ---------------
         TOTAL STOCKHOLDERS' EQUITY                                                  295,069             264,392
                                                                        --------------------     ---------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $      379,287             337,441
                                                                        ====================     ===============

</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                    3 of 23
<PAGE>


                           DMC STRATEX NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                            Three Months Ended                      Nine Months Ended
                                                               December 31,                           December 31,
                                                               ------------                           ------------
                                                        2000                 1999                2000                 1999
                                                        ----                 ----                ----                 ----

<S>                                               <C>                  <C>                 <C>                 <C>
NET SALES                                          $      115,194       $        77,435     $       307,361     $        211,915
Cost of sales                                              79,448                54,013             207,781              149,760
                                                   ----------------     ----------------    ----------------    ------------------
GROSS PROFIT                                               35,746                23,422              99,580               62,155
                                                   ----------------     ----------------    ----------------    ------------------

OPERATING EXPENSES:
     Research and development                               5,673                 6,149              17,677               18,253
     Selling, general and administrative                   16,654                13,382              47,287               37,128
                                                   ----------------     ----------------    ----------------    ------------------
TOTAL OPERATING EXPENSES                                   22,327                19,531              64,964               55,381
                                                   ----------------     ----------------    ----------------    ------------------

OPERATING INCOME                                           13,419                 3,891              34,616                6,774

OTHER INCOME (EXPENSE):
     Interest income                                          967                   584               4,451                1,183
     Interest expense                                         (17)                 (256)                (46)                (721)
     Other income (expense), net                             (281)                   27              (1,151)              (1,211)
                                                   ----------------     ----------------    ----------------    ------------------
INCOME BEFORE PROVISION
    FOR INCOME TAXES                                       14,088                 4,246              37,870                6,025

Provision for income taxes                                  2,113                   849               5,680                1,205
                                                   ----------------     ----------------    ----------------    ------------------
NET INCOME                                         $       11,975       $         3,397     $        32,190     $          4,820
                                                   ================     ================    ================    ==================

BASIC EARNINGS PER SHARE                           $         0.16       $          0.05     $          0.44     $           0.07
                                                   ================     ================    ================    ==================
DILUTED EARNINGS PER SHARE                         $         0.16       $          0.05     $          0.42     $           0.07
                                                   ================     ================    ================    ==================

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                  73,591                66,316              73,283               64,391
Impact of dilutive stock options and warrants               2,490                 5,197               3,491                5,048
                                                   ----------------     ----------------    ----------------    ------------------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                76,081                71,513              76,774               69,439
                                                   ================     ================    ================    ==================


</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                    4 of 23

<PAGE>



                     DMC STRATEX NETWORKS, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands)
                             (Unaudited)


<TABLE>
<CAPTION>
                                                                                             Nine Months Ended
                                                                                                December 31,
                                                                               --------------------------------------------
                                                                                      2000                        1999
                                                                               ----------------            ----------------

<S>                                                                            <C>                         <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                      $     32,190               $      4,820
Adjustments to reconcile net income to net cash used for operating
activities:
      Depreciation and amortization                                                   12,959                     14,356
      Provision for uncollectable accounts                                               659                        662
      Provision for inventory reserves                                                 1,456                      1,748
      Provision for warranty reserves                                                  5,444                      5,698
      Changes in assets and liabilities:
         Increase in accounts receivable                                             (43,222)                   (26,495)
         Decrease (increase) in inventories                                          (65,072)                       285
         Decrease (increase) in other assets                                          (3,880)                     4,028
         Increase in accounts payable                                                 18,262                      7,620
         Increase in income tax payable                                                4,820                        142
         Decrease in other accrued liabilities                                       (16,334)                   (16,136)
                                                                               ----------------            ----------------
NET CASH USED FOR OPERATING ACTIVITIES                                               (52,718)                    (3,272)
                                                                               ----------------            ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of available-for-sale securities                                      (48,224)                   (57,824)
      Proceeds from available-for-sale securities                                     83,155                     28,228
      Purchase of property and equipment                                             (15,534)                   (15,747)
      Minority investments                                                           (13,045)                    (7,000)
                                                                               ----------------            ----------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES                                   6,352                    (52,343)
                                                                               ----------------            ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Repayment to banks                                                                   0                     (2,600)
      Payment of capital lease obligations                                              (145)                      (663)
      Proceeds from sales of common stock                                              8,578                     66,285
                                                                               ----------------            ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                              8,433                     63,022
                                                                               ----------------            ----------------

Effect of exchange rate changes in cash                                               (1,553)                       189
                                                                               ----------------            ----------------
NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                (39,486)                     7,596
Cash and cash equivalents at beginning of period                                      58,339                     21,518
                                                                               ----------------            ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $     18,853               $     29,114
                                                                               =================           ================

SUPPLEMENTAL DATA:
      Interest paid                                                             $         53               $        663
      Income taxes paid                                                         $      1,132               $        278

</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.

                                    5 of 23
<PAGE>


                           DMC STRATEX NETWORKS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

BASIS OF PRESENTATION

       The condensed consolidated financial statements include the accounts of
       DMC Stratex Networks, Inc. and its wholly owned subsidiaries (the
       Company). Intercompany accounts and transactions have been eliminated.
       Certain prior years amounts have been reclassified to conform to current
       year presentation.

       While the financial information furnished is unaudited, the financial
       statements included in this report reflect all adjustments (consisting
       only of normal recurring adjustments) that 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 Company's financial statements included in its annual report and
       Form 10-K for the fiscal year ended March 31, 2000.

CASH AND CASH EQUIVALENTS

       For purposes of the consolidated statement 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,
       net of applicable reserves. Inventories consist of (in thousands):


<TABLE>
<CAPTION>

                                                   DECEMBER 31, 2000               MARCH 31, 2000
                                                   -----------------               --------------
                                                      (Unaudited)

<S>                                                <C>                           <C>
         Raw materials                               $            59,878             $        22,558
         Work in process                                          19,525                      13,833
         Finished goods                                           31,474                      12,156
                                                     --------------------            ----------------
                                                     $           110,877             $        48,547
                                                     ====================            ================

</TABLE>


OTHER ASSETS

         Included in other assets is goodwill of $0.9 million that is being
         amortized on a straight line basis over the useful life ranging from
         five to ten years, as well as minority investments. The minority
         investments were purchased for the promotion of business and strategic
         objectives. Investments in marketable securities are reported at fair
         value with unrealized gains and losses recorded in stockholders'
         equity. Investments in non-marketable securities are recorded at the
         lower of cost or market.


                                    6 of 23
<PAGE>

         During the third quarter of Fiscal 2001, the Company recorded $5.0
         million in unrealized losses, which consisted primarily of a $4.7
         million unrealized loss on our investment in Endwave Corporation. The
         Company considers this loss to be temporary in nature, and accordingly,
         this unrealized loss has been recorded in stockholders' equity.

ACCRUED LIABILITIES

         Accrued liabilities included the following (in thousands):

<TABLE>
<CAPTION>

                                                       December 31, 2000     March 31, 2000
                                                       -----------------     --------------
                                                          (Unaudited)
                                                       ---------------------------------------

<S>                                                      <C>               <C>

       Customer deposits                                 $       1,850     $              770
       Accrued payroll and benefits                              7,232                  4,703
       Accrued commissions                                         575                  1,929
       Accrued warranty                                          4,533                  5,533
       Accrued restructuring, purchase order
           cancellation and other costs                          1,477                  6,188
       Other                                                     4,318                 11,847
                                                       ---------------------------------------
                                                         $      19,985     $           30,970
                                                       ---------------------------------------

</TABLE>


CURRENCY TRANSLATION

         The functional currency of the Company's subsidiaries located in the
         United Kingdom and Latin America is the U.S. dollar. Accordingly, all
         of the monetary assets and liabilities of these subsidiaries are
         remeasured into U.S. dollars at the current exchange rate as of the
         applicable balance sheet date, and all non-monetary assets and
         liabilities are remeasured at historical 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 in the Consolidated Statements of
         Operations. The Company's other international subsidiaries use their
         local currency as their functional currency. Assets and liabilities of
         these subsidiaries are translated at the current exchange rates in
         effect at the balance sheet date, and income and expense accounts are
         translated at the average exchange rates during the year. The resulting
         translation adjustments are included in accumulated other comprehensive
         loss in the accompanying financial statements.

DERIVATIVE FINANCIAL INSTRUMENTS

         The Company enters into forward foreign exchange contracts to hedge
         some of its firm committed backlog, open purchase orders and certain
         assets and liabilities denominated in foreign currencies. At December
         31, 2000, the Company had forward foreign exchange contracts to
         exchange various foreign currencies for U.S. dollars in the gross
         amount of $45.2 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. The amount of unrealized
         loss on these contracts as of December 31, 2000 was $0.3 million.


                                    7 of 23
<PAGE>


NET INCOME PER SHARE

         Basic earnings per share are computed by dividing net income by the
         weighted average number of common shares outstanding during the period.
         Diluted earnings per share are computed by dividing net income by the
         weighted average number of common shares and potentially dilutive
         securities outstanding during the period.

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

         Accounts receivable concentrated with certain customers primarily in
         the telecommunications industry and in certain geographic locations
         potentially subject the Company to concentration of credit risk. Two
         customers, one in the United States and one in China, accounted for
         approximately 20% and 12% respectively of the total accounts receivable
         balance at the end of the third quarter of Fiscal 2001. The Company
         expects to collect most of these amounts during the fourth quarter of
         Fiscal 2001. In addition to sales in North America and Western Europe,
         the Company actively markets and sells products in Africa, Asia,
         Eastern Europe, the Middle East and South America. The Company performs
         on-going credit evaluations of its customers' financial conditions and
         generally requires no collateral, although sales to Asia, Eastern
         Europe and the Middle East are primarily paid through letters of
         credit.

COMPREHENSIVE INCOME

         In June 1997, the FASB issued Statement on Financial Accounting
         Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which
         establishes standards for reporting and display of comprehensive income
         and its components (revenue, expenses, gains and losses) in a full set
         of general-purpose financial statements. The following table reconciles
         comprehensive income under the provisions of SFAS 130 (in thousands)
         for:

<TABLE>
<CAPTION>

                                                           Three Months Ended                      Nine Months Ended
                                                              December 31,                           December 31,
                                                              ------------                           ------------
                                                       2000                 1999                 2000                 1999
                                                       ----                 ----                 ----                 ----

<S>                                               <C>                  <C>                 <C>                   <C>

Net income                                        $       11,975       $        3,397      $        32,190       $        4,820
     Other comprehensive
     income (loss) net of tax:
     Unrealized currency gain (loss)                       2,521                 (551)              (3,538)              (1,573)
     Unrealized holding gain (loss)
     on investments                                       (5,025)                 858               (6,564)                 586
                                                  ----------------     ----------------    -----------------     ----------------
Comprehensive income                              $        9,471       $        3,704      $        22,088       $        3,833
                                                  ================     ================    =================     ================

</TABLE>

                                    8 of 23
<PAGE>


NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued Financial Accounting Standards No. 133
         ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
         Activities," which establishes standards for the reporting and display
         of comprehensive income and its components in general purpose financial
         statements. SFAS 133 is effective for companies in the fiscal year
         beginning after June 15, 2000, which for the Company would be Fiscal
         2002. SFAS 133 requires the Company to recognize all derivatives on the
         balance sheet at fair value. Derivatives that are not hedges must be
         adjusted to fair value through income. If the derivative is a hedge,
         depending on the nature of the hedge, changes in the fair value of
         derivatives will either be offset against the change in fair value of
         the hedged assets, liabilities or firm commitments through earnings, or
         recognized in other comprehensive income until the hedged item is
         recognized in earnings. The Company is currently assessing the impact
         of this standard and believes that the adoption of this new
         pronouncement will not have a material effect on the Company's
         financial statements.

         In December 1999, the Securities and Exchange Commission issued Staff
         Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
         Financial Statements." SAB 101 provides guidance on applying generally
         accepted accounting principles to revenue recognition issues in
         financial statements. The Company is currently assessing the impact of
         this guidance and will adopt SAB 101 in the fourth quarter of Fiscal
         2001 and does not anticipate that adoption will have a material impact
         on its consolidated financial position, results of operations or cash
         flows.

OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

         The Company is organized into two operating segments: Products and
         Services. The Chief Executive Officer has been identified as the Chief
         Operating Decision-Maker as defined by SFAS 131, "Disclosures about
         Segments of an Enterprise and Related Information." Resources are
         allocated to each of these groups using information on their revenues
         and operating profits before interest and taxes.

         The products operating segment includes the Altium, DART, DXR, SPECTRUM
         II and XP4 digital microwave systems for digital transmission markets.
         The Company designs, develops, and manufactures these products in
         Seattle, Washington; San Jose, California; and Wellington, New Zealand.
         The Services operating segment includes, but is not limited to,
         installation, repair, network design, path surveys, integration and
         other services. The Company maintains regional service centers in San
         Jose, California; Lanarkshire, Scotland; and Clark Field, Pampanga,
         Philippines.

                                    9 of 23
<PAGE>


         The following table sets forth revenues and operating income by
operating segments (in thousands) for:

<TABLE>
<CAPTION>

                                                   Three Months Ended                    Nine Months Ended
                                                      December 31,                          December 31,
                                                      ------------                          ------------
                                                2000                1999               2000                 1999
                                                ----                ----               ----                 ----


<S>                                        <C>                 <C>                <C>                  <C>

  Products:
       Revenues                            $      106,480      $      73,019      $      284,253       $      201,183
       Operating income                            13,708              4,176              34,553                7,656

  Services:
       Revenues                                     8,714              4,416              23,108               10,732
       Operating income (loss)                       (289)              (285)                 63                 (882)

  Total:
       Revenues                            $      115,194      $      77,435      $      307,361       $      211,915
       Operating income                            13,419              3,891              34,616                6,774

</TABLE>


         The following table sets forth revenues from unaffiliated customers by
product (in thousands) for:


<TABLE>
<CAPTION>
                                               Three Months Ended                     Nine Months Ended
                                                  December 31,                           December 31,
                                                  ------------                           ------------
                                           2000                  1999               2000                 1999
                                           ----                  ----               ----                 ----

<S>                                   <C>                   <C>                <C>                 <C>

  SPECTRUM II                         $        23,536       $       30,286     $        77,710     $         90,588
  XP4                                          34,834               16,039              82,982               41,187
  DXR                                           9,261               11,030              28,302               29,446
  Altium                                       34,536               12,499              81,354               28,760
  Other products                                4,313                3,165              13,905               11,202
                                      -----------------     ---------------    ----------------    -----------------
        Total products                        106,480               73,019             284,253              201,183
        Total services                          8,714                4,416              23,108               10,732
                                      -----------------     ---------------    ----------------    -----------------
  Total revenue                       $       115,194       $       77,435     $       307,361     $        211,915
                                      =================     ===============    ================    =================

</TABLE>


                                    10 of 23
<PAGE>


         The following table sets forth revenues from unaffiliated customers by
geographic region (in thousands) for:

<TABLE>
<CAPTION>

                                               Three Months Ended                     Nine Months Ended
                                                  December 31,                           December 31,
                                                  ------------                           ------------
                                           2000                  1999               2000                 1999
                                           ----                  ----               ----                 ----

<S>                                   <C>                   <C>                <C>                 <C>

  Africa                              $         6,550       $        4,912     $        16,584     $         16,244
  China                                        11,675               12,084              23,244               33,767
  Europe                                       23,137               22,592              73,163               57,532
  Mexico                                        2,813               10,775              40,807               21,245
  Other Americas                                9,302                3,945              26,101               14,281
  Other Asia/Pacific                           11,578                6,664              28,230               25,963
  United States                                50,139               16,463              99,232               42,883
                                      -----------------     ---------------    ----------------    -----------------
  Total Revenue                       $       115,194       $       77,435     $       307,361     $        211,915
                                      =================     ===============    ================    =================

</TABLE>


         Long-lived assets by country and consisting of net property and
equipment was as follows (in thousands):

<TABLE>
<CAPTION>


                                                                    December 31, 2000               March 31, 2000
                                                                    -----------------               --------------

<S>                                                                <C>                     <C>

        United States                                              $            30,945     $                29,423
        United Kingdom                                                          12,769                       9,719
        Other foreign countries                                                  5,628                       4,659
                                                                   --------------------    ------------------------
        Total property and equipment, net                          $            49,342     $                43,801
                                                                   ====================    ========================

</TABLE>


SUBSEQUENT EVENTS

At December 31, 2000, the Company had an investment of $4.0 million in
Southern California Edison bonds. Subsequent to December 31, 2000, these
bonds have suffered approximately a 20% loss in fair market value as of
February 8, 2001, due to the California energy crisis. These bonds mature on
June 1, 2001. The Company intends to hold these bonds for now, pending
further developments. However, this unrealized loss could become a realized
loss in the future if the decrease in fair value is other than temporary.
(See other assets footnote for accounting policy).

                                    11 of 23
<PAGE>


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

The discussion in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contains trend analyses and other forward-looking
statements within the meaning of Section 27a of the Securities Act of 1933, as
amended, and Section 21e of the Securities Exchange Act of 1934, as amended. All
statements, trend analyses and other information contained herein relative to
markets for our services and products and trends in revenue, as well as other
statements including such words as "anticipate," "believe," "plan," "estimate,"
"expect," "goal" and "intend" and other similar expressions constitute
forward-looking statements. These forward-looking statements are subject to
business and economic risks, and our actual results could differ materially from
those set forth in the forward-looking statements as a result of factors set
forth elsewhere herein, including "factors that may affect future financial
results," page 16, as well as factors set forth in our Annual Report filed on
Form 10-K for the year ended March 31, 2000.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                                         Three Months Ended                       Nine Months Ended
                                                            December 31,                            December 31,
                                                            ------------                            ------------
                                                     2000                  1999                 2000                 1999
                                                     ----                  ----                 ----                 ----

<S>                                                   <C>                  <C>                 <C>                  <C>

Net sales                                             100.0   %            100.0   %           100.0   %            100.0   %
Cost of sales                                          69.0                 69.8                67.6                 70.7
                                               ------------------    -----------------    -----------------    -----------------
Gross profit                                           31.0                 30.2                32.4                 29.3

Research & development                                  4.9                  7.9                 5.8                  8.6
Selling, general &  administrative                     14.5                 17.3                15.4                 17.5
                                               ------------------    -----------------    -----------------    -----------------

Operating income                                       11.6                  5.0                11.2                  3.2

Other income (expense), net                             0.6                  0.5                 1.1                 (0.4)
                                               ------------------    -----------------    -----------------    -----------------

Income before provision for income
taxes                                                  12.2                  5.5                12.3                  2.8

Provision for income taxes                              1.8                  1.1                 1.8                  0.5
                                               ------------------    -----------------    -----------------    -----------------

     Net income                                        10.4   %              4.4   %            10.5   %              2.3   %
                                               ==================    =================    =================    =================

</TABLE>


NET SALES
Net sales for the third quarter of Fiscal 2001 increased to $115.2 million,
compared to $77.4 million reported in the third quarter of Fiscal 2000 due to
increased customer demand and improved manufacturing capacity. Our Altium
product line net sales increased significantly to $34.5 million in the third
quarter of Fiscal 2001, from $12.5 million in the comparable quarter of


                                    12 of 23
<PAGE>


Fiscal 2000, and our XP4 product line net sales increased to $34.8 million
from $16.0 million. Net sales of our Spectrum II product line decreased to
$23.5 million from $30.3 million in the comparable quarter of Fiscal 2000.
Net sales to U.S. customers were $50.1 million in the third quarter of Fiscal
2001 compared to $16.5 million in the third quarter of Fiscal 2000 due to
increased sales to competitive local exchange carriers and rapid growth in
system build outs. Net sales to Mexico decreased to $2.8 million in the third
quarter of Fiscal 2001 compared to $10.8 million in the third quarter of
Fiscal 2000; however, for the first nine months of Fiscal 2001 Mexico sales
are almost double in comparison to the first nine months of Fiscal 2000.
Service revenue increased to $8.7 million in the third quarter of Fiscal 2001
compared to $4.4 million in the third quarter of Fiscal 2000 due to
additional installation work as a result of increased sales.

Net sales for the first nine months of Fiscal 2001 were $307.4 million, compared
to $211.9 million reported in the first nine months of Fiscal 2000 due to
increased customer demand and improved manufacturing capacity. The increase in
net sales was due primarily to increased sales of our XP4 and Altium product
lines. Sales to U.S. customers increased to $99.2 million in the first nine
months of Fiscal 2001 compared to $42.9 million in the first nine months of
Fiscal 2000. Sales to Mexico were $40.8 million in the first nine months of
Fiscal 2001 compared to $21.2 million in the first nine months of Fiscal 2000.
Sales in Europe increased to $73.2 million in the first nine months of Fiscal
2001 compared to $57.5 in the first nine months of Fiscal 2000. However, we
experienced sales declines in China as sales there were $23.2 million in the
first nine months of Fiscal 2001 compared to $33.8 million in the first nine
months of Fiscal 2000. These declines were due largely to capacity constraints
in the XP4 product line. Service revenue increased to $23.1 million in the first
nine months of Fiscal 2001 compared to $10.7 million in the first nine months of
Fiscal 2000 due to additional installation work as a result of increased sales.

During the third quarter of Fiscal 2001, we received $133.6 million in new
orders shippable over the next 12 months, compared to $104.3 million in the
third quarter of Fiscal 2000, an increase of 28%. During the first nine months
of Fiscal 2001, we received $392.1 million in new orders shippable over the next
12 months, compared to $243.3 million in the first nine months of Fiscal 2000,
an increase of 61%. The backlog at December 31, 2000 was $189.0 million,
compared to $92.6 million at December 31, 1999 and $111.8 million at March 31,
2000.

We include in our backlog purchase orders with respect to which a delivery
schedule has been specified for product shipment within one year. Orders in our
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 PROFIT
Gross profit as a percentage of net sales for the third quarter of Fiscal 2001
was 31.0% compared to 30.2% in the third quarter of Fiscal 2000. Our gross
margin in the third quarter of Fiscal 2001 increased due to our increased
capacity utilization.

Gross profit as a percentage of net sales for the first nine months of Fiscal
2001 was 32.4% compared to 29.3% in the first nine months of Fiscal 2000. The
increase in gross profit was primarily the result of our shift in revenue to the
newer Altium and XP4 product lines, from older product lines with lower margins,
as well as increased capacity utilization.


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<PAGE>



RESEARCH AND DEVELOPMENT
In the third quarter of Fiscal 2001, research and development expenses decreased
to $5.7 million from $6.1 million in the third quarter of Fiscal 2000. The
decrease was due to a decline from the prior year in design costs for the Altium
product and the completion of the initial design of a modem chip set. As a
percentage of net sales, research and development expenses decreased to 4.9% in
the third quarter of Fiscal 2001 compared to 7.9% in the third quarter of Fiscal
2000 due to the decrease in expenses and an increase in net sales.

In the first nine months of Fiscal 2001, research and development expenses
decreased by $0.6 million to $17.7 million from $18.3 million in the same period
in Fiscal 2000. As a percentage of net sales, research and development expenses
were 5.8% in the first nine months of Fiscal 2001 compared to 8.6% in the first
nine months of Fiscal 2000 due to an increase in net sales.

We expect to increase research and development expenses during the fourth
quarter of Fiscal 2001 as we develop new high capacity products.

SELLING, GENERAL AND ADMINISTRATIVE
In the third quarter of Fiscal 2001, selling, general and administrative
expenses increased to $16.7 million from $13.4 million in the third quarter of
Fiscal 2000. This increase was a result of higher depreciation and other costs
attributable to purchases of enterprise-wide business and manufacturing systems
and higher sales expenses incurred to address growing market opportunities. As a
percentage of net sales, selling, general and administrative expenses decreased
to 14.5% in the third quarter of Fiscal 2001 compared to 17.3% in the comparable
quarter of Fiscal 2000 due to an increase in net sales.

In the first nine months of Fiscal 2001, selling, general and administrative
expenses increased to $47.3 million from $37.1 million in the first nine
months of Fiscal 2000. This increase was a result of higher depreciation and
other costs attributable to purchases of enterprise-wide business systems and
higher sales expenses incurred to address growing market opportunities. As a
percentage of net sales, selling, general and administrative expenses were
15.4% in the first nine months of Fiscal 2001 compared to 17.5% in the
comparable period of Fiscal 2000 due to an increase in net sales.

OTHER INCOME (EXPENSE)
The increase in interest income in the third quarter of Fiscal 2001 of $0.4
million compared to the third quarter of Fiscal 2000 was primarily due to higher
average cash balances. Interest expense decreased in the third quarter of Fiscal
2001 compared to the third quarter of Fiscal 2000 primarily due to lower average
lease obligations. Other expense increased by $0.3 million in the third quarter
of Fiscal 2001 compared to the third quarter of Fiscal 2000 primarily due to
higher foreign exchange cover costs and foreign exchange losses.

PROVISION FOR INCOME TAXES
In the third quarter of Fiscal 2001, we recorded a provision for income taxes at
less than the statutory rate primarily due to the anticipated utilization of net
operating loss carry forwards in Fiscal 2001.


                                    14 of 23
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Net cash used for operating activities in the first nine months of Fiscal 2001
was $52.7 million, compared to net cash used of $3.3 million in the first nine
months of Fiscal 2000. The increase in cash used for operations was primarily
the result of increased receivables and increased inventory. Inventory increased
$65.1 million, excluding a foreign exchange impact, in the first nine months of
Fiscal 2001 due to increased product backlog. Backlog at December 31, 2000 was
$189.0 million, compared to $92.6 million at December 31, 1999 and $111.8
million at March 31, 2000. Accounts receivable increased $43.2 million during
the first nine months of Fiscal 2001, excluding a foreign exchange impact, due
to increased sales and the timing of shipments as 59% of our Fiscal 2001 third
quarter shipments occurred in the last month of the period. Accounts payable
increased $18.3 million, excluding a foreign exchange impact, in support of the
increase in purchase volume of inventory in the first nine months of Fiscal
2001.

Purchases of property and equipment were $15.5 million in the first nine
months of Fiscal 2001 compared to $15.7 million in the first nine months of
Fiscal 2000. The first nine months Fiscal 2001 activity was attributable to
purchases in manufacturing to meet increased production volumes and purchases
of enterprise-wide business and manufacturing systems. The proceeds relating
to available-for-sale securities in the first nine months of Fiscal 2001
relate to working capital requirements and higher average cash balances
compared to the same period of the prior year. We made $13.0 million in
minority investments during the first nine months of Fiscal 2001; these
investments were all within the telecommunications industry and represented a
less than 10% ownership in each of the companies. We expect to continue to
make similar minority investments in the future.

Proceeds from the sale of common stock are primarily derived from the exercise
of employee stock options and the employee stock purchase plan. However, in the
third quarter of Fiscal 2000 we received proceeds of $55.1 million from the
issuance of 3.45 million shares of our common stock under our shelf registration
statement. In addition, our filing of a new registration statement on Form S-3
became effective in the third quarter of Fiscal 2001. Under this new
registration statement, we may sell up to $300 million in debt securities,
common stock and debt and common stock warrants.

At December 31, 2000, our principal sources of liquidity consisted of $49.5
million in cash and cash equivalents and short-term investments. However,
depending on the growth of our business, we may require additional financing; we
may not be able to obtain such additional financing in the required time frame
on commercially reasonable terms, or at all. We believe that we have the
financial resources needed to meet our business requirements for at least the
next 12 months.


                                    15 of 23
<PAGE>


EUROPEAN MONETARY UNION

In January 1999, a new currency called the "euro" was introduced in certain
Economic and Monetary Union ("EMU") countries. During 2002, all EMU countries
are expected to be operating with the euro as their single currency. Uncertainty
exists as to the effect the euro currency will have on the marketplace.
Additionally, all of the rules and regulations have not yet been defined and
finalized by the European Commission with regard to the euro currency. We have
assessed the effect the euro formation will have on our internal systems and the
sale of our products. Our European sales and operating transactions are based
primarily in U.S. dollars or U.K. pounds sterling, neither of which are subject
to the euro conversion. While we do have some sales denominated in the European
Currency Unit, this currency is successfully being converted in the market to
the new European Monetary Unit at parity. In addition, we upgraded our internal
computer systems to convert the European currencies to the euro. The cost of
upgrading our systems in connection with the euro conversion was not material,
and we expect no harm to our business, financial condition or results of
operations due to the upgrade.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our short-term investment activities is to preserve
principal while at the same time maximizing yields, without significantly
increasing risk. Our short-term investments are for fixed interest rates;
therefore, changes in interest rates will not generate a gain or loss on these
investments unless they are sold prior to maturity. Actual gains and losses due
to the sale of our investments prior to maturity have been immaterial.
Investments are generally not held for more than one year. The average length of
investments held at the end of the third quarter of Fiscal 2001 was 60 days and
had an average yield of 6.5% per annum.

We are exposed to equity price risks on the marketable portion of equity
securities included in our portfolio of investments entered into for the
promotion of business and strategic objectives. These investments are generally
in companies in the telecommunications industry sector, many of which are small
capitalization stocks. We typically do not attempt to reduce or eliminate our
market exposure on these securities. A 20% adverse change in equity prices would
result in an approximate $0.3 million decrease in the fair value of our
available-for-sale securities as of the end of the third quarter of Fiscal 2001.

During the third quarter of Fiscal 2001 we recorded $5.0 million in unrealized
losses, which consisted primarily of a $4.7 million unrealized loss on our
investment in Endwave Corporation. We consider this loss to be temporary in
nature and accordingly this unrealized loss has been recorded in stockholders'
equity and the investment has been recorded at fair value on the balance sheet.

In addition, at December 31, 2000, we had an investment of $4.0 million in
Southern California Edison bonds. Subsequent to December 31, 2000, these
bonds have suffered approximately a 20% loss in fair market value as of
February 8, 2001, due to the California energy crisis. These bonds mature on
June 1, 2001. The Company intends to hold these bonds for now, pending
further developments. However, this unrealized loss could become a realized
loss in the future if the decrease in fair value is other than temporary.

It is our policy not to enter into derivative financial instruments except for
hedging of foreign currency exposures. We hedge certain portions of our exposure
to foreign currency fluctuations through the use of forward foreign exchange
contracts. We enter into forward foreign exchange


                                    16 of 23
<PAGE>


contracts for purposes other than trading; however, we do not engage in any
foreign currency speculation. Forward foreign exchange contracts represent
agreements to buy or sell a specified amount of foreign currency at a specified
price in the future. These contracts generally have maturities that do not
exceed one month. At December 31, 2000, we had forward foreign exchange
contracts to exchange various foreign currencies for U.S. dollars in the
aggregate amount of $45.2 million, primarily in New Zealand dollars, British
pounds and the euro. Gains and losses associated with currency rate changes on
forward foreign exchange contracts are recorded currently in income as they
offset corresponding gains and losses on the foreign currency-denominated assets
and liabilities being hedged. Therefore, the carrying value of forward foreign
exchange contracts approximates their fair value. We believe that the credit
risk with respect to our forward foreign exchange contracts is minimal because
we execute contracts with major financial institutions. Market risk with respect
to forward foreign exchange contracts is offset by the corresponding exposure
related to the underlying assets and liabilities.

Although nearly all our sales and expenses are denominated in U.S. dollars, we
have experienced some foreign exchange gains and losses to date, and expect to
incur additional gains and losses in Fiscal 2001. We did engage in foreign
currency hedging activities during the quarter ended December 31, 2000, as
explained above, and intend to continue doing so as needed.

FACTORS THAT MAY AFFECT FUTURE FINANCIAL RESULTS

The statements in this Form 10-Q concerning our future products, expenses,
revenues, gross margins, liquidity and cash needs, as well as our plans and
strategies, contain forward-looking statements concerning our future operations
and financial results within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. All statements, trend analyses and other
information contained herein relative to markets for our services and products
and trends in revenue, as well as other statements including such words as
"anticipate," "believe," "plan," "estimate," "expect," "goal" and "intend" and
other similar expressions constitute forward-looking statements. These
forward-looking statements are based on current expectations, and we assume 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 in our Report
on Form 10-K, filed on June 29, 2000, and those set forth below in evaluating
these forward-looking statements.

Sales of our products are concentrated in a small number of customers. For the
first nine months of Fiscal 2001, the top three customers accounted for 36% of
the net sales. As of December 31, 2000, three of our customers accounted for 34%
of the backlog. The worldwide telecommunications industry is dominated by a
small number of large corporations, and we expect 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 our inability to gain additional
customers could harm our business, financial condition and results of
operations. In addition, a substantial portion of shipments may occur near the
end of each quarter. Accordingly, our 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.


                                    17 of 23
<PAGE>


Wireless infrastructure suppliers are experiencing, and will likely continue to
experience, price pressure that has resulted, and is expected to continue to
result, in downward pricing pressure on our products. As a result, we have in
the past experienced, and expect to continue to experience, declining average
sales prices for our products. Our ability to maintain our gross profit margins
is dependent upon our ability to continue to introduce new products and product
enhancements. Our inability to respond to increased price competition would harm
our business, financial condition and results of operations.

The markets for our products are extremely competitive, and we expect that
competition will increase. Our existing and potential competitors include
established and emerging companies, such as Alcatel, Ceragon, L. M. Ericsson,
Microwave Communications Division of Harris Corporation, NEC, Nera, Nokia,
P-COM, Inc., Sagem, SIAE, Siemens AG and Triton Network Systems, many of which
have more extensive engineering, manufacturing, and marketing capabilities and
significantly greater financial, technical, and personnel resources than us. We
believe that our ability to compete successfully will depend on a number of
factors, both within and outside our control, including price, quality,
availability, customer service and support, breadth of product line, product
performance and features, rapid time-to-market delivery capabilities,
reliability, timing of new product introductions by us, our customers and our
competitors, and the ability of our customers to obtain financing.

We expect that international sales will continue to account for a large portion
of our net product sales for the foreseeable future. As a result, we are 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. There can be no
assurance that currency fluctuations, changes in the rate of inflation or any of
the factors mentioned above will not harm our business, financial condition and
results of operations.

Due to the energy crisis in California, our operations may be adversely affected
by periodic rolling blackouts, which could result in product delivery delays,
lower than expected revenues and higher costs.

Our manufacturing operations are highly dependent upon the delivery of materials
by outside suppliers in a timely manner. In addition, we depend in part upon
subcontractors to assemble major components and subsystems used in its products
in a timely and satisfactory manner. While we enter into long-term or volume
purchase agreements with a few of our suppliers, no assurance can be given that
materials, components and subsystems will be available in the quantities we
require, if at all. Our inability to develop alternative sources of supply
quickly and on a cost-effective basis could materially impair our ability to
manufacture and deliver our products in a timely manner, which could harm our
business, financial condition and results of operations. We may experience
material supply problems or component or subsystem delays in the future.

We have pursued, and will continue to pursue, growth opportunities through
internal development and acquisitions of complementary businesses and
technologies. Acquisitions may involve difficulties in the retention of
personnel, diversion of management's attention, unexpected legal liabilities,
and tax and accounting issues. We may not be able to successfully identify
suitable acquisition candidates, complete acquisitions, integrate acquired
businesses into


                                    18 of 23
<PAGE>


our operations, or expand into new markets. Once integrated, acquired businesses
may not achieve comparable levels of revenues, profitability or productivity as
our existing business or otherwise perform as expected. Our inability to manage
our growth effectively could harm our business, financial condition and results
of operations.


                                    19 of 23
<PAGE>



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a description of our market risks, see page 16, "Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Quantitative and Qualitative Disclosures About Market Risk."


                                    20 of 23
<PAGE>


PART II - OTHER INFORMATION

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 22.

(b)      Reports on Form 8-K

         None


                                    21 of 23
<PAGE>


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>

Exhibit
Number     Description
-------------------------------------------------------------

<S>      <C>

2.1      Agreement and Plan of Reorganization and Amalgamation, dated December
         22, 1997, among the Company, South Amalgamation Sub Ltd. and MAS
         (incorporated by reference to Exhibit 2.1 to the Company's Registration
         Statement on Form S-4 (File No. 333-45053)).

2.2      Agreement and Plan of Reorganization and Merger, dated as of July 22,
         1998, by and among the Company, Iguana Merger Corp. and Innova
         Corporation (incorporated by reference to Exhibit 2.1 to the Company's
         Registration Statement on Form S-4 (File No. 333-62673)).

2.3      Certificate of Ownership and Merger merging DMC Stratex Networks, Inc.
         into Digital Microwave Corporation, dated August 9, 2000 (incorporated
         by reference to Exhibit 2.1 to the Company's Quarterly Report on Form
         10-Q for the quarter ended June 30, 2000).

3.1      Certificate of Amendment of Certificate of Incorporation of DMC Stratex
         Networks, Inc., dated August 9, 2000 (incorporated by reference to
         Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
         quarter ended June 30, 2000).

3.2      Amended and Restated Bylaws, Amended and Restated as of August 8, 2000
         (incorporated by reference to Exhibit 3.2 to the Company's Quarterly
         Report on Form 10-Q for the quarter ended September 31, 2000).

4.1      Form of Common Stock Certificate (incorporated by reference to Exhibit
         4.1 to the Company's Annual Report on Form 10-K for the year ended
         March 31, 1988).

4.2      Amended and Restated Rights Agreement dated as of November 3, 1998,
         between the Company and Chase Mellon Shareholder Services, L.L.C.,
         including the form of the Certificate of Designation for the Series A
         Junior Participating Stock (incorporated by reference to Exhibit 4.1 to
         the Company's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1998).

27.1     Financial Data Schedule for the quarter ended December 31, 2000.


</TABLE>



                                    22 of 23
<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.






                                    DMC STRATEX NETWORKS, INC.


Date:   February 13, 2001           By /s/ Carl A. Thomsen
      --------------------             -------------------------------
                                       Carl A. Thomsen
                                       Senior Vice President, Chief Financial
                                       Officer and Secretary



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