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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]    Quarterly  report  pursuant to Section 13 or 15(d) of the  Securities
       Exchange Act of 1934 for the quarterly period ended JULY 1, 2001.

                                       OR

[ ]    Transition  report  pursuant to Section 13 or 15(d) of the  Securities
       Exchange  Act of 1934  FOR  THE  TRANSITION  PERIOD  FROM  __________  TO
       __________.

Commission file number: 0-24360


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

          DELAWARE                                       77-0023003
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 ncorporation or organization)



                               350 West Java Drive
                           Sunnyvale, California 94089
               (Address of principal executive offices) (Zip Code)

                         Telephone Number (408) 745-5400
              (Registrant's telephone number, including area code)


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     [   ]

As of July 30,  2001 there were  11,586,600  shares of the  Registrant's  Common
Stock outstanding.

================================================================================
<PAGE>

<TABLE>
                              SPECTRIAN CORPORATION

                                    FORM 10-Q

                                      INDEX

                         FOR QUARTER ENDED JULY 1, 2001

<CAPTION>
                                                                                                               Page

                                               PART I - FINANCIAL INFORMATION
<S>             <C>                                                                                             <C>
item 1.         Financial Statements

                Condensed Consolidated Balance Sheets - July 1, 2001 and March 31, 2001.....................     3

                Condensed Consolidated Statements Of Operations - Three Months Ended July 1, 2001 and
                    July 2, 2000.........................................................................        4

                Condensed Consolidated Statements of Cash Flows - Three Months Ended July 1, 2001 and July
                    2, 2000.................................................................................     5

                Notes to Condensed Consolidated Financial Statements........................................     6

ITEM 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations.......    14

ITEM 3.         Quantitative and Qualitative Disclosures about Market Risk..................................    31


                                                PART II - OTHER INFORMATION

ITEM 6.         Exhibits and Reports on Form 8-K............................................................    32

Signatures..................................................................................................    33
</TABLE>
                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

<TABLE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                   (Unaudited)
<CAPTION>
                                                                                   July 1,            March 31,
                                                                                    2001               2001 (1)
                                                                                    ----               --------
<S>                                                                                <C>                <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                       $  51,761          $  36,397
   Restricted cash                                                                     3,213              6,354
   Short-term investments                                                             64,540             73,512
   Accounts receivable, less allowance for doubtful
     accounts of $460 and $460, respectively                                          14,953             27,587
   Inventories                                                                        26,779             22,221
   Deferred tax asset                                                                  3,818              3,818
   Prepaid expenses and other current assets                                           6,033              4,918
                                                                                   ---------          ---------
     Total current assets                                                            171,097            174,807

Property and equipment, net                                                           10,813             11,632
Other assets                                                                           1,573              1,584
                                                                                   ---------          ---------
     Total assets                                                                   $183,483           $188,023
                                                                                   =========          =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                                 $ 14,373          $  23,613
   Accrued liabilities                                                                14,477             13,958
   Income taxes payable                                                                  697                750
   Deferred gain, current portion                                                     30,600             31,550
   Current portion of debt and capital lease obligations                                 124                 --
                                                                                   ---------          ---------
     Total current liabilities                                                        60,271             69,871

   Deferred gain, net of current portion                                              13,100             19,650
   Debt and capital lease obligations, net of current portion                             45                 --
                                                                                   ---------          ---------
     Total liabilities                                                                73,416             89,521
                                                                                   ---------          ---------

STOCKHOLDERS' EQUITY:
   Preferred stock,  $0.001 par value,  5,000,000 shares  authorized;  none
      issued and outstanding, respectively                                                --                 --
   Common  stock,   $0.001  par  value,   20,000,000   shares   authorized;
      12,583,060 and 12,501,026  shares  issued,  respectively;  11,583,060
      and 11,501,026 shares outstanding, respectively                                     13                 13
   Additional paid-in capital                                                        168,446            167,524
   Treasury stock, 1,000,000 shares of common stock held                             (14,789)           (14,789)
   Deferred compensation expense                                                         (62)               (69)
   Accumulated other comprehensive loss                                               (7,994)           (22,856)
   Accumulated deficit                                                               (35,547)           (31,321)
                                                                                   ---------          ---------
     Total stockholders' equity                                                      110,067             98,502
                                                                                   ---------          ---------
     Total liabilities and stockholders' equity                                     $183,483           $188,023
                                                                                   =========          =========

<FN>
(1)  Derived from the March 31, 2001 audited  balance sheet included in the 2001
     Annual Report on Form 10-K of Spectrian Corporation.

See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                       3
<PAGE>

<TABLE>
                    SPECTRIAN CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<CAPTION>
                                                                               Three Months Ended
                                                                             ---------------------
                                                                               July 1,     July 2,
                                                                                 2001        2000
                                                                             --------    --------
<S>                                                                            <C>         <C>
REVENUES                                                                     $ 30,440    $ 42,190
                                                                             --------    --------
COSTS AND EXPENSES:
  Cost of revenues                                                             29,852      35,268
  Research and development                                                      5,932       5,601
  Selling, general and administrative                                           4,708       5,660
  Restructuring costs                                                             686        --
                                                                             --------    --------
     Total costs and expenses                                                  41,178      46,529
                                                                             --------    --------
OPERATING LOSS                                                                (10,738)     (4,339)

INTEREST INCOME                                                                   887         597
INTEREST EXPENSE                                                                   (8)        (46)
OTHER INCOME, NET                                                               5,154        --
                                                                             --------    --------
LOSS BEFORE INCOME TAXES                                                       (4,705)     (3,788)
INCOME TAXES                                                                       15          12
                                                                             --------    --------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                                                    (4,720)     (3,800)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -
  ADOPTION OF SFAS 133                                                            494        --
                                                                             --------    --------
NET LOSS                                                                     $ (4,226)   $ (3,800)
                                                                             --------    --------
NET LOSS PER SHARE:
  Basic and diluted loss per share before cumulative effect
     of change in accounting principle                                       $  (0.41)   $  (0.35)
  Cumulative effect of change in accounting principle                            0.04        --
                                                                             --------    --------
  Basic and diluted net loss per share                                       $  (0.37)   $  (0.35)
                                                                             ========    ========
SHARES USED IN COMPUTING PER SHARE AMOUNTS:
  Basic and diluted                                                            11,552      10,916
                                                                             ========    ========
<FN>

See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                       4
<PAGE>

<TABLE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<CAPTION>

                                                                             Three Months Ended
                                                                           ---------------------
                                                                             July 1,     July 2,
                                                                               2001        2000
                                                                           --------    --------
<S>                                                                        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                               $ (4,226)   $ (3,800)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Cumulative effect of change in accounting principle                    (494)       --
        Changes in fair value of equity options                              (1,772)
        Depreciation and amortization                                         1,342       2,928
        Gain on the sale of UltraRF                                          (7,500)       --
        Loss on sale of short-term investments                                4,104
        Loss on sale and write-off of property and equipment, net               483           5
        Stock option compensation expense                                         7         139
        Decrease in income tax payable                                          (53)       --
        Changes in operating assets and liabilities:
          Accounts receivable                                                12,634      (3,511)
          Inventories                                                        (4,558)        (42)
          Prepaid expenses and other assets                                  (1,104)     (1,762)
          Accounts payable                                                   (9,240)      2,900
          Accrued liabilities                                                   519        (983)
                                                                           --------    --------
             Net cash used in operating activities                           (9,858)     (4,126)
                                                                           --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of short-term investments                                      (13,023)       --
    Proceeds from sale and maturities of short-term investments              34,947       4,922
    Release of restricted cash                                                3,213        --
    Purchase of property and equipment                                         (837)     (2,245)
                                                                           --------    --------
             Net cash provided by investing activities                       24,300       2,677
                                                                           --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Repayment of debt and capital lease obligations                            --          (140)
    Proceeds from sales of common stock, net                                    922       1,215
                                                                           --------    --------
             Net cash provided by financing activities                          922       1,075
                                                                           --------    --------

Net increase (decrease) in cash and cash equivalents                         15,364        (374)

Cash and cash equivalents, beginning of period                               36,397      11,553
                                                                           --------    --------
Cash and cash equivalents, end of period                                   $ 51,761    $ 11,179
                                                                           ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    Cash paid for interest                                                 $      8    $     46
                                                                           ========    ========
    Cash paid for income taxes                                             $     68    $     12
                                                                           ========    ========
    Acquisition of equipment under capital lease obligations               $    169    $   --
                                                                           ========    ========
<FN>

See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                       5
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       BASIS OF PRESENTATION

         Principles of Consolidation

         The accompanying  unaudited condensed consolidated financial statements
of Spectrian  Corporation and  subsidiaries  ("Spectrian" or the "Company") have
been prepared in  conformity  with  generally  accepted  accounting  principles.
However,  certain  information  or  footnote  disclosures  normally  included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted  pursuant to the rules and regulations
of the Securities  and Exchange  Commission.  In the opinion of management,  the
statements  include all adjustments (which are of a normal and recurring nature)
necessary  for the fair  presentation  of the  financial  information  set forth
therein.  These  financial  statements  should be read in  conjunction  with the
Company's audited  consolidated  financial  statements as set forth on pages F-1
through  F-26 of the  Company's  Annual  Report on Form 10-K for the fiscal year
ended March 31, 2001. The interim results  presented  herein are not necessarily
indicative of the results of operations that may be expected for the full fiscal
year ending March 31, 2002, or any other future period.

2.       SALE OF ULTRARF

         On December 29, 2000, the Company  completed the sale of  substantially
all of  the  assets  and  liabilities  comprising  the  Company's  semiconductor
division, UltraRF, pursuant to the Asset Purchase Agreement dated as of November
20, 2000 (the "Asset  Purchase  Agreement")  among Cree, Inc.  ("Cree"),  Zoltar
Acquisition, Inc. ("Zoltar") and the Company for 1,815,402 shares of Cree common
stock  valued at  $64,503,000,  based  upon the per  share  price at the date of
closing,  plus common  stock of Cree with a guaranteed  realizable  value of $30
million,  less $1,141,000 owed by the Company to Cree due to a change in the net
assets of UltraRF  between  October 1, 2000 and December 29, 2000.  Of the total
consideration  received,  191,094  shares of Cree  common  stock were  placed in
escrow to secure the Company's  representations,  warranties and covenants under
the Asset  Purchase  Agreement  over a 12-month  period.  In January  2001,  the
Company  sold all the shares  held in escrow for  approximately  $6,309,000  and
recognized a loss of approximately  $481,000 from the sale of these  securities.
On June 29, 2001,  one-half of the cash  proceeds from the sale of escrow shares
plus interest  earned in the amount of $3,213,000 was released from escrow.  The
remaining amount of approximately  $3,213,000 held in escrow on July 1, 2001 was
classified as restricted cash in the financial statements.

         As part of the definitive agreement,  the Company and Cree entered into
a two-year supply  agreement under which Spectrian is obligated to purchase from
Cree an aggregate of $58 million of semiconductors. In the event Spectrian fails
to  make  these  purchases,  it is  obligated  to pay  Cree  the  amount  of the
shortfall.  Accordingly, the Company deferred $58 million of the gain on sale of
UltraRF and is recognizing it in periods as the related purchase  commitments to
Cree are  being  fulfilled.  In  addition,  Spectrian  and Cree  entered  into a
one-year joint development agreement to develop advanced technologies related to
laterally diffused metal oxide semiconductors ("LDMOS"),  linear high gain LDMOS
driver modules,  high efficiency LDMOS power modules and SiC MESFET  components,
under which Spectrian will pay to Cree a development fee of $2.4 million in four
quarterly  installments  of $600,000  beginning in April 2001.  The Company also
subleased one of the  facilities in Sunnyvale,  California to Cree for a term of
11 years (with three options to extend the lease an additional  five years) with
similar terms as the lease agreement between the Company and its landlord.

         The Company  realized an aggregate  gain of $69.7 million from the sale
of UltraRF assets,  of which $58.0 million was deferred as noted above, with the
balance of $11.7 million  being  recognized as other

                                       6
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

income  during third  quarter of fiscal 2002.  During the first  quarter  fiscal
2001, Spectrian recognized a gain of $7.5 million as other income as the related
purchase commitment was fulfilled by the Company.

3. ADOPTION OF SFAS 133

         The Company  adopted  Statement of Financial  Accounting  Standards No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended by
Statement of Financial  Accounting  Standards No. 137, Accounting for Derivative
Instruments  and Hedging  Activities  - Deferral of the  Effective  Date of FASB
Statement  No. 133, an amendment  of FASB  Statement  No. 133, and  Statement of
Financial  Accounting  Standards  No. 138,  Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133 (referred to hereafter as "SFAS 133"),  on April 1, 2001. In accordance with
the  transition  provisions  of SFAS 133,  the Company  recorded an  approximate
$494,000 gain cumulative effect adjustment in earnings as of April 1, 2001.

         Accounting for Derivatives and Hedging Activities

         All  derivatives  are  recognized  on the  balance  sheet at their fair
value.  On the date that the  Company  enters  into a  derivative  contract,  it
designates the derivative as (1) a hedge of the fair value of a recognized asset
or  liability  or (2) an  instrument  that is held for  trading  or  non-hedging
purposes (a "trading" or  "non-hedging"  instrument).  Since April 1, 2001,  the
Company has designated all derivative contacts as a fair value hedge and has not
entered into derivatives for the purposes of trading.  Changes in the fair value
of a  derivative  that is  highly  effective  as - and  that is  designated  and
qualifies as - a fair-value  hedge,  along with changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk, are recorded
in current-period earnings.

         The  Company  formally  documents  all  relationships  between  hedging
instruments  and hedged  items,  as well as its  risk-management  objective  and
strategy for  undertaking  various  hedge  transactions.  This process  includes
linking all  derivatives  that are  designated as fair-value  hedges to specific
assets on the balance  sheet.  The Company also formally  assesses  (both at the
hedge's inception and on an ongoing basis) whether the derivatives that are used
in hedging  transactions have been highly effective in offsetting changes in the
fair value of hedged  items and  whether  those  derivatives  may be expected to
remain  highly  effective  in  future  periods.  When  it is  determined  that a
derivative is not (or has ceased to be) highly effective as a hedge, the Company
discontinues hedge accounting prospectively.

         The Company  discontinues  hedge accounting  prospectively  when (1) it
determines that the derivative is no longer  effective in offsetting  changes in
the  fair  value  of a  hedged  item;  (2) the  derivative  expires  or is sold,
terminated,  or exercised;  or (3) management  determines  that  designating the
derivative as a hedging instrument is no longer appropriate.

         Derivative Instruments and Hedging Activities

         The Company has an  investment  in the common stock of Cree (see Note 2
above).  The  Company's  investment  exposes it to a risk related the effects of
changes in price of Cree common stock. This financial  exposure is monitored and
managed  by  the  Company.   The  Company's   risk-management   focuses  on  the
unpredictability  of  financial  markets  and  seeks to reduce  the  potentially
adverse  effects that the  volatility of these markets may have on its operating
results.  The Company uses cashless  collars,  which are  combinations of option
contracts to hedge this risk. The Company  generally hedges 60 to 100 percent of
investments  in Cree common stock.  The Company  excludes from its assessment of
hedge  effectiveness  the gain or loss  associated  with  the time  value of the
options.

                                       7
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

         At July 1, 2001,  885,000  shares of Cree common  stock were hedged and
these option arrangements will expire from August 2001 to May 2002. Accordingly,
the Company  should realize an average of $25.34 per share for the hedged shares
if the share price of Cree common stock is lower than  approximately  $25.34 per
share when the options expire. If the Cree common stock price exceeds an average
of approximately  $41.21 per share when the options expire, the Company may sell
its hedged shares at $41.21 or settle the options for a cash amount equal to the
difference  between the Cree common stock price and the option price.  Until the
options  expire,  the company will be  restricted  from  disposing of the hedged
shares unless it also disposes of the associated options.

         For the quarter ended July 1, 2001,  the Company  recognized a net gain
of $1.8  million,  (included  in other income in the  statement of  operations),
which represented the time value of the options.

         By using derivative financial instruments to hedge exposures to changes
in share  prices,  the Company  exposes  itself to credit risk and market  risk.
Credit  risk is the  risk  that  the  counterparty  might  fail to  fulfill  its
performance  obligations  under the terms of the derivative  contract.  When the
fair value of a  derivative  contract is  positive,  the  counterparty  owes the
Company,  which creates repayment risk for the Company. When the fair value of a
derivative  contract  is  negative,  the  Company  owes  the  counterparty  and,
therefore,  does not assume repayment risk. The Company minimizes its credit (or
repayment) risk in derivative instruments by (1) entering into transactions with
high-quality  counterparties,  (2)  limiting  the amount of its exposure to each
counterparty,  and (3) monitoring the financial condition of its counterparties.
The Company also maintains a policy of requiring  that all derivative  contracts
be  governed  by an  International  Swaps  and  Derivatives  Association  Master
Agreement.

4. OTHER INCOME, NET

         Other income, net included (in thousands):

                                                              Three Months Ended
                                                              ------------------
                                                               July 1,   July 2,
                                                                 2001     2000
                                                                 ----     ----
         Gain on sale of UltraRF                                $7,500    $  --
         Loss on sale of Cree, Inc. common stock and options    (4,118)      --
         Gain on Cree, Inc. common stock options                 1,772       --
                                                                ------    -----
         Other income, net                                      $5,154    $  --
                                                                ======    =====

                                       8
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

5. BALANCE SHEET COMPONENTS

         Balance sheet components are as follows (in thousands):

                                                             July 1,   March 31,
                                                               2001      2001
                                                               ----      ----

        Inventories:

           Raw materials                                     $10,609    $11,185
           Work in progress                                    2,737      5,699
           Finished goods                                     13,433      5,337
                                                             -------    -------
                                                             $26,779    $22,221
                                                             =======    =======

        Property and equipment:

           Machinery and equipment                           $42,704    $47,341
           Software                                            3,839      3,819
           Leasehold improvements                              2,711      2,673
                                                             -------    -------
                                                              49,254     53,833
           Less accumulated depreciation and amortization     38,441     42,201
                                                             -------    -------
                                                             $10,813    $11,632
                                                             =======    =======

        Accrued liabilities:

           Employee compensation and benefits                $ 3,035    $ 2,839
           Warranty                                            9,300      9,800
           Restructuring                                         518         --
           Other accrued liabilities                           1,624      1,319
                                                             -------    -------
                                                             $14,477    $13,958
                                                             =======    =======

6.       RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  No. 141 ("SFAS  141"),  "Business
Combinations."  SFAS 141 requires the purchase method of accounting for business
combinations    initiated    after   June   30,   2001   and    eliminates   the
pooling-of-interests  method. The Company believes that the adoption of SFAS 141
will not have a significant impact on their financial statements.

         In July  2001,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is
effective for fiscal years beginning after December 15, 2001. SFAS 142 requires,
among other things,  the discontinuance of goodwill  amortization.  In addition,
the standard  includes  provisions  upon  adoption for the  reclassification  of
certain existing recognized intangibles as goodwill,  reassessment of the useful
lives  of  existing   recognized   intangibles,   reclassification   of  certain
intangibles out of previously  reported  goodwill and the testing for impairment
of existing goodwill and other intangibles.  The Company is currently  assessing
but has not yet  determined the impact of SFAS 142 on their  financial  position
and  results of  operations.  The  Company  will  adopt SFAS 142 in the  quarter
beginning April 1, 2002.

                                       9
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

7. SHORT-TERM INVESTMENTS

         The Company considers all liquid  investments with an original maturity
of three  months or less to be cash  equivalents.  As of July 1, 2001,  the cash
equivalents consisted of commercial paper and U.S. government securities.

         The Company has classified its investments in certain debt  securities,
equity options and common stock investments in Cree as "available-for-sale," and
records such  investments  at fair market value.  Unrealized  unhedged gains and
losses on debt securities and common stock investments in Cree are reported as a
separate  component  of  stockholders'  equity.  Realized  gains and  losses are
determined using the specific identification method. Interest income is recorded
using an  effective  interest  rate,  with the  associated  premium or  discount
amortized to interest income.

         As  of  July  1,  2001  and  March  31,  2001,  short-term  investments
classified as available-for-sale securities were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   Amortized       Unrealized Gain         Fair
                      As of July 1, 2001                              Cost              (Loss)            Value
---------------------------------------------------------------- ---------------- ----------------- -----------------

<S>                                                                  <C>             <C>                <C>
Government bonds and notes...................................        $ 26,136         $    125          $ 26,261
Corporate bonds and notes....................................          31,249              191            31,440
Cree, Inc. common stock......................................          31,456           (8,310)           23,146
Cree, Inc. common stock options .............................              --            2,266             2,266
                                                                     --------         --------          --------
                                                                       88,841           (5,728)           83,113
Less amounts classified as cash equivalents..................          18,573               --            18,573
                                                                     --------         --------          --------
Short-term investments.......................................        $ 70,268         $ (5,728)         $ 64,540
                                                                     ========         ========          ========

Contractual maturity dates of short-term investment in bonds and notes:

     Less than 1 year........................................                                           $ 14,607
     1 to 5 years............................................                                             24,521
                                                                                                       ---------
                                                                                                        $ 39,128
                                                                                                        ========

                                                                    Amortized      Unrealized Gain         Fair
                     As of March 31, 2001                              Cost             (Loss)            Value
---------------------------------------------------------------- ---------------- ----------------- -----------------

Government bonds and notes...................................       $  23,355            $ 120          $ 23,475
Corporate bonds and notes....................................          41,164              144            41,308
Cree, Inc. common stock......................................          57,713          (33,397)           24,316
Cree, Inc. common stock options .............................              --           10,277            10,277
                                                                     --------         --------          --------
                                                                      122,232          (22,856)           99,376
Less amounts classified as cash equivalents..................          25,864               --            25,864
                                                                     --------         --------          --------
Short-term investments.......................................        $ 96,368        $ (22,856)         $ 73,512
                                                                     ========        =========          ========

Contractual maturity dates of short-term investment in bonds and notes:

     Less than 1 year........................................                                          $   8,931
     1 to 5 years............................................                                             29,988
                                                                                                       ---------
                                                                                                        $ 38,919
                                                                                                        ========
</TABLE>
                                       10
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

8. PER SHARE COMPUTATION

         Basic  net  loss per  share is  computed  by  dividing  net loss by the
weighted-average number of common shares outstanding for the period. Diluted net
income per share is computed  using the  weighted  average  number of common and
potentially  dilutive  common  shares  outstanding  during the period  using the
treasury stock method.  Potentially dilutive common shares include the effect of
stock  options.  For the  three  months  ended  July 1,  2001 and July 2,  2000,
2,849,491 and 3,215,017  stock options were not included in the  calculation  of
diluted net loss per share as they were considered  antidilutive  due to the net
loss the Company experienced in these fiscal periods.

9. SEGMENT INFORMATION

Geographic Segment Data:

         Revenue  from   unaffiliated   customers  by  geographic  region  as  a
percentage of revenues were as follows:

                                                            Three Months Ended
                                                            ------------------
                                                         July 1,         July 2,
                                                           2001            2000
                                                           ----            ----
         Canada                                             37%             35%
         United States                                      35%             34%
         China                                              13%              --
         South Korea                                        11%              5%
         France                                              2%             25%
         Other countries                                     2%              1%
                                                          -----           -----
         Total                                             100%            100%
                                                          =====           =====

         The Company's  long-lived assets are located in the following countries
(in thousands):

                                                        July 1,        March 31,
                                                          2001            2001
                                                          ----            ----
         United States                                   $  6,766       $  7,966
         Thailand                                           2,630          2,707
         South Korea                                        1,417            959
                                                         --------       --------
                                                         $ 10,813       $ 11,632
                                                         ========       ========

10. RESTRUCTURING COSTS

         During  the first  quarter  of fiscal  2002,  the  Company  decided  to
transfer its power amplifier repair  operations in Sunnyvale,  California,  to a
contract manufacturer located in Thailand. In connection with the decision,  the
Company recognized in the first quarter of fiscal 2002 an approximately $686,000
restructuring  charge for estimated  severance  costs related to  organizational
changes  and a planned  reduction  in work force and to write off  property  and
equipment that have no future value to the Company.  Approximately  60 employees
engaged in the repair operations are anticipated to be terminated as a result of

                                       11
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

the  restructuring.  The  Company  anticipates  that the  restructuring  will be
substantially  completed  in the second  quarter of fiscal 2002.  The  following
table represents the  restructuring  activity that took place up through July 1,
2001 (in thousands):

<TABLE>
<CAPTION>
                                                         Asset        Reduction in
                                                      Write-offs       Workforce           Other
                                                      (Non Cash)         (Cash)           (Cash)          Total
                                                      ----------         ------           ------          -----
<S>                                                       <C>             <C>                <C>           <C>
        Accrual for restructuring charges                 $ 161           $ 485           $   40           $ 686
        Cash payment of severance costs                      --              (7)              --              (7)
        Write-off of property and equipment                (161)             --               --            (161)
                                                          -----           -----           ------           -----
        Balance at July 1, 2001                           $  --           $ 478           $   40           $ 518
                                                          =====           =====           ======           =====
</TABLE>

         The  balance  of the  restructuring  accrual  is  included  in  accrued
liabilities on the condensed consolidated balance sheets.

11. COMPREHENSIVE INCOME

         Statement  of  Financial  Accounting  Standard  No.  130  ("SFAS  130")
"Reporting Comprehensive Income" establishes rules for the reporting and display
of comprehensive income and its components.  The following are the components of
comprehensive income (loss) (in thousands):

                                                             Three Months Ended
                                                             ------------------
                                                             July 1,    July 2,
                                                              2001        2000
                                                             -------    -------

         Net loss                                            $(4,226)   $(3,800)
         Unrealized gain (loss) on marketable securities      14,862        115
                                                             -------    -------
         Comprehensive income (loss)                         $10,636    $(3,685)
                                                             =======    =======

         The components of accumulated other  comprehensive  loss are as follows
(in thousands):

                                                             July 1,   March 31,
                                                              2001       2001
                                                             -------    -------
         Unrealized loss on marketable securities           $(7,994)   $(22,856)
                                                            =======    ========

12. COMMITMENTS

         Purchase Commitments

         As  described  in Note 2, the  Company  has  signed a  two-year  supply
agreement  with  Cree  on  December  29,  2000  to  purchase  $58.0  million  of
semiconductors.  The Company  fulfilled  its purchase  obligation  for the first
quarter of fiscal 2002 and  recognized  $7.5 million of the deferred gain. As of
July 1, 2001,  the Company has an  obligation  to purchase an  additional  $43.7
million of semiconductors  from Cree under the supply agreement,  of which $30.6
million of  purchases  are required to be made over the next 12 months and $13.1
million of  purchases  are required to be made  starting  the second  quarter of
fiscal 2003.

                                       12
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

13. LINE OF CREDIT

         The Company has a revolving line of credit of $10.0 million with a bank
collateralized  by the  majority  of the  Company's  assets.  The line of credit
expires on June 30, 2002. Under the terms of the master agreement governing this
credit  instrument,  as amended,  the  Company is  required to maintain  certain
minimum working capital,  profitability and other specific financial ratios. The
master  agreement also has certain  restrictions on other  indebtedness  and the
payment of  dividends.  At July 1, 2001,  the  Company was in default of certain
covenants and the bank has granted a waiver of the default for the quarter ended
July, 1 2001. The amount available to borrow at July 1, 2001, was $10.0 million.
The Company can borrow at either (i) a variable  rate equal to the prime rate or
(ii) a fixed rate equal to 200 basis points above the LIBOR rate,  which at July
1, 2001 was 6.8% and 5.8%, respectively. The Company had no borrowings under the
line of credit at July 1, 2001.

                                       13
<PAGE>

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

The  statements  contained  in this  Quarterly  Report on Form 10-Q that are not
purely historical are  forward-looking  statements within the meaning of Section
27A of the Securities Act of 1933 (the "Securities  Act") and Section 21E of the
Securities  Exchange  Act of 1934 (the  "Exchange  Act"),  including  statements
regarding   Spectrian   Corporation's  ("the  Company")   expectations,   hopes,
intentions  or  strategies  regarding  the future.  When used herein,  the words
"may,"  "will,"  "expect,"  "anticipate,"   "continue,"  "estimate,"  "project,"
"intend"  and similar  expressions  are  intended  to  identify  forward-looking
statements  within  the  meaning of the  Securities  Act and the  Exchange  Act.
Forward looking  statements  include,  but are not limited to: the statements in
the second  paragraph of "Overview"  regarding the  recognition in the future of
gains on the sale of  UltraRF  and the  effect  of the  sale of  UltraRF  on the
Company's semiconductor cost, in the third paragraph regarding the impact on the
Company of a loss of a major OEM customer and the future  fluctuations of Nortel
product  orders,  in the fourth  paragraph  regarding  international  sales as a
percentage of future revenues and the impact of currency  fluctuations on future
revenues in the fifth  paragraph  regarding  the timing of the transfer of power
amplifier repair operations, and in the last paragraph regarding average selling
prices and gross margins;  the statements in the second paragraph under "Results
of Operations - Cost of Revenues"  regarding the gross margin as a percentage of
net  revenues;  the  statements  under  "Results of  Operations  - Research  and
Development" regarding new product development initiatives;  the statement under
"Results of Operations - Income  Taxes"  regarding  the  recoverability  and the
recording of the net deferred tax asset;  the  statements in the last  paragraph
under "Liquidity and Capital Resources"  concerning the anticipated spending for
capital  additions for the next twelve months,  the sufficiency of the Company's
available  resources  to meet  cash  requirements  and the  factors  which  will
determine the Company's future cash requirements; and the statements in "Factors
Affecting Future Operating  Results."  Results could differ  materially based on
various factors including,  but not limited to, those described below, under the
heading  "Factors  Affecting  Future  Operating  Results" and  elsewhere in this
Quarterly Report on Form 10-Q.

All   forward-looking   statements  included  in  this  document  are  based  on
information available to the Company on the date hereof, and the Company assumes
no  obligation  to update any such  forward-looking  statements.  Investors  are
cautioned  that any  forward-looking  statements  are not  guarantees  of future
performance and are subject to risks and  uncertainties  and that actual results
may differ materially from those included within the forward-looking  statements
as a result of various  factors.  These  forward-looking  statements are made in
reliance  upon the safe harbor  provision of The Private  Securities  Litigation
Reform Act of 1995.

Overview

         Spectrian   Corporation   ("Spectrian"   or  the  "Company")   designs,
manufacturers and markets high-power radio frequency ("RF") amplifiers,  for the
global wireless communications  industry. The Company's power amplifiers support
a broad  range  of  transmission  standards,  including  Advanced  Mobile  Phone
Services  ("AMPS"),  Time  Division  Multiple  Access  ("TDMA"),  Code  Division
Multiple Access ("CDMA" and "CDMA2000"), Personal Communications System ("PCS"),
Global System for Mobil  Communications  ("GSM"),  Wireless  Local Loop ("WLL"),
Universal Mobile Telephone  Service  ("UMTS"),  and IMT-2000.  Spectrian's power
amplifiers  are utilized as part of the  infrastructure  for both wireless voice
and data networks. The Company's power amplifiers boost the power of a signal so
that  it can  reach a  wireless  phone  or  other  device  within  a  designated
geography.

         On December 29, 2000, the Company  completed the sale of  substantially
all  of  the  assets  and  external  liabilities  comprising  its  semiconductor
division,  UltraRF,  to Cree,  Inc.  ("Cree")  pursuant  to the  Asset  Purchase
Agreement dated as of November 20, 2000 (the "Asset Purchase  Agreement")  among
Cree, Zoltar  Acquisition,  Inc. ("Zoltar") and the Company for 1,815,402 shares
of common stock of Cree plus

                                       14
<PAGE>

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

common stock with a guaranteed  realizable value of $30 million, less $1,141,000
owed by the Company to Cree due to a change in the net assets of UltraRF between
October 1, 2000 and December 29, 2000. As part of the definitive agreement,  the
Company and Cree entered into a two-year supply  agreement under which Spectrian
is   obligated   to  purchase   from  Cree  an   aggregate  of  $58  million  of
semiconductors.  In the event  Spectrian  fails to make these  purchases,  it is
obligated to purchase excess  inventory that it may never utilize or to pay Cree
the amount of the shortfall. Accordingly,  Spectrian deferred $58 million of the
gain on sale of UltraRF and is recognizing it in periods as the related purchase
commitments  to Cree are being  fulfilled.  In the  quarter  ended July 1, 2001,
Spectrian  fulfilled its purchase  obligation  under the contract and recognized
$7.5  million of the  deferred  gain.  Spectrian  and Cree also  entered  into a
one-year joint development agreement to develop advanced technologies related to
laterally diffused metal oxide semiconductors ("LDMOS"),  linear high gain LDMOS
driver modules,  high efficiency LDMOS power modules and SiC MESFET  components.
Following  the close of the sale of UltraRF,  the Company no longer has revenues
related to the sale of UltraRF products to third party customers.  Additionally,
as a result  of the  sale,  the  Company's  cost of  semiconductors  used in the
manufacturing  of amplifier  products  have  increased  because  purchases  from
UltraRF  are at fair  market  value  rather  than at  manufacturing  cost as has
historically been the case.

         For the three months ended July 1, 2001,  Nortel  Networks  Corporation
("Nortel") and Verizon Communications  ("Verizon"),  accounted for approximately
76% and 10% of net  revenues,  respectively.  For the three months ended July 2,
2000,  Nortel  and  Verizon  accounted  for  approximately  61%  and  28% of net
revenues,  respectively.  The  Company  and  Nortel  have  a  supply  agreement,
renegotiated  annually,  pursuant to which Nortel  commits to purchase a certain
volume of its annual power amplifier  requirements for specified prices from the
Company.  This agreement  allows Nortel to change the product mix  requirements,
which can  significantly  affect  the  Company's  gross  margins,  and to change
requested delivery dates without significant  financial  consequences to Nortel,
which affects the Company's ability to efficiently  manage production  schedules
and inventory  levels and to accurately  forecast  product sales.  The Company's
business,  financial  condition and results of operations  have been  materially
adversely  affected in the past by anticipated orders failing to materialize and
by  deferrals  or  cancellations  of orders as a result of changes  in  customer
requirements.  In the past,  product orders from Nortel have fluctuated  sharply
and the Company does not  currently  sell any  multicarrier  products to Nortel,
which has adversely affected the Company's revenues and earnings in prior fiscal
periods.  There can be no assurance  that the Company will not  experience  such
fluctuations  in the  future or that the  Company  will  receive  any orders for
multicarrier  products  from Nortel in the  future.  If the Company is unable to
find other customers to generate demand for its new and existing  products,  the
Company's revenues may be materially adversely affected.  If the Company were to
lose  Nortel,  Verizon,  Samsung or any other  major  customer,  or if orders by
Nortel,  Verizon,  Samsung  or  any  other  major  customer  were  to  otherwise
materially decrease either in unit quantity or in price, the Company's business,
financial  condition  and results of operations  would be  materially  adversely
affected.

         During the three  months  ended  July 1, 2001 and July 2,  2000,  sales
outside of the United States were 65% and 66%, respectively. The Company expects
that international  sales will continue to account for a significant  percentage
of the  Company's  net revenues for the  foreseeable  future.  Financial  market
turmoil,  economic  downturn,  consolidation  or merger of customers,  and other
changes  in  business  conditions  in any of the  Company's  current  or  future
markets,  such as Canada,  South  Korea,  China and France,  may have a material
adverse effect on the Company's sales of its products. Furthermore,  because the
Company's  products  are  priced  in U.S.  dollars,  currency  fluctuations  and
instability in the financial markets that are served by the Company may have the
effect of making  the  Company's  products  more  expensive  than those of other
manufacturers  whose  products are priced in the local  currency of the customer
and may result in reduced revenues for the Company.

                                       15
<PAGE>

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

         The  Company  currently   services  its  power  amplifier  products  in
Sunnyvale,  California. During the quarter ended July 1, 2001, the Company began
to transition its power amplifier repair  operations to a contract  manufacturer
located in  Thailand.  The Company  anticipates  that the  transfer of its power
amplifier repair operations will be substantially completed in the quarter ended
September 30, 2001. In September 2000, the Company completed the transfer of its
power  amplifier  production from  Sunnyvale,  California,  to the same contract
manufacturer on a turnkey basis. The Company utilizes contract  manufacturing to
decrease the  Company's  manufacturing  overhead and costs of its  products,  to
increase  flexibility  to  respond  to  fluctuations  in  product  demand and to
leverage the strengths of the contract manufacturer's focus on high volume, high
quality manufacturing. The cost of transitioning manufacturing activities to the
contract manufacturer were higher than the savings from costs of products, which
adversely  affected the  Company's  gross  margins from January 1999 to November
2000. As a result of its  infrastructure,  the Company has a high level of fixed
costs  and is  dependent  upon  substantial  revenue  to  achieve  and  maintain
profitability.

         The  market  for  the  Company's  products  is  becoming   increasingly
competitive. The Company is selling its power amplifier products in South Korea,
as well as directly to cellular  service  providers  where its  competitors  are
already established as suppliers. In addition, the Company competes with several
merchant amplifier  manufacturers for business from Nortel. This competition has
resulted in, and will continue to result in reduced  average  selling prices for
the Company's products, which accordingly will negatively impact gross margins.

                                       16
<PAGE>

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

Results of Operations

         The  following  table  sets  forth for the  periods  indicated  certain
statement of operations  data of the Company  expressed as a percentage of total
revenues and gross margin on sales.

                                                            Three Months Ended
                                                            ------------------
                                                           July 1,      July 2,
                                                            2001         2000
                                                           -------      ------
         NET REVENUES                                       100.0%       100.0%
                                                           ------       ------
         COSTS AND EXPENSES:
           Cost of revenues                                  98.1         83.6
           Research and development                          19.5         13.3
           Selling, general and administrative               15.4         13.4
           Restructuring costs                                2.3           --
                                                          -------       ------
              Total costs and expenses                      135.3        110.3
                                                            -----        -----
         Operating loss                                     (35.3)       (10.3)

         INTEREST INCOME                                      2.9          1.4
         INTEREST EXPENSE                                      --         (0.1)
         OTHER INCOME                                        16.9           --
                                                          -------       ------
         LOSS BEFORE INCOME TAXES                           (15.5)        (9.0)
         INCOME TAXES                                          --           --
                                                          -------       ------

         LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
           ACCOUNTING PRINCIPLE                             (15.5)        (9.0)
         CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
           PRINCIPLE - ADOPTION OF SFAS 133                   1.6           --

         NET LOSS                                           (13.9)%       (9.0)%
                                                          ========      =======
         GROSS MARGIN ON SALES                                1.9%        16.4%
                                                          ========      =======

         Net Revenues. The Company's net revenues decreased 28% to $30.4 million
for the three months ended July 1, 2001 from $42.2  million for the three months
ended July 2, 2000.  The decrease in net  revenues  compared to the three months
ended July 2, 2000 is primarily  due to lower  demand in all product  lines as a
result of delays and reductions in capital  spending by the Company's  customers
and a decline in the average  selling prices of single  carrier power  amplifier
("SCPA") products.  Multicarrier power amplifier ("MCPA") revenues decreased 32%
to $5.9  million for the three  months  ended July 1, 2001 from $8.7 million for
the three  months  ended  July 2, 2000.  SCPA  revenues  decreased  14% to $22.2
million for the three months ended July 1, 2001 from $25.8 million for the three
months ended July 2, 2000.  Broadband revenues decreased 90% to $0.6 million for
the three months ended July 1, 2001 from $6.0 million for the three months ended
July 2, 2000.

         Cost of  Revenues.  Cost of  revenues  consists  primarily  of  turnkey
amplifier costs for the Company's products, internal amplifier assembly and test
costs,  radio  frequency  ("RF")  semiconductor  fabrication,  assembly and test
costs, raw materials,  manufacturing  overhead and warranty costs. The Company's
cost of sales  decreased by 15% to $29.9 million for the three months ended July
1, 2001 from $35.3 million for the three months ended July 2, 2000. The decrease
on a dollar and  percentage  basis for the three  months ended July 1, 2001 were
due to lower sales.

                                       17
<PAGE>

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

         Gross margin on sales was 2% for the three months ended July 1, 2001 as
compared to 16% for the three months  ended July 2, 2000.  The decrease in gross
margin was due to a higher per unit manufacturing costs for SCPA products, lower
production  volumes to absorb fixed overhead costs, and a decline in the average
selling prices of SCPA products.  The Company anticipates that gross margin as a
percentage of net revenues will continue to be adversely effected as a result of
the sale of the UltraRF  division to Cree as the Company is required to purchase
the LDMOS RF  semiconductor  parts at market price rather than  recognizing  the
cost of  revenues  at the actual  cost of  production  and  continued  declining
average selling prices.

         Research and  Development.  Research and development  ("R&D")  expenses
include the cost of designing,  developing or reducing the manufacturing cost of
amplifiers and RF semiconductors.  The Company's R&D expenses increased by 6% to
$5.9  million in the three  months  ended July 1, 2001 from $5.7  million in the
three months ended July 2, 2000. As a percentage  of net revenues,  R&D expenses
represented  20% of net  revenues  for the three  months  ended  July 1, 2001 as
compared  to 13% of  revenues  for the three  months  ended  July 2,  2000.  The
increase in R&D  expenses on a dollar  basis for the three  months ended July 1,
2001 reflects new product development initiatives which the Company believes are
required to meet  current and future  market and customer  requirements  and the
cost of the development  agreement between the Company and Cree. The increase in
R&D expenses as a percentage  of net revenues for the three months ended July 1,
2001 was due to higher  R&D  expense  on a dollar  basis and lower  revenues  as
compared to the similar period in the prior year.

         Selling,    General   and   Administrative.    Selling,   general   and
administrative  ("SG&A")  expenses include  compensation and benefits for sales,
marketing,  senior management and administrative personnel,  commissions paid to
independent sales  representatives,  professional  fees and other expenses.  The
Company's  SG&A  expenses  decreased  by 17% to $4.7 million in the three months
ended July 1, 2001 from $5.6 million in the three months ended July 2, 2000.  As
a percentage of net revenues,  SG&A expenses represented 15% of net revenues for
the three  months  ended July 1, 2001 as compared to 13% of net revenues for the
three months ended July 2, 2000. The decrease in SG&A expenses on a dollar basis
was primarily due to lower  commissions  associated with lower sales as compared
to the similar period in the prior year and reduced  general and  administrative
spending as a result of the sale of UltraRF in December  2000.  The  increase in
SG&A expenses as a percentage of net revenues for the three months ended July 1,
2001 was due to lower  revenues as  compared to the similar  period in the prior
year.

         Restructuring  Costs.  During  the first  quarter of fiscal  2002,  the
Company decided to transfer its power amplifier repair  operations in Sunnyvale,
California,  to a contract  manufacturer located in Thailand. In connection with
the  decision,  the Company  recognized  in the first  quarter of fiscal 2002 an
approximately  $686,000  restructuring  charge  for  estimated  severance  costs
related to  organizational  changes and a planned reduction in work force and to
write off  property  and  equipment  that have no future  value to the  Company.
Approximately 60 employees  engaged in the repair  operations are anticipated to
be terminated as a result of the restructuring. The Company anticipates that the
restructuring  will be  substantially  completed in the second quarter of fiscal
2002.

         Interest  Income.  Interest  income for the three  months ended July 1,
2001 increased to $0.9 million from $0.6 million for the three months ended July
2, 2000. The increase in interest income  resulted from higher  interest-bearing
investment  balances  associated  with higher  average cash and cash  equivalent
balances.

         Interest  Expense.  Interest expense for the three months ended July 1,
2001  decreased  to $8,000 from $46,000 for the three months ended July 2, 2000.
The decrease in interest expense was a result of  substantially  reduced average
borrowing levels due to repayments of debt and capital lease obligations made in
association with the sale of UltraRF in December 2000.

                                       18
<PAGE>

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

         Other  Income.  Other  income for the three  months  ended July 1, 2001
increased  to $5.2  million  from none for the three  months ended July 2, 2000.
Other  income for the three  months  ended July 1, 2001  includes a $7.5 million
gain  recognized  on sale of UltraRF  in  December  2000,  a $1.8  million  gain
associated with the increase in value of Cree stock options, partially offset by
a $4.1  million  realized  loss on  sale  of a  portion  of  Cree  common  stock
investments.

         Income Taxes.  The Company did not record income tax expense except for
minimum state taxes and foreign taxes in the three months ended July 1, 2001 and
July 2,  2000.  Due to the  uncertainties  surrounding  the  realization  of the
deferred tax assets  resulting  from the Company's  accumulated  deficit and net
losses in fiscal 2000 and 1999,  the Company has provided a valuation  allowance
against  deferred tax assets where the  realization is uncertain.  The valuation
allowance reduces the net deferred tax asset to the amount that is estimated may
be recovered through carryback from future periods. The Company will continue to
evaluate  positive  and  negative  evidence  on the  recoverability  of its  net
deferred  tax asset each quarter and will record the net deferred tax asset when
it is more likely than not that it will be recovered.

         Cumulative  Effect of Change in  Accounting  Principle  -  Adoption  of
SFAS133.  The Company adopted  Statement of Financial  Accounting  Standards No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended by
Statement of Financial  Accounting  Standards No. 137, Accounting for Derivative
Instruments  and Hedging  Activities  - Deferral of the  Effective  Date of FASB
Statement  No. 133, an amendment  of FASB  Statement  No. 133, and  Statement of
Financial  Accounting  Standards  No. 138,  Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133 (referred to hereafter as "SFAS 133"), on April 1, 2001. In the three months
ended  December 31, 2000 and the three  months  ended July 1, 2001,  the Company
entered into various option  arrangements  known as a cashless collar,  to hedge
its  investment  in Cree common  stock,  which was acquired  through the sale of
UltraRF.  The Company has  designated  these option  arrangements  as fair value
hedges under SFAS 133. In accordance with the transition provisions of SFAS 133,
the Company recorded an approximate  $494,000 gain cumulative  effect adjustment
in earnings as of April 1, 2001.

Recent Accounting Pronouncements

         In July 2001, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  No. 141 ("SFAS  141"),  "Business
Combinations."  SFAS 141 requires the purchase method of accounting for business
combinations    initiated    after   June   30,   2001   and    eliminates   the
pooling-of-interests  method. The Company believes that the adoption of SFAS 141
will not have a significant impact on their financial statements.

         In July  2001,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is
effective for fiscal years beginning after December 15, 2001. SFAS 142 requires,
among other things,  the discontinuance of goodwill  amortization.  In addition,
the standard  includes  provisions  upon  adoption for the  reclassification  of
certain existing recognized intangibles as goodwill,  reassessment of the useful
lives  of  existing   recognized   intangibles,   reclassification   of  certain
intangibles out of previously  reported  goodwill and the testing for impairment
of existing goodwill and other intangibles.  The Company is currently  assessing
but has not yet  determined the impact of SFAS 142 on their  financial  position
and  results of  operations.  The  Company  will  adopt SFAS 142 in the  quarter
beginning April 1, 2002.

                                       19
<PAGE>

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

Liquidity and Capital Resources

         The Company has  financed  its growth  through  sales of common  stock,
private sales of equity  securities,  capital  equipment  leases,  bank lines of
credit and cash flows from operations. Principal sources of liquidity at July 1,
2001 consisted of cash and cash  equivalent,  restricted  cash,  short-term debt
investments,  investment  in Cree common  stock and options  which total  $119.5
million and bank borrowing arrangements.

         The Company has a revolving line of credit of $10.0 million with a bank
collateralized  by the  majority  of the  Company's  assets.  The line of credit
expires on June 30, 2002. Under the terms of the master agreement governing this
credit  instrument,  as amended,  the  Company is  required to maintain  certain
minimum working capital,  profitability and other specific financial ratios. The
master  agreement also has certain  restrictions on other  indebtedness  and the
payment of dividends. The Company was in default of certain debt covenants as of
July 1, 2001 and the bank has  granted a waiver of the  default  for the quarter
ended July 1, 2001.  The  amount  available  to borrow at July 1, 2001 was $10.0
million. The Company can borrow at either (i) a variable rate equal to the prime
rate or (ii) a fixed rate equal to 200 basis points above the LIBOR rate,  which
at July 1, 2001 was 6.8% and 5.8%,  respectively.  The Company had no borrowings
under the line of credit at July 1, 2001.

         The  Company's  working  capital  increased  by $5.9  million to $110.8
million  as of July 1, 2001  from  $104.9  million  as of March  31,  2001.  The
increase  was  primarily  attributable  to a $9.2  million  decrease in accounts
payable due to lower production  volumes associated with lower sales as compared
with the  three  months  ended  March  31,  2001,  a $1.0  million  decrease  in
short-term  deferred  gain as a result of fulfilling  the $7.5 million  purchase
commitments to Cree in the three months ended July 1, 2001,  partially offset by
the  reclassification of $6.5 million from long-term deferred gain to short-term
deferred  gain,  a $4.6  million  increase  in net  inventory  due to  increased
finished  goods  caused  by  lower  than  expected  revenues  compared  with the
Company's revenue outlook, a $1.1 million increase in prepaid expenses and other
assets and a $3.3 million  increase in cash and  short-term  investments,  which
were partially  offset by a $12.6 million  decrease in accounts  receivable as a
result of lower sales and  improved  days-outstanding  ratio and a $0.5  million
increase in accrued  liabilities  primarily due to the reserve for restructuring
charges.  The Company's short-term debt investments were principally invested in
investment grade, interest-bearing securities.

         Cash used by  operations  was $9.9  million for the three  months ended
July 1, 2001 compared to cash used by operations for the three months ended July
2, 2000 of $4.1 million. Cash used by operations for the three months ended July
1, 2001 was  principally  the result of a $4.2  million net loss, a $0.5 million
non-cash  cumulative-effect gain related to the adoption of SFAS 133 on April 1,
2001, a $1.8 million non-cash gain associated with changes in fair value of Cree
stock options not related to their hedging function,  a $7.5 million  recognized
non-cash  gain from the sale of  UltraRF,  a $9.2  million  decrease in accounts
payable due to lower  production  volumes  associated  with lower sales,  a $4.6
million  increase in net inventory due to increased  finished  goods caused by a
lower than expected revenue compared with the Company's revenue outlook,  a $1.1
million  increase in prepaid  expenses and other  assets,  which were  partially
offset by a $12.6 million  decrease in accounts  receivable as a result of lower
sales and improved  days-outstanding  ratio, a $4.1 million realized loss on the
sale of Cree common stock, a $1.3 million depreciation and amortization expense,
a $0.5 million loss on the sale and  write-off of property and  equipment  and a
$0.5 million  increase in accrued  liabilities  primarily due to the reserve for
restructuring charges.

         Cash used by  operations  for the three  months  ended July 2, 2000 was
principally  the result of a $3.8 million net loss,  a $3.5 million  increase in
accounts receivable, which increased as a result of the timing of shipments late
in the quarter,  a $1.8 million  increase in prepaid  expenses and other current
assets and a $1.0 million reduction in accrued  liabilities which were partially
offset  by  a  $2.9  million  increase  in

                                       20
<PAGE>

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

accounts payable,  which increased  proportionately  with production levels, and
depreciation and amortization of $2.9 million.

         The Company's  investing  activities during the three months ended July
1, 2001  provided cash of  approximately  $24.3 million as compared to providing
cash of $2.7  million  during  the  comparable  period in the prior  year.  Cash
provided by  investing  activities  during the three  months  ended July 1, 2001
resulted  primarily  from $35.0  million  proceeds  from sale and  maturities of
short-term  investments,  which included  approximately  $22.2 million generated
from the sale of 739,000 shares of Cree common stock,  and $3.2 million from the
release of restricted  cash,  which  represented  one-half of the amount held in
escrow to secure the Company's representations, warranties and covenants related
to the sale of UltraRF to Cree,  partially  offset by $13.0 million in purchases
of  short-term  investments  and $0.8  million  in  additions  to  property  and
equipment.  Capital  additions  for the three months ended July 1, 2001 included
manufacturing test and production equipment required to support new products and
test equipment to support various research and development projects.

         Cash  provided by  investing  activities  during the three months ended
July 2, 2000  resulted  primarily  from $4.9  million in proceeds  from sale and
maturities of short-term investments which were partially offset by $2.2 million
in additions to property and equipment.  Capital  additions for the three months
ended July 2, 2000 included manufacturing test and production equipment required
to support new  products  and test  equipment  to support  various  research and
development projects.

         The Company's  financing  activities during the three months ended July
1, 2001  provided  cash of  approximately  $0.9 million as compared to providing
$1.1  million  of cash  during the  comparable  period in the prior  year.  Cash
provided by financing  activities during the three months ended July 1, 2001 was
the result of $0.9 million  proceeds from the issuance of common stock,  through
the  exercise of  employee  stock  options  and  employee  stock  purchase  plan
activity.

         Cash  provided by  financing  activities  during the three months ended
July 2, 2000 was the result of $1.2  million in  proceeds  from the  issuance of
common  stock,  through  the  exercise  of  employee  stock  options,  which was
partially  offset  by $0.1  million  in  repayments  of debt and  capital  lease
obligations.

         As part of the sale of UltraRF,  the Company has  committed to purchase
$58.0 million of  semiconductors  over the two-year period ending December 2002.
The Company anticipates spending approximately $5.0 million over the next twelve
months for capital additions primarily to support  manufacturing  production and
test  requirements  and  development  projects.  Based on the Company's  current
working capital position and the available line of credit,  the Company believes
that  sufficient  resources  will  be  available  to  meet  the  Company's  cash
requirements for at least the next twelve months.  Cash  requirements for future
periods will depend on the Company's profitability,  timing and level of capital
expenditures, working capital requirements and rate of growth.

                                       21
<PAGE>

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

Factors Affecting Future Operating Results

         Customer Concentration;  Dependence on Nortel and Verizon. The wireless
infrastructure equipment market is dominated by a small number of large OEMs and
wireless service  providers,  including  Ericsson,  Lucent,  Motorola,  Samsung,
Nortel,  Verizon and Siemens.  The Company's revenues are derived primarily from
sales to a limited number of these customers, in particular, Nortel, Verizon and
Samsung.  Furthermore, a substantial portion of revenues from Nortel in the past
has  resulted  from sales of a limited  number of the  Company's  products.  The
Company's  business,  financial  condition and results of  operations  have been
materially  adversely  affected  in the past by  anticipated  orders  failing to
materialize and by deferrals or  cancellations  of orders as a result of changes
in  customer  requirements.  The  Company  and Nortel  have a supply  agreement,
renegotiated  annually,  pursuant to which Nortel  commits to purchase a certain
volume of its annual power amplifier  requirements for specified prices from the
Company.  This agreement  allows Nortel to change the product mix  requirements,
which can  significantly  affect  the  Company's  gross  margins,  and to change
requested delivery dates without significant  financial  consequences to Nortel,
which affects the Company's ability to efficiently  manage production  schedules
and inventory levels and to accurately  forecast product sales. Any reduction in
the level of  purchases  of the  Company's  amplifiers  by  Nortel,  Verizon  or
Samsung, or any material reduction in pricing without significant offsets, would
have a material adverse effect on the Company's  business,  financial  condition
and results of  operations.  For  example,  in the first and second  quarters of
fiscal 2001 product orders from Nortel fell drastically and the Company does not
currently  sell  any  multicarrier  amplifier  products  to  Nortel,  which  has
adversely  affected the Company's  business.  There can be no assurance that the
Company will receive any product orders for multicarrier amplifier products from
Nortel in the future.  If the Company's current or new customers do not generate
sufficient  demand for the  Company's new products  replacing  prior demand from
Nortel, the Company's  business,  financial  condition and results of operations
could be materially  adversely  affected.  Further,  if the Company were to lose
Nortel,  Verizon or Samsung or any other major customer, the Company's business,
financial  condition  and results of operations  would be  materially  adversely
affected. In addition,  wireless  infrastructure  equipment OEMs have come under
increasing  price pressure from wireless  service  providers,  which in turn has
resulted in downward  pricing  pressure on the Company's  products.  The Company
expects to incur increasing pricing pressures from Nortel, Verizon,  Samsung and
other major customers in future periods, which could result in declining average
sales prices and gross margins for the Company's products.

         Fluctuations in Operating Results.  The Company's  quarterly and annual
results have in the past been,  and will continue to be,  subject to significant
fluctuations  due to a number of  factors,  any of which  could  have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  In  particular,  the Company's  results of operations are likely to
vary due to: the timing,  cancellation,  delay or  rescheduling  of OEM customer
orders  and  shipments;  the timing of  announcements  or  introductions  of new
products by the Company, its competitors or their respective OEM customers;  the
acceptance  of such  products by wireless  equipment  OEMs and their  customers;
relative variations in manufacturing efficiencies and costs; competitive factors
such as the  pricing,  availability,  and  demand  for  competing  amplification
products;  changes in average  sales prices and related gross margins which vary
significantly based upon product mix; subcontractor  performance;  variations in
operating  expenses;  changes in  manufacturing  capacity and  variations in the
utilization of this capacity;  shortages of key supplies;  the long sales cycles
associated  with the  Company's  products;  the timing and level of product  and
process  development  costs;  changes  in  inventory  levels;  and the  relative
strength or weakness of international financial markets. Anticipated orders from
the Company's OEM customers have in the past failed to materialize  and delivery
schedules  have been deferred or canceled as a result of changes in OEM customer
requirements  and the  Company  expects  this  pattern to  continue  as customer
requirements  continue  to change and  industry  standards  continue  to evolve.
Reduced  demand for  wireless  infrastructure  equipment  in the past has caused
significant  fluctuations  in  the  Company's  product  sales.  There  can be no
assurance that the Company will not experience  such  fluctuations in the future
or that the Company will experience in the

                                       22
<PAGE>

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

future the same annual  revenue  growth that it did in fiscal 2000 and 2001. The
Company  establishes  its expenditure  levels for product  development and other
operating expenses based on its expected  revenues,  and expenses are relatively
fixed in the short term. As a result, variations in timing of revenues can cause
significant  variations  in  quarterly  results of  operations.  There can be no
assurance that the Company will be profitable on a  quarter-to-quarter  basis in
the future.  The  Company  believes  that  period-to-period  comparisons  of its
financial  results are not necessarily  meaningful and should not be relied upon
as an indication of future performance.  Due to all the foregoing factors, it is
likely  that in some  future  quarter or  quarters  the  Company's  revenues  or
operating results will not meet the expectations of public stock market analysts
or  investors.  In such event,  the market price of the  Company's  Common Stock
would be materially adversely affected.

         Declining  Average  Sales  Prices.  The  Company has  experienced,  and
expects to  continue  to  experience,  declining  average  sales  prices for its
products,  especially  in the market for its single  carrier  power  amplifiers.
Wireless infrastructure equipment manufacturers have come under increasing price
pressure from wireless service providers, which in turn has resulted in downward
pricing  pressure  on the  Company's  products.  In  addition,  competition  has
increased  the  downward  pricing  pressure  on the  Company's  products.  Since
wireless  infrastructure  equipment  manufacturers  frequently  negotiate supply
arrangements  far in advance of delivery dates, the Company often must commit to
price  reductions  for its  products  before  it is  aware of how,  or if,  cost
reductions  can be obtained.  To offset  declining  average  sales  prices,  the
Company  believes that it must achieve  manufacturing  cost  reductions.  If the
Company is unable to achieve such cost  reductions,  the Company's gross margins
will  decline,  and such  decline  will have a  material  adverse  effect on the
Company's business, financial condition and results of operations.

         Product Quality,  Performance and Reliability. The Company expects that
its customers will continue to establish  demanding  specifications for quality,
performance and reliability  that must be met by the Company's  products.  Power
amplifiers  as  complex  as  those  offered  by  the  Company  often   encounter
development delays and may contain  undetected defects or failures.  The Company
has from time to time in the past experienced  product quality,  performance and
reliability  problems.  In addition, a multicarrier power amplifier has a higher
probability of malfunction than a single carrier power amplifier  because of its
greater complexity.  There can be no assurance that defects or failures relating
to the Company's product quality,  performance and reliability will not occur in
the future that may have a material  adverse  effect on the Company's  business,
financial condition and results of operations.

         Internal  Amplifier  Design and  Production  Capabilities  of OEMs. The
Company  believes that a majority of the present  worldwide  production of power
amplifiers is captive within the manufacturing  operations of wireless equipment
OEMs,  many of which  have  chosen  not to  purchase  a  significant  volume  of
amplifiers from outside suppliers. In addition, these manufacturers could decide
to sell amplifiers to other wireless  equipment OEMs. If this should occur,  the
competition for power amplifiers would  significantly  increase and could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

         The Company  also  believes  that those OEMs that  purchase  from third
party  amplifier  vendors are reluctant to switch once committed to a particular
merchant  vendor.  Consequently,  the Company has only limited  opportunities to
increase revenues by replacing  internal OEM amplifier  production or displacing
other merchant amplifier suppliers.  Moreover,  given the limited  opportunities
for  merchant  power  amplifier  suppliers,  any  decision by an OEM to employ a
second  source  merchant  supplier  for a  product  currently  purchased  from a
merchant  supplier  may  reduce  the  existing  merchant  supplier's  ability to
maintain a given level of product sales to such OEM or, possibly,  to retain the
OEM as a  customer  due to price  competition  from the second  source  merchant
supplier.  There can be no assurance that the Company's major OEM customers will
continue to rely,  or  increase  their  reliance,  on the Company as an external
source of supply for their power  amplifiers,  or that other wireless  equipment
OEMs will become customers of the Company.

                                       23
<PAGE>

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

If the major  wireless  infrastructure  equipment  suppliers  do not purchase or
continue to  purchase  their  power  amplifiers  from  merchant  suppliers,  the
Company's  business,  results of  operations  and  financial  condition  will be
materially adversely affected.

         Rapid Technological Change; Evolving Industry Standards;  Dependence on
New Products. The markets in which the Company and its OEM customers compete are
characterized by rapidly changing  technology,  evolving industry  standards and
continuous  improvements  in products and services.  In particular,  because the
Company's  strategy  of  rapidly  bringing  to market  products  customized  for
numerous and evolving  modulation  standards  requires  developing and achieving
volume production of a large number of distinct products,  the Company's ability
to rapidly design and produce individual products for which there is significant
OEM  customer  demand will be a critical  determinant  of the  Company's  future
success. A softening of demand in the markets served by the Company or a failure
of modulation standard in which the Company has invested substantial development
resources  may  have  a  material  adverse  effect  on the  Company's  business,
financial  condition and results of  operations.  No assurance can be given that
the  Company's  product  development  efforts will be  successful,  that its new
products  will  meet  customer  requirements  and be  accepted  or that  its OEM
customers' product offerings will achieve customer acceptance.  If a significant
number  of  development  projects,  including  the  Company's  new  multicarrier
products,  do not result in substantial  volume production or if technologies or
standards  supported by the Company's or its customers' products become obsolete
or fail to gain widespread commercial acceptance,  the Company's business may be
materially adversely affected.

         Purchase  and  Supply  Agreement  with  Cree.  In  connection  with the
Company's  completion of the sale of UltraRF to Cree, the Company entered into a
Purchase and Supply Agreement,  dated as of December 29, 2000 by and between the
Company  and Zoltar  (subsequently  renamed  "UltraRF,  Inc.").  Pursuant to the
Purchase  and Supply  Agreement,  the Company  committed  to purchase and accept
delivery from UltraRF,  Inc. ("UltraRF") of $58 million of semiconductors over a
two-year period starting January 2001. The quarterly commitments to purchase and
accept   delivery  of   semiconductor   components   from  UltraRF   range  from
approximately  $6.6  million to $9.2  million.  The  Company's  need for UltraRF
components  during a calendar quarter may be insufficient to satisfy its minimum
commitments  for such  calendar  quarter.  In such event,  the Company  would be
obligated to purchase  excess  inventory  that it may never  utilize or to pay a
shortfall surcharge, either of which could have a material adverse effect on the
Company's business, financial condition, and cash flows.

         Arm's-Length Relationship. The Company relies on UltraRF for the supply
of a substantial  amount of components  used in the manufacture of its products.
When the Company operated UltraRF as a separate  division,  it may have obtained
more favorable terms for semiconductor  products than through  negotiations with
unaffiliated third parties.  With the sale of UltraRF, the Company must now deal
with UltraRF on an arm's-length basis.  Accordingly,  the prices and other terms
for UltraRF semiconductor  products are less favorable to the Company than prior
to the sale of UltraRF to Cree.

         Sole or Limited  Sources  of  Products,  Materials  and  Services.  The
Company  currently  procures  from single  sources power  amplifier  assemblies,
certain  specialized  semiconductors,  components and services for its products.
The Company  purchases  these  products,  components  and services on a purchase
order basis, does not carry significant inventories of these components and does
not have any long-term supply contracts with its sole source vendors.  In fiscal
2001, the Company  completed the transfer of the production of power  amplifiers
to a  contract  manufacturer  in  Thailand.  As a result of this  transfer,  the
Company no longer has  significant  manufacturing  capacity.  The Company issues
non-cancelable  purchase orders to the contract  manufacturer 60 days in advance
of requested delivery,  which is greater than the committed delivery schedule of
some of its  customers,  such as Nortel.  In  addition,  the  Company  began the
process  of  transferring  its power  amplifier  repair  operations  to the same
contract  manufacturer in Thailand in the quarter ended July 1, 2001 and expects
to substantially complete this transfer in the

                                       24
<PAGE>

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

quarter ended  September 30, 2001. On December 29, 2000,  the Company  completed
the sale of  substantially  all of the assets  and  liabilities  comprising  the
Company's  semiconductor  division,  UltraRF,  pursuant  to the  Asset  Purchase
Agreement  dated as of November  20, 2000 to Cree.  As a result,  the Company no
longer  manufactures  bipolar  and  LDMOS RF  power  semiconductors,  which  are
critical  components in the Company's power amplifier  products.  As part of the
definitive  agreement,  the  Company  and Cree  entered  into a two-year  supply
agreement  under  which  the  Company  is  obligated  to  purchase  from Cree an
aggregate of $58 million of semiconductors.  Consequently, Cree is the Company's
sole source  vendor of certain  bipolar and LDMOS RF power  semiconductors.  The
Company's  reliance on sole sources for certain  components and its migration to
an outsourced, turnkey manufacturing and repair services strategy entail certain
risks including reduced control over the price, timely delivery, reliability and
quality of the components  and reliance on the financial  strength and continued
relationship with the contract  manufacturer.  If the Company were to change any
of its sole  source  vendors or  contract  manufacturer,  the  Company  would be
required  to  requalify  the  components   with  each  new  vendor  or  contract
manufacturer,  respectively.  Any  inability  of the  Company  to obtain  timely
deliveries of components,  repair services or assembled amplifiers of acceptable
quality  in  required  quantities  or a  significant  increase  in the prices of
components  for  which  the  Company  does not have  alternative  sources  could
materially and adversely affect the Company's business,  financial condition and
results of operations.  The Company has occasionally experienced difficulties in
obtaining some components, and no assurance can be given that shortages will not
occur in the future.

         Risks of International  Sales. The Company operates in an international
market and  expects  that  international  sales will  continue  to account for a
significant  percentage  of the  Company's  total  revenues for the  foreseeable
future. These sales involve a number of inherent risks,  including imposition of
government  controls,  currency exchange  fluctuations,  potential insolvency of
international distributors, representatives and customers, reduced protection of
intellectual  property  rights in some  countries,  the  impact of  recessionary
environments in economies outside the United States,  political  instability and
generally longer receivables  collection  periods,  as well as tariffs and other
trade barriers. In addition,  because substantially all of the Company's foreign
sales are  denominated  in U.S.  dollars,  increases  in the value of the dollar
relative  to the  local  currency  would  increase  the  price of the  Company's
products in foreign  markets and make the  Company's  products  relatively  more
expensive and less price competitive than competitors'  products that are priced
in local currencies.  There can be no assurance that these factors will not have
a material  adverse  effect on the  Company's  future  international  sales and,
consequently,  on the  Company's  business,  financial  condition and results of
operations.

         The  Company  anticipates  that  turmoil in  financial  markets and the
deterioration of the underlying  economic  conditions in certain countries where
the Company has  significant  sales may have an impact on its sales to customers
located in or whose  projects are based in those  countries due to the impact of
currency  fluctuations  on the  relative  price of the  Company's  products  and
restrictions on government  spending imposed by the International  Monetary Fund
(the "IMF") on those  countries  receiving  the IMF's  assistance.  In addition,
customers in those  countries may face reduced access to working capital to fund
component  purchases,  such as the Company's  products,  due to higher  interest
rates,  reduced  funding of wireless  infrastructure  by  domestic  governments,
reduced  bank  lending  due  to   contractions   in  the  money  supply  or  the
deterioration  in  the  customer's  or its  bank's  financial  condition  or the
inability to access equity  financing.  A substantial  majority of the Company's
products are sold to OEMs who  incorporate  the Company's  products into systems
sold and  installed  to  end-user  customers.  These  OEMs are not  required  by
contract and do not typically provide the Company with information regarding the
location and identity of their end-user customers,  and, therefore,  the Company
is not able to determine  what portion of its product  sales have been or future
orders  will  be   incorporated   into  OEM  sales  to  end-users  in  countries
experiencing   financial   market  turmoil  and/or   deterioration  of  economic
conditions. Furthermore, a large portion of the Company's existing customers and
potential new customers are servicing new markets in developing  countries  that
the Company's customers expect will deploy wireless communication networks as an

                                       25
<PAGE>

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

alternative to the construction of a wireline infrastructure.  If such countries
decline to construct  wireless  communication  systems,  or construction of such
systems is delayed for any reason,  including  business and economic  conditions
and changes in economic stability due to factors such as increased inflation and
political  turmoil,  such  delays  could have a material  adverse  effect on the
Company's business, financial condition and results of operations.

         Reliance upon Growth of Wireless Services. Sales of power amplifiers to
wireless  infrastructure  equipment  suppliers and network operators have in the
past accounted, and are expected in the future to account, for substantially all
of the Company's product sales. Demand for wireless infrastructure  equipment is
driven by demand for wireless service.  Although demand for power amplifiers has
grown in recent  years,  if demand for  wireless  services  fails to increase or
increases  more slowly than the Company or its customers  currently  anticipate,
the Company's  business,  financial condition and results of operations would be
materially and adversely affected.

         Market for the Company's Products Is Highly  Competitive.  The wireless
communications  equipment industry is extremely competitive and is characterized
by rapid technological change, new product development and product obsolescence,
evolving  industry  standards and  significant  price erosion over the life of a
product.  The  ability  of the  Company  to  compete  successfully  and  sustain
profitability  depends in part upon the rates at which  wireless  equipment OEMs
incorporate the Company's  products into their systems and the Company  captures
market share from other merchant suppliers.

         The Company's  major OEM  customers  continuously  evaluate  whether to
manufacture  their own  amplification  products  or purchase  them from  outside
sources. There can be no assurance that these OEM customers will incorporate the
Company's  products  into their systems or that in general they will continue to
rely, or expand their  reliance,  on external  sources of supply for their power
amplifiers.   These  customers  and  other  large   manufacturers   of  wireless
communications  equipment  could  also  elect to enter the  merchant  market and
compete  directly with the Company,  and at least one OEM, NEC, has already done
so. Such increased  competition could materially  adversely affect the Company's
business, financial condition and results of operations.

         The  Company's  principal   competitors  in  the  market  for  wireless
amplification  products  provided by merchant  suppliers  currently  include AML
Communications,  Amplidyne, Fujitsu, Mitsubishi,  Paradigm Communications,  Inc.
and  Powerwave  Technologies  Inc.. No assurance can be given that the Company's
competitors  will not  develop  new  technologies  or  enhancements  to existing
products or introduce new products that will offer superior price or performance
features compared to the Company's products.

         Uncertain Protection of Intellectual Property. The Company's ability to
compete  successfully and achieve future revenue growth will depend, in part, on
its ability to protect its proprietary technology and operate without infringing
the rights of others.  The Company has a policy of seeking patents on inventions
resulting from its ongoing research and development activities.  There can be no
assurance that the Company's pending patent applications will be allowed or that
the  issued  or  pending  patents  will not be  challenged  or  circumvented  by
competitors.  Notwithstanding the Company's active pursuit of patent protection,
the  Company  believes  that the  success of its  business  depends  more on the
collective  value of its  patents,  specifications,  computer  aided  design and
modeling tools,  technical  processes and employee expertise.  In addition,  the
Company assigned 20 of its United States patents and 4 of its foreign patents to
Cree in  connection  with the sale of UltraRF.  The Company has been  granted by
Cree a non-exclusive,  royalty-free  license to each of these patents,  however,
there can be no assurance  that Cree will  adequately  protect this  proprietary
information and any such failure could adversely affect the Company's  business,
financial condition and results of operations. The Company generally enters into
confidentiality and nondisclosure agreements with its employees,  suppliers, OEM
customers,  and potential customers and limits access to and distribution of its
proprietary  technology.  However,  there can be no assurance that such

                                       26
<PAGE>

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

measures will provide  adequate  protection  for the Company's  trade secrets or
other  proprietary   information,   or  that  the  Company's  trade  secrets  or
proprietary  technology  will not  otherwise  become  known or be  independently
developed by competitors.  The failure of the Company to protect its proprietary
technology  could  have a material  adverse  effect on its  business,  financial
condition and results of operations.

         Risk  of  Third  Party  Claims  of  Infringement.   The  communications
equipment  industry  is  characterized  by  vigorous  protection  and pursuit of
intellectual  property  rights or positions,  which have resulted in significant
and often  protracted and expensive  litigation.  Although there is currently no
pending intellectual property litigation against the Company, the Company or its
suppliers  may from time to time be  notified  of claims that the Company may be
infringing patents or other intellectual property rights owned by third parties.
If it is  necessary  or  desirable,  the  Company may seek  licenses  under such
patents  or  other  intellectual  property  rights.  However,  there  can  be no
assurance  that  licenses  will be  offered  or that the  terms  of any  offered
licenses will be acceptable to the Company. The failure to obtain a license from
a third party for technology  used by the Company or otherwise  secure rights to
use such technology could cause the Company to incur substantial liabilities, to
suspend the manufacture of products or expend  significant  resources to develop
noninfringing  technology.  There can be no assurance  that the Company would be
successful  in such  development  or that such  licenses  would be  available on
reasonable  terms,  if at  all.  In the  event  that  any  third  party  makes a
successful  claim  against the Company or its  customers and either a license is
not made available to the Company on commercially  reasonable terms or a "design
around" is not  practicable,  the Company's  business,  financial  condition and
results of operations would be materially adversely affected.

         Furthermore,  the Company may  initiate  claims or  litigation  against
third  parties  for  infringement  of the  Company's  proprietary  rights  or to
establish the validity of the  Company's  proprietary  rights.  Litigation by or
against  the  Company  could  result in  significant  expense to the Company and
divert the efforts of the Company's technical and management personnel,  whether
or not such litigation results in a favorable  determination for the Company. In
the event of an adverse  result in any such  litigation,  the  Company  could be
required  to  pay  substantial  damages,  indemnify  its  customers,  cease  the
manufacture,  use and sale of infringing products,  expend significant resources
to develop noninfringing technology, discontinue the use of certain processes or
obtain licenses to the infringing technology.

         Government  Regulation  of  Communications  Industry.  Radio  frequency
transmissions and emissions,  and certain equipment used in connection therewith
are regulated in the United States, Canada and throughout the rest of the world.
Regulatory  approvals  generally  must be obtained by the Company in  connection
with the manufacture and sale of its products, and by wireless service providers
to operate the  Company's  products.  The United States  Federal  Communications
Commission (the "FCC") and regulatory  authorities  abroad  constantly review RF
emission  issues  and  promulgate  standards  based  on  such  reviews.  If more
stringent RF emission regulations are adopted, the Company and its OEM customers
may be required to alter the manner in which radio  signals are  transmitted  or
otherwise alter the equipment  transmitting such signals, which could materially
adversely affect the Company's  products and markets.  The enactment by federal,
state, local or international governments of new laws or regulations or a change
in the  interpretation of existing  regulations could also materially  adversely
affect the market for the Company's products. For example, recently enacted laws
and regulations  which prohibit the use of hand held cellular  telephones  while
operating a motor vehicle may have a material  adverse  affect on the market for
the Company's products.  Although  deregulation of international  communications
industries along with radio frequency spectrum  allocations made by the FCC have
increased the potential demand for the Company's  products by providing users of
those   products  with   opportunities   to  establish  new  wireless   personal
communications  services,  there  can be no  assurance  that  the  trend  toward
deregulation and current regulatory  developments  favorable to the promotion of
new and expanded  personal  communications  services will continue or that other
future  regulatory  changes  will have a  positive  impact on the  Company.  The
increasing demand for wireless communications has exerted pressure on regulatory
bodies worldwide

                                       27
<PAGE>

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

to  adopt  new  standards  for  such  products,  generally  following  extensive
investigation  of and  deliberation  over  competing  technologies.  The  delays
inherent in this governmental  approval process have in the past caused, and may
in the future cause,  the  cancellation,  postponement  or  rescheduling  of the
installation  of  communications  systems by the Company's OEM customers.  These
delays  have had in the past,  and in the  future may have,  a material  adverse
effect on the sale of products by the Company to such OEM customers.

         Environmental  Regulations.  The  Company  is  subject  to a variety of
local,  state and federal  governmental  regulations  relating  to the  storage,
discharge, handling, emission, generation,  manufacture and disposal of toxic or
other  hazardous  substances  used to manufacture  the Company's  products.  The
Company  believes that it is currently in  compliance  in all material  respects
with such  regulations  and that it has  obtained  all  necessary  environmental
permits  to conduct  its  business.  Nevertheless,  the  failure to comply  with
current or future  regulations  could result in the  imposition  of  substantial
fines on the Company, suspension of production,  alteration of its manufacturing
processes or cessation of operations.  Compliance  with such  regulations  could
require  the  Company to acquire  expensive  remediation  equipment  or to incur
substantial  expenses.  Any failure by the Company to control the use, disposal,
removal or storage of, or to adequately  restrict the discharge of, or assist in
the cleanup of,  hazardous  or toxic  substances,  could  subject the Company to
significant  liabilities,  including joint and several liabilities under certain
statutes.  The imposition of such liabilities could materially  adversely affect
the  Company's  business,  financial  condition  and results of  operations.  In
addition,  the  Company  is liable  for any  potential  claim,  loss or  expense
incurred by Cree as a result of any  inaccuracy  or breach of the  environmental
representations  and warranties  made by the Company in connection with the sale
of UltraRF. See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations - Factors  Affecting  Future  Operating  Results - Escrow
Funds."

         Management  of  Growth;  Dependence  on Key  Personnel.  The  Company's
business  and growth  has  placed,  and is  expected  to  continue  to place,  a
significant strain on the Company's  personnel,  management and other resources.
The Company's ability to manage any future growth effectively will require it to
attract,  motivate, manage and retain new employees successfully,  especially in
the  highly  competitive  northern  California  job  market,  to  integrate  new
employees into its overall operations and to retain the continued service of its
key technical,  marketing and management  personnel,  and to continue to improve
its  operational,  financial and management  information  systems.  Although the
Company has employment  contracts with several of its executive officers,  these
agreements do not obligate such  individuals  to remain in the employment of the
Company.  The Company does not maintain key person life  insurance on any of its
key technical  personnel.  The  competition  for such personnel is intense.  The
Company  has  experienced  loss of key  employees  in the past and  could in the
future. Such losses could have a material adverse effect on the Company.

         The Company's  ability to manage its growth will require it to continue
to invest in its  operational,  financial and  management  information  systems,
procedures and controls.  The Company can give no assurance that it will be able
to manage its growth  effectively.  Failure to manage growth  effectively  would
have a material adverse effect on the Company's  business,  financial  condition
and  results of  operations.  The  Company  may,  from time to time,  pursue the
acquisition  of other  companies,  technology,  assets  or  product  lines  that
complement or expand its existing  business.  The Company may also, from time to
time,  pursue  divestitures  of  existing  operations,   technology  or  assets.
Acquisitions  and  divestitures  involve a number of risks that could  adversely
affect the  Company's  operating  results.  These risks include the diversion of
management's  attention from day-to-day  business,  the fluctuation of operating
results due to the timing of charges for costs  associated with  acquisitions or
divestitures,  the difficulty of combining and  assimilating  the operations and
personnel of the acquired  companies,  the  difficulty  of separating a divested
operation from the remaining operations,  charges to the Company's earnings as a
result of the  purchase of  intangible  assets,  and the  potential  loss of key
employees as a result of an acquisition or  divestiture.  Should any acquisition
take place, we can give no assurance that this  acquisition  will not materially
and adversely  affect the Company or that any such  acquisition will enhance the
Company's business.

         Risk of Business Interruption.  The Company's operations are vulnerable
to interruption by fire, earthquake, power loss,  telecommunications failure and
other events beyond the Company's control.  The

                                       28
<PAGE>

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

Company does not have a detailed  disaster  recovery plan and its  facilities in
the State of  California  are  currently  subject to  electrical  blackouts as a
consequence  of a shortage of  available  electrical  power.  In the event these
blackouts continue or increase in severity, they could disrupt the operations of
the  Company's  facilities in  California  and increase the Company's  operating
costs. In addition,  the Company does not carry sufficient business interruption
insurance to  compensate  it for losses that may occur and any losses or damages
incurred could have a material adverse effect on the Company's business.

         Volatility  of Stock  Price.  The market  price of the shares of Common
Stock has been and is likely to continue to be highly volatile,  and is affected
significantly  by factors such as  fluctuations  in the Company's  quarterly and
annual  operating  results,  customer  concentration,  reliance on single source
vendors, the timing difference between Nortel's requested delivery dates and its
vendor  purchase  commitments to support the customer's  delivery  requirements,
reliance  on  international  markets,  the  absence  of the  economies  of scale
achieved by some of its competitors, announcements of technological innovations,
new  customer  contracts  or new  products  by the  Company or its  competitors,
announcements by the Company's  customers regarding their business or prospects,
changes in analysts' expectations,  estimates and recommendations,  news reports
regarding the Company, its competitors and its markets,  governmental regulatory
action,   developments   with   respect  to  patents  or   proprietary   rights,
announcements  of  significant  acquisitions  or strategic  partnerships  by the
Company  or  its  competitors,  announcements  of  significant  divestitures  of
existing  businesses  or product  lines,  the market  price of the shares of the
common  stock  of  Cree,  concentration  of stock  ownership  by a few  entities
resulting in a low float of the  Company's  common  stock in the public  market,
general market  conditions and other factors.  In addition,  the stock market in
general, and the market prices for power amplifier  manufacturers in particular,
have  experienced  extreme  volatility  that is often unrelated to the operating
performance of these companies. These broad market and industry fluctuations may
adversely affect the price of the Company's  common stock,  regardless of actual
operating  performance.  The  market  price of the  Company's  Common  Stock has
fluctuated significantly in the past.

         Volatility of Cree's Common Stock Price. Pursuant to the Asset Purchase
Agreement,  the  Company  received  as  partial  consideration  for the  sale of
UltraRF,  1,815,402 shares of common stock of Cree. In January 2001, the Company
sold 191,094 shares, which were held in escrow, for approximately $6,309,000 and
realized a loss of approximately $481,000 from the sale of these securities.  In
the first quarter of fiscal 2002, the Company sold 739,000 shares of Cree common
stock for  approximately  $22.2 million and  recognized a loss of  approximately
$4.1  million.  Between  January to May 2001,  the Company  entered into various
option  arrangements,  known as a cashless collar,  expiring from August 2001 to
May 2002, to hedge the remaining 885,000 shares of Cree common stock on hand. As
a result,  the  Company is able to realize an average of $25.34 per share  ("the
floor price") for the 885,000  hedged shares if the share price of Cree is lower
than the floor price when the options expire. If the Cree stock price exceeds an
average of $41.21 ("the ceiling price") when the options expire, the Company may
sell its hedged  shares at the  ceiling  price or settle the  options for a cash
amount  equal to the  difference  between  the Cree stock  price and the ceiling
price.  Until the options expire,  the Company will be restricted from disposing
of the hedged shares. The Company faces a number of risks due to the size of its
ownership in Cree  including the risk that its financial  statements and results
of operations  reflect the Company's  ownership stake in Cree, which impacts the
Company's  stock price.  At July 1, 2001, the  unrealized  loss on the Company's
investments  in Cree common stock was  approximately  $8.3  million.  The market
price of the shares of Cree's common stock has been and is likely to continue to
be highly  volatile.  Although  the 885,000  shares of Cree common stock on hand
have been hedged,  the  Company's  investment in Cree common stock is subject to
price   fluctuation   between  the  floor  and  ceiling  prices  of  the  option
arrangements. Such volatility in the market price of Cree's common stock and the
resulting  impact on investors  and analysts'  perceptions  of the change of the
Company's  valuation  due to the size of its  holdings in Cree common  stock may
adversely affect the market price of the Company's common stock.

                                       29
<PAGE>

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

         Escrow Funds. Of the total  consideration paid under the Asset Purchase
Agreement,  191,094 shares of Cree common stock,  valued at  approximately  $6.8
million  on  December  29,  2000,  was held in escrow to  secure  the  Company's
representations,  warranties and covenants  under the Asset  Purchase  Agreement
over a 12-month period,  ending in December 2001. On June 29, 2001, $3.2 million
representing  one-half  of the  proceeds  from the sale of  escrow  shares  plus
interest  earned  was  released  from the  escrow  account.  If any  claims  for
indemnification are made against the Company anytime prior to December 29, 2001,
whether  meritorious  or not,  the  Company  may be  delayed or  precluded  from
realizing the remaining $3.2 million proceeds placed in escrow. In addition, the
funds  placed in escrow do not cover any  potential  claims,  losses or expenses
incurred by Cree as a direct or indirect  result of any  inaccuracy or breach of
the intellectual property, taxes or environmental representations and warranties
made by the  Company  in  connection  with the sale of  UltraRF.  The  Company's
liability with respect to any such potential claim,  loss or expense incurred by
Cree is unlimited  and the filing of any such claim could  materially  adversely
affect the Company's business, results of operations and financial condition. As
of July 1,  2001,  no claims for  indemnification  had been  filed  against  the
Company.

         Shareholder  Rights  Plan;  Issuance of Preferred  Stock.  The Board of
Directors of the Company adopted a Shareholder  Rights Plan in October 1996 (the
"Original Agreement"). On August 9, 2000, pursuant to section 27 of the Original
Agreement,  the Company's Board of Directors agreed to restate the dividend that
it had declared  under the Original  Agreement in a Second  Amended and Restated
Preferred Shares Rights Agreement dated August 14, 2000 (the "Prior Agreement").
On  January  18,  2001,  pursuant  to  section  27 of the Prior  Agreement,  the
Company's  Board of Directors  agreed to amend the  triggering  event  threshold
applicable to Kopp Investment  Advisors,  Inc. and State of Wisconsin Investment
Board to thirty percent (30%) and twenty percent (20%), respectively.  Under the
Prior Agreement,  each right (a "Right," and collectively the "Rights") entitles
the registered holder to purchase from the Company one one-thousandth of a share
of Series A Preferred at an exercise  price of $126.00 (the  "Purchase  Price"),
subject to  adjustment.  The Rights become  exercisable  upon the  occurrence of
certain events,  including the  announcement of a tender offer or exchange offer
for the Company's  Common Stock or the acquisition of a specified  percentage of
the  Company's  Common Stock by a third party.  The exercise of the Rights could
have the effect of delaying,  deferring or preventing a change in control of the
Company, including,  without limitation,  discouraging a proxy contest or making
more difficult the  acquisition of a substantial  block of the Company's  Common
Stock.  These  provisions  could also limit the price  that  investors  might be
willing to pay in the future for shares of the Company's Common Stock. The Board
of Directors has the authority to issue up to 5,000,000  shares of  undesignated
Preferred  Stock and to  determine  the powers,  preferences  and rights and the
qualifications,  limitations  or  restrictions  granted to or  imposed  upon any
wholly unissued shares of undesignated  Preferred Stock and to fix the number of
shares  constituting any series and the designation of such series,  without any
further vote or action by the Company's stockholders. For example, in connection
with the Company's  Shareholder  Rights Plan, the Board of Directors  designated
20,000  shares of  Preferred  Stock as Series A  Participating  Preferred  Stock
although  none of such shares have been  issued.  The  Preferred  Stock could be
issued with voting, liquidation,  dividend and other rights superior to those of
the holders of Common  Stock.  The  issuance of  Preferred  Stock under  certain
circumstances  could have the effect of  delaying,  deferring  or  preventing  a
change in control of the Company.

                                       30
<PAGE>

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

         The  Company  develops  products  in the United  States and markets its
products in North America,  South America,  Europe and the Asia-Pacific  region.
Thus,  the  financial  results  could be affected by factors  such as changes in
foreign currency exchange rates or weak economic  conditions in foreign markets.
As all sales are currently made in U.S.  dollars,  a strengthening of the dollar
could make the Company's products less competitive in foreign markets.

         The  Company's  exposure  to market  rate risk for  changes in interest
rates relate  primarily to its investment  portfolio.  The Company does not hold
derivative  financial  instruments  in its investment  portfolio  except for the
option  arrangements  to hedge 885,000  shares of the Cree common stock on hand.
The Company places its investments with high quality institutions and limits the
amount of credit exposure to any one issuer.  The Company is averse to principal
loss and ensures the safety and  preservation  of its invested funds by limiting
default,  market and  reinvestment  risk. The Company  classifies its short-term
investments as  "fixed-rate" if the rate of return on such  instruments  remains
fixed over their term. These  "fixed-rate"  investments  include fixed-rate U.S.
government  securities and corporate obligations with contractual maturity dates
ranging from less than one year up to five years.  The table below  presents the
amounts  and  related  weighted  interest  rates  of  the  Company's  short-term
investments at July 1, 2001 and March 31, 2001 (dollars in thousands).

                                                July 1,            March 31,
                                                  2001                2001
                                                  ----                ----
           Average fixed interest rate              5.1%                5.5%
                                                =======             =======

           Amortized cost                       $38,812             $38,655
                                                =======             =======
           Fair value                           $39,128             $38,919
                                                =======             =======

           Contractual maturity dates:
                Less than 1 year                $14,607            $  8,931
                1 to 5 years                     24,521              29,988
                                                -------            --------
                                                $39,128             $38,919
                                                =======             =======

         Pursuant  to the Asset  Purchase  Agreement,  the  Company  received as
partial consideration for the sale of UltraRF,  1,815,402 shares of common stock
of Cree. In January 2001,  the Company sold 191,094  shares,  which were held in
escrow,  for  approximately  $6,309,000  and  realized  a loss of  approximately
$481,000 from the sale of these securities. In the first quarter of fiscal 2002,
the Company sold 739,000  shares of Cree common  stock for  approximately  $22.2
million and realized a loss of  approximately  $4.1 million.  Between January to
May 2001,  the Company  entered into  various  option  arrangements,  known as a
cashless  collar,  expiring from August 2001 to May 2002, to hedge the remaining
885,000 shares of Cree common stock on hand. As a result, the Company is able to
realize  an average of $25.34  per share for the  885,000  hedged  shares if the
share price of Cree is lower than $25.34  when the options  expire.  If the Cree
stock price  exceeds an average of $41.21 when the options  expire,  the Company
may sell its hedged  shares at $41.21 or settle the  options  for a cash  amount
equal to the difference between the Cree stock price and the option price. Until
the options expire,  the Company will be restricted from disposing of the hedged
shares unless it also disposes of the associated options. Following the adoption
of SFAS 133 on April 1, 2001,  the Cree  common  stock  options  were  valued at
approximately  $2.3 million and included in the Company's short term investments
at July 1, 2001.  The value of these options will fluctuate with the share price
of Cree.  A fall in the fair  value of Cree  common  stock  below  approximately
$25.34  at  the  expiration  of  the  option  arrangements  would  result  in an
approximate  $3.0  million  loss  compared  to the fair  value  of Cree  related
investments at July 1, 2001.

                                       31
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.
         --------

         Exhibit
          Number                         Description

         10.40.1     Form of Change in Control  Severance  Agreement between the
                     Registrant and Joseph M. Madden,  Harry W. Oh, and David S.
                     Piazza.

         10.40.2     Change  in  Control   Severance   Agreement   between   the
                     Registrant and Thomas H. Waechter.

         10.40.3     Change  in  Control   Severance   Agreement   between   the
                     Registrant and Michael D. Angel.

         10.53       Loan Modification Agreement between the Company and Silicon
                     Valley Bank dated August 2, 2001.

(b)      Reports on Form 8-K.  The  Company did not file any Reports on Form 8-K
         during the quarter ended July 1, 2001.

                                       32
<PAGE>

                                   SIGNATURES

         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.

                                             SPECTRIAN CORPORATION

                                                 (Registrant)

Dated: August 3, 2001                  By:    /s/  MICHAEL D. ANGEL
                                            ---------------------------
                                                Michael D. Angel
                                            Executive Vice President,
                                           Finance and Administration,
                                      Chief Financial Officer and Secretary
                                        (Authorized Officer and Principal
                                        Financial and Accounting Officer)

                                       33
<PAGE>

                                INDEX TO EXHIBITS

         Exhibit
          Number                            Description

         10.40.1     Form of Change in Control  Severance  Agreement between the
                     Registrant and Joseph M. Madden,  Harry W. Oh, and David S.
                     Piazza.

         10.40.2     Change  in  Control   Severance   Agreement   between   the
                     Registrant and Thomas H. Waechter.

         10.40.3     Change  in  Control   Severance   Agreement   between   the
                     Registrant and Michael D. Angel.

         10.53       Loan Modification Agreement between the Company and Silicon
                     Valley Bank dated August 2, 2001.

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