================================================================================

                                  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 SEPTEMBER 30, 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)
incorporation 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 November 2, 2001 there were 11,359,690  shares of the Registrant's  Common
Stock outstanding.

================================================================================

<PAGE>

                              SPECTRIAN CORPORATION

                                    FORM 10-Q

                                      INDEX

                      FOR QUARTER ENDED SEPTEMBER 30, 2001


<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
                                               PART I - FINANCIAL INFORMATION
<S>             <C>                                                                                             <C>

ITEM 1.         Financial Statements

                Condensed Consolidated Balance Sheets - September 30, 2001 and March 31, 2001...............     3

                Condensed Consolidated Statements Of Operations - Three Months and Six Months Ended
                    September 30, 2001 and October 1, 2000...............................................        4

                Condensed Consolidated Statements of Cash Flows - Six Months Ended September 30, 2001 and
                    October 1, 2000.........................................................................     5

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

ITEM 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations.......    15

ITEM 3.         Quantitative and Qualitative Disclosures about Market Risk..................................    33


                                                PART II - OTHER INFORMATION

ITEM 4.         Submission of Matters to a Vote of Security Holders.........................................    34

ITEM 6.         Exhibits and Reports on Form 8-K............................................................    35

Signatures..................................................................................................    36


</TABLE>

                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            September 30,  March 31,
                                                                                2001        2001 (1)
                                                                              ---------    ---------
<S>                                                                           <C>          <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                  $  61,201    $  36,397
   Restricted cash                                                                3,257        6,354
   Short-term investments                                                        40,912       73,512
   Accounts receivable, less allowance for doubtful
     accounts of $460 and $460, respectively                                     10,008       27,587
   Inventories                                                                   27,027       22,221
   Deferred tax asset                                                             3,818        3,818
   Prepaid expenses and other current assets                                      2,988        4,918
                                                                              ---------    ---------
     Total current assets                                                       149,211      174,807
Property and equipment, net                                                       9,756       11,632
Other assets                                                                      1,551        1,584
                                                                              ---------    ---------
     Total assets                                                             $ 160,518    $ 188,023
                                                                              =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                           $  10,319    $  23,613
   Accrued liabilities                                                           12,337       13,958
   Income taxes payable                                                             697          750
   Deferred gain, current portion                                                28,850       31,550
   Capital lease obligations                                                        129         --
                                                                              ---------    ---------
     Total current liabilities                                                   52,332       69,871
Deferred gain, net of current portion                                             6,550       19,650
                                                                              ---------    ---------
     Total liabilities                                                           58,882       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;
      12,594,086 and 12,501,026  shares  issued,  respectively; 11,456,086
      and 11,501,026 shares outstanding, respectively                                13           13
   Additional paid-in capital                                                   168,570      167,524
   Treasury stock, 1,138,000 and 1,000,000 shares of common stock held,         (16,195)     (14,789)
      respectively
   Deferred compensation expense                                                    (55)         (69)
   Accumulated other comprehensive gain (loss)                                      688      (22,856)
   Accumulated deficit                                                          (51,385)     (31,321)
                                                                              ---------    ---------
     Total stockholders' equity                                                 101,636       98,502
                                                                              ---------    ---------
     Total liabilities and stockholders' equity                               $ 160,518    $ 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>


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

<TABLE>
<CAPTION>
                                                          Three Months Ended            Six Months Ended
                                                     ---------------------------   ----------------------------
                                                     September 30,    October 1,    September 30,    October 1,
                                                          2001           2000           2001           2000
                                                        --------       --------       --------       --------
<S>                                                     <C>            <C>            <C>            <C>
REVENUES                                                $ 20,370       $ 41,916       $ 50,810       $ 84,106
                                                        --------       --------       --------       --------
COSTS AND EXPENSES:
  Cost of revenues                                        23,767         34,714         53,619         69,982
  Research and development                                 5,863          5,341         11,795         10,942
  Selling, general and administrative                      4,615          6,206          9,323         11,866
  Restructuring costs                                       --             --              686           --
                                                        --------       --------       --------       --------
     Total costs and expenses                             34,245         46,261         75,423         92,790
                                                        --------       --------       --------       --------
OPERATING LOSS                                           (13,875)        (4,345)       (24,613)        (8,684)

INTEREST INCOME                                              934            523          1,821          1,120
INTEREST EXPENSE                                            --              (43)            (8)           (89)
OTHER INCOME (LOSS), NET                                  (2,897)          --            2,257           --
                                                        --------       --------       --------       --------

LOSS BEFORE INCOME TAXES                                 (15,838)        (3,865)       (20,543)        (7,653)

INCOME TAXES                                                --             --               15             12
                                                        --------       --------       --------       --------

LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                              (15,838)        (3,865)       (20,558)        (7,665)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
  --     ADOPTION OF SFAS 33                                --              --             494           --
                                                        --------       --------       --------       --------
NET LOSS                                                $(15,838)      $ (3,865)      $(20,064)      $ (7,665)
                                                        ========       ========       ========       ========
NET LOSS PER SHARE:
  Basic and diluted loss per share before cumulative
     effect of change in accounting principle           $  (1.37)      $  (0.35)      $  (1.77)      $ (0.70)
  Cumulative effect of change in accounting principle       --             --             0.04          --
                                                        --------       --------       --------       -------
  Basic and diluted net loss per share                  $  (1.37)      $  (0.35)      $  (1.73)      $ (0.70)
                                                        ========       ========       ========       ========


SHARES USED IN COMPUTING PER SHARE AMOUNTS:
  Basic and diluted                                       11,581         10,974         11,567         10,945
                                                        ========       ========       ========       ========
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                       4
<PAGE>

                     SPECTRIAN CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      Six Months Ended
                                                                  --------------------------
                                                                  September 30,   October 1,
                                                                      2001          2000
                                                                    --------      --------
<S>                                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

    Net loss                                                        $(20,064)     $ (7,665)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
        Depreciation and amortization                                  2,660         5,722
        Gain on the sale of UltraRF                                  (15,800)         --
        Net loss on sale of short-term investments                    13,035          --
        Loss on sale and write-off of property and equipment, net        789            23
        Stock option compensation expense                                 14           146
        Changes in operating assets and liabilities:
          Accounts receivable                                         17,579          (181)
          Inventories                                                 (4,806)        6,483
          Prepaid expenses and other assets                            1,963        (3,754)
          Accounts payable                                           (13,294)          806
          Accrued liabilities                                         (1,621)       (2,420)
          Income tax payable                                             (53)         --
                                                                    --------      --------
             Net cash used in operating activities                   (19,598)         (840)
                                                                    --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of short-term investments                               (24,574)         --
    Proceeds from sale and maturities of short-term investments       67,567         8,152
    Release of restricted cash                                         3,213          --
    Purchase of property and equipment                                (1,404)       (4,637)
    Proceeds from sale of property and equipment                        --              95
                                                                    --------      --------
             Net cash provided by investing activities                44,802         3,610
                                                                    --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:

    Repayment of debt and capital lease obligations                      (40)         (281)
    Proceeds from sales of common stock, net                           1,046         1,969
    Purchase of treasury stock                                        (1,406)         --
                                                                    --------      --------
             Net cash provided by (used in) financing activities        (400)        1,688
                                                                    --------      --------
Net increase in cash and cash equivalents                             24,804         4,458

Cash and cash equivalents, beginning of period                        36,397        11,553
                                                                    --------      --------
Cash and cash equivalents, end of period                            $ 61,201      $ 16,011
                                                                    ========      ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    Cash paid for interest                                          $      8      $     89
                                                                    ========      ========
    Cash paid for income taxes                                      $     68      $     12
                                                                    ========      ========
    Acquisition of equipment under capital lease obligation         $    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  and  the  Company's  unaudited  consolidated  financial
statements  in the  Quarterly  Report on Form 10-Q for the quarter ended July 1,
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 held in escrow plus  interest  earned  totaling  $3,257,000 on
September  30,  2001  was  classified  as  restricted   cash  in  the  financial
statements.

         For the quarter  ended  September  30,  2001,  the Company sold 400,308
shares  of Cree  common  stock  for $5.8  million  and  realized  a loss of $8.5
million.  In addition,  the Company exercised put options in relation to 485,000
shares of Cree common stock for proceeds of $12.4 million and realized a loss of
$4.8 million.

         For the quarter ended July 1, 2001,  the Company sold 739,000 shares of
Cree common stock for $22.2 million and realized a loss of $4.1 million.

         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

                                       6
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

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 was recognized as other income during the quarter ended
December 31,  2000.  During the quarter  ended  September  30,  2001,  Spectrian
recognized  a gain of $8.3  million  as other  income  as the  related  purchase
commitment was fulfilled by the Company.  During the six months ended  September
30, 2001,  Spectrian  recognized a gain of $15.8  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.

         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.

                                       7
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

         Derivative Instruments and Hedging Activities

         The Company had an  investment  in the common stock of Cree (see Note 2
above). The Company's  investment exposed it to a risk related to 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 used cashless  collars,  which are  combinations of option
contracts to hedge this risk. The Company  generally hedged 60 to 100 percent of
its investment 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.

         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.

         For the quarter  ended  September  30,  2001,  the  Company  terminated
400,000 shares of Cree common stock options prior to their  expiration dates and
realized a gain of $4.4 million,  which  represented the proceeds  realized upon
termination  of these  options.  In prior  quarters,  the Company  had  recorded
unrealized  gains of $2.3 million  related to these options and therefore a $2.1
million net gain was  recorded in the  quarter  ended  September  30,  2001.  At
September 30, 2001, the Company held no Cree common stock or stock options.

         For the six months ended  September  30, 2001,  the Company  terminated
615,000  shares of Cree,  Inc.  common stock options  prior to their  expiration
dates and  realized  a gain of $4.4  million,  which  represented  the  proceeds
realized  upon  termination  of  these  options.  Of  this  gain,  $494,000  was
recognized  as a  cumulative  effect  of  change in  accounting  principle  upon
adoption of SFAS 133 and  therefore a $3.9  million net gain was recorded in the
six months ended September 30, 2001.

4.       OTHER INCOME (LOSS), NET

         Other income, net included (in thousands):

<TABLE>
<CAPTION>
                                                        Three Months Ended                    Six Months Ended
                                                  --------------------------------    ---------------------------------
                                                   September 30,     October 1,        September 30,      October 1,
                                                       2001             2000               2001              2000
                                                  ---------------- ---------------    ---------------- ----------------
<S>                                                  <C>                  <C>              <C>                <C>
Gain on sale of UltraRF                              $   8,300            $--              $15,800            $--
Loss on sale of Cree, Inc. common stock                (13,311)            --              (17,429)            --
Net gain on Cree, Inc. common stock options              2,114             --                3,886             --
                                                      --------           ----              -------           ----
Other income (loss), net                              $ (2,897)           $--              $ 2,257            $--
                                                      ========           ====              =======           ====

</TABLE>

                                  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):

                                                   September 30,   March 31,
                                                       2001          2001
                                                      -------       -------
Inventories:

     Raw materials                                    $12,794       $11,185
     Work in progress                                   2,632         5,699
     Finished goods                                    11,601         5,337
                                                      -------       -------
                                                      $27,027       $22,221
                                                      =======       =======
Property and equipment:

     Machinery and equipment                          $42,013       $47,341
     Software                                           3,727         3,819
     Leasehold improvements                             2,022         2,673
                                                      -------       -------
                                                       47,762        53,833
     Less accumulated depreciation and amortization    38,006        42,201
                                                      -------       -------
                                                      $ 9,756       $11,632
                                                      =======       =======
Accrued liabilities:

     Employee compensation and benefits               $ 2,506       $ 2,839
     Warranty                                           7,500         9,800
     Restructuring                                        240          --
     Other accrued liabilities                          2,091         1,319
                                                      -------       -------
                                                      $12,337       $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

                                  9
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

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.

         In October  2001,  the FASB issued  Statement of  Financial  Accounting
Standards No. 144 ("SFAS 144"),  "Accounting  for the  Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001 and  interim  periods  within  those  fiscal  periods.  This  Statement
supersedes FASB Statement No. 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to be Disposed of" and  Accounting  Principals
Board  Opinion No. 30 ("APB 30"),  "Reporting  Results of Operations - Reporting
the Effects of Disposal of a Division of a Business",  however,  this  Statement
retains the requirement of APB 30 to report discontinued  operations  separately
from  continuing  operations  and extends  that  reporting  to a component of an
entity  that  either has been  disposed  of (by sale,  by  abandonment,  or in a
distribution  to  owners)  or is  classified  as held for sale.  This  Statement
addresses  financial  accounting  and  reporting  for the  impairment of certain
long-lived  assets and for long-lived assets to be disposed of. The Company does
not expect the adoption of SFAS 144 to have a material  impact on the  Company's
financial position and results of operations.


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 September 30, 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  September  30, 2001 and March 31, 2001,  short-term  investments
classified as available-for-sale securities were as follows (in thousands):
<TABLE>
<CAPTION>

                                                                    Amortized         Unrealized         Fair
                   As of September 30, 2001                           Cost            Gain (Loss)        Value
---------------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                  <C>                <C>            <C>
Government bonds and notes...................................        $ 25,651           $  296         $  25,947
Corporate bonds and notes....................................          37,307              392            37,699
                                                                     --------           ------           -------
                                                                       62,958              688            63,646
Less amounts classified as cash equivalents..................          22,734               --            22,734
                                                                     --------           ------          --------
Short-term investments.......................................        $ 40,224           $  688          $ 40,912
                                                                     ========           ======          ========

Contractual maturity dates of short-term investment in
  bonds and notes:
     Less than 1 year........................................                                           $ 10,985
     1 to 5 years............................................                                             29,927
                                                                                                        --------
                                                                                                        $ 40,912
                                                                                                        ========
</TABLE>

                                       10
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Amortized         Unrealized         Fair
                     As of March 31, 2001                             Cost            Gain (Loss)        Value
---------------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                 <C>                  <C>            <C>
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>

8.       TREASURY STOCK

         In September 2001, the Board of Directors  authorized the repurchase of
up to $10 million of the Company's  common stock.  During the three months ended
September 30, 2001, the Company  repurchased  138,000 shares of the  outstanding
common stock for approximately  $1.4 million.  Treasury stock is carried at cost
in the condensed consolidated balance sheets.


9.       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 and six months ended September 30, 2001, 2,872,265
stock  options  were not included  for 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.  For the three and six months ended October
1, 2000,  3,064,478  stock  options  were not included  for 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.

                                       11
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


10.      SEGMENT INFORMATION

Geographic Segment Data:

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

<TABLE>
<CAPTION>
                                                  Three Months Ended                      Six Months Ended
                                           ----------------------------------     ---------------------------------
                                            September 30,      October 1,          September 30,     October 1,
                                                 2001             2000                 2001             2000
                                           ----------------- ----------------     ---------------- ----------------
<S>                                               <C>                <C>                <C>              <C>
         Canada                                   38%                46%                38%              40%
         United States                            20%                28%                29%              31%
         South Korea                              28%                 7%                17%               6%
         France                                    8%                15%                 4%              20%
         China                                    --                 --                  8%              --
         Other countries                           6%                 4%                 4%               3%
                                                -----              -----              -----            -----
         Total                                   100%               100%               100%             100%
                                                =====              =====              =====            =====
</TABLE>


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

                                     September 30,           March 31,
                                          2001                  2001
                                    -----------------     ----------------

         United States                  $  5,352             $   7,966
         Thailand                          2,646                 2,707
         South Korea                       1,335                   959
         China                               321                    --
         Malaysia                            102                    --
                                        --------             ---------
                                        $  9,756             $  11,632
                                        ========             =========

                                       12
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


11.      RESTRUCTURING COSTS

         During the quarter ended July 1, 2001, 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  quarter  ended  July  1,  2001,  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.  As of September 30, 2001, approximately 40 employees engaged
in the repair  operations  were  terminated.  The Company  anticipates  that the
restructuring will be substantially  completed in the quarter ended December 30,
2001. The following table represents the restructuring  activity that took place
up through September 30, 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                            --            (270)               --          (270)
Cash payment of other restructuring costs                  --              --               (15)          (15)
Write-off of property and equipment                      (161)             --                --          (161)
                                                        -----           -----            ------         -----
Balance at September 30, 2001                           $  --           $ 215            $   25         $ 240
                                                        =====           =====            ======         =====
</TABLE>

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


12.      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):

<TABLE>
<CAPTION>
                                          Three Months Ended           Six Months Ended
                                       -------------------------   -------------------------
                                       September 30,  October 1,   September 30,  October 1,
                                           2001          2000          2001          2000
                                         --------      --------      --------      --------
<S>                                      <C>           <C>           <C>           <C>
Net loss                                 $(15,838)     $ (3,865)     $(20,064)     $ (7,665)
Realized loss on marketable securities
previously included in unrealized loss      8,883          --          12,987          --
Unrealized gain (loss) on marketable
securities                                   (201)          221        10,557           336
                                         --------      --------      --------      --------
Comprehensive income (loss)              $ (7,156)     $ (3,644)     $  3,480      $ (7,329)
                                         ========      ========      ========      ========
</TABLE>

                                       13
<PAGE>
                     SPECTRIAN CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                   (Unaudited)


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

                                                      September 30,   March 31,
                                                           2001          2001
                                                      -------------   ---------
      Unrealized gain (loss) on marketable securities      $688       $(22,856)
                                                           ====       =========

13.      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 quarter
and the six months  ended  September  30, 2001 and  recognized  $8.3 million and
$15.8 million of the deferred gain, respectively.  As of September 30, 2001, the
Company  has  an  obligation   to  purchase  an  additional   $35.4  million  of
semiconductors  from Cree under the supply agreement,  of which $28.9 million of
purchases  are  required to be made over the next 12 months and $6.5  million of
purchases are required to be made starting the third quarter of fiscal 2003.


14.      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  and  other  specific  financial  ratios.  The  master
agreement also has certain restrictions on other indebtedness and the payment of
dividends.  At  September  30,  2001,  the  Company was in  compliance  with the
covenants of the master  agreement.  The amount available to borrow at September
30,  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 September 30, 2001 was 6% and 4.6%, respectively.
The Company had no borrowings under the line of credit at September 30, 2001.


15.      SUBSEQUENT EVENTS

         From  October 1 to November 8, 2001,  the Company  repurchased  152,000
shares of outstanding common stock for approximately $1.4 million.

                                       14
<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 sixth  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 - Restructuring Costs"
regarding the timing of the completion of the restructuring and the reduction in
force due to the  reorganization;  the statements under "Results of Operations -
Research and Development"  regarding new product  development  initiatives;  the
statements   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

                                       15
<PAGE>

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

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 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 and six months ended September 30, 2001,  Spectrian fulfilled its
purchase  obligation  under the contract and  recognized  $8.3 million and $15.8
million of the deferred gain, respectively. 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  six  months  ended   September  30,  2001,   Nortel  Networks
Corporation ("Nortel") and Samsung Electronics Co., Ltd. ("Samsung"),  accounted
for approximately 70% and 13% of net revenues,  respectively. For the six months
ended October 1, 2000, Nortel and Verizon  Communications  ("Verizon") accounted
for  approximately  63% and 24% 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 six months  ended  September  30,  2001 and October 1, 2000,
sales outside of the United States were 71% and 69%,  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.


                                       16
<PAGE>

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

         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. Although the Company
has transitioned substantially all of its manufacturing activities to an outside
contract manufacturer,  the  Company  still has  significant  fixed costs and is
therefore   dependent   upon   substantial   revenue  to  achieve  and  maintain
profitability.

         Prior to July 2001, the Company  serviced 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.  As of September  30, 2001, a majority of the
Company's power amplifier products are serviced by the contract  manufacturer in
Thailand.  The Company  anticipates  that the  transfer of its  remaining  power
amplifier repair operations will be substantially completed in the quarter ended
December 30, 2001.

         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.


                                       17
<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.


<TABLE>
<CAPTION>
                                             Three Months Ended           Six Months Ended
                                          -------------------------   -------------------------
                                          September 30,  October 1,   September 30,  October 1,
                                             2001          2000          2001          2000
                                             -----         -----         -----         -----
<S>                                          <C>           <C>           <C>           <C>
NET REVENUES                                 100.0%        100.0%        100.0%        100.0%
                                             -----         -----         -----         -----
COSTS AND EXPENSES:
  Cost of revenues                           116.7          82.8         105.5          83.2
  Research and development                    28.8          12.7          23.3          13.0
  Selling, general and administrative         22.7          14.8          18.3          14.1
  Restructuring costs                         --            --             1.4          --
                                             -----         -----         -----         -----
     Total costs and expenses                168.2         110.3         148.5         110.3
                                             -----         -----         -----         -----
OPERATING LOSS                               (68.2)        (10.3)        (48.5)        (10.3)

INTEREST INCOME                                4.6           1.2           3.6           1.3
INTEREST EXPENSE                              --            (0.1)         --            (0.1)
OTHER INCOME (LOSS)                          (14.2)         --             4.4          --
                                             -----         -----         -----         -----
LOSS BEFORE INCOME TAXES                     (77.8)         (9.2)        (40.5)         (9.1)
INCOME TAXES                                  --            --            --            --
                                             -----         -----         -----         -----

LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE                       (77.8)         (9.2)        (40.5)         (9.1)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE - ADOPTION OF SFAS 133            --            --             1.0          --
                                             -----         -----         -----         -----
NET LOSS                                     (77.8)%        (9.0)%       (39.5)  %      (9.1)%
                                             =====         =====         =====         =====

GROSS MARGIN ON SALES                        (16.7)%        17.2%         (5.5)  %      16.8%
                                             =====         =====         =====         =====
</TABLE>

         Net Revenues. The Company's net revenues decreased 51% to $20.4 million
for the three months ended  September  30, 2001 from $41.9 million for the three
months ended October 1, 2000. The Company's net revenues  decreased 40% to $50.8
million for the six months ended  September  30, 2001 from $84.1 million for the
six months ended October 1, 2000.  The decrease in net revenues  compared to the
three and six months ended  October 1, 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 to a lesser degree due to a decline in the average
selling  prices of single  carrier power  amplifier  ("SCPA")  products and some
multicarrier power amplifier  ("MCPA") products.  MCPA revenues decreased 21% to
$7.2 million for the three months ended September 30, 2001 from $9.1 million for
the three months ended  October 1, 2000.  SCPA  revenues  decreased 57% to $11.5
million for the three months ended September 30, 2001 from $26.5 million for the
three months ended October 1, 2000.  Broadband  revenues  decreased 100% to none
for the three  months ended  September  30, 2001 from $3.8 million for the three
months ended October 1, 2000. For the six months ended  September 30, 2001, MCPA
revenues  decreased  23% to $13.7  million from $17.9 million for the six months
ended October 1, 2000. SCPA revenues  decreased 36% to $33.7 million for the six
months  ended  September  30, 2001 from $52.5  million for the six months  ended
October 1, 2000. Broadband revenues decreased 94% to $600,000 for the six months
ended  September  30, 2001 from $9.7 million for the six months ended October 1,
2000.

                                       18
<PAGE>

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

         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 32% to $23.8  million  for the three  months  ended
September  30, 2001 from $34.7  million for the three  months  ended  October 1,
2000. The Company's cost of sales  decreased by 23% to $53.6 million for the six
months  ended  September  30, 2001 from $70.0  million for the six months  ended
October 1, 2000.  The  decrease  on a dollar  basis for the three and six months
ended September 30, 2001 were due to lower sales, partially offset by the higher
costs of semiconductors  because purchases from UltraRF are at fair market value
rather  than at  manufacturing  cost  as has  historically  been  the  case  and
increased  allowances  for excess and  obsolete  inventory  and lower of cost or
market.

         Gross  margin on sales was  negative  17% for the  three  months  ended
September  30,  2001 as compared to 17% for the three  months  ended  October 1,
2000.  Gross margin on sales was negative 6% for the six months ended  September
30,  2001 as  compared  to 17% for the six months  ended  October  1, 2000.  The
decrease in gross  margin was due to lower  production  volumes to absorb  fixed
overhead  costs,  a decline in the average  selling  prices of SCPA products and
some MCPA products,  and increased  allowances for excess and obsolete inventory
and lower of cost or market.  The  Company  anticipates  that gross  margin as a
percentage  of net  revenues  will  continue  to be  adversely  effected  due to
continued  declining  average  selling prices and 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.

         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 10% to
$5.9 million in the three months ended  September  30, 2001 from $5.3 million in
the three months ended October 1, 2000. The Company's R&D expenses  increased by
8% to $11.8  million  in the six  months  ended  September  30,  2001 from $10.9
million  in the six  months  ended  October  1,  2000.  As a  percentage  of net
revenues,  R&D  expenses  represented  29% of net  revenues for the three months
ended  September  30, 2001 as compared to 13% of revenues  for the three  months
ended October 1, 2000. As a percentage of net revenues, R&D expenses represented
23% of net revenues for the six months ended  September  30, 2001 as compared to
13% of revenues  for the six months ended  October 1, 2000.  The increase in R&D
expenses on a dollar basis for the three and six months ended September 30, 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 and six months ended
September  30,  2001 was due to higher R&D  expense on a dollar  basis and lower
revenues as compared to the similar periods 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 26% to $4.6 million in the three months
ended  September 30, 2001 from $6.2 million in the three months ended October 1,
2000.  The Company's  SG&A expenses  decreased by 21% to $9.3 million in the six
months  ended  September  30,  2001 from $11.7  million in the six months  ended
October 1, 2000. As a percentage of net revenues,  SG&A expenses represented 23%
of net revenues for the three months ended September 30, 2001 as compared to 15%
of net revenues for the three months ended  October 1, 2000.  As a percentage of
net revenues,  SG&A expenses  represented 18% of net revenues for the six months
ended  September  30, 2001 as compared to 14% of net revenues for the six

                                       19
<PAGE>

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

months ended  October 1, 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 periods 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 and six months ended
September 30, 2001 was due to lower revenues as compared to the similar  periods
in the prior year.

         Restructuring Costs. During the quarter ended July 1, 2001, 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 quarter  ended July 1, 2001,  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.  As of  September  30,  2001,
approximately 40 employees engaged in the repair operations were terminated. The
Company  anticipates that the restructuring  will be substantially  completed in
the quarter ended December 30, 2001.

         Interest  Income.  Interest income for the three months ended September
30, 2001  increased to $0.9 million from $0.5 million for the three months ended
October 1, 2000.  Interest  income for the six months ended  September  30, 2001
increased to $1.8 million from $1.1 million for the six months ended  October 1,
2000.  The increase in interest  income  resulted  from higher  interest-bearing
investment  balances  associated  with higher  average cash and cash  equivalent
balances, partially offset by lower average interest rates.

         Interest Expense. Interest expense for the three months ended September
30, 2001  decreased to none from  $43,000 for the three months ended  October 1,
2000.  Interest expense for the six months ended September 30, 2001 decreased to
$8,000 from  $89,000 for the six months ended  October 1, 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.

         Other Income and Loss.  Other loss for the three months ended September
30, 2001 was $2.9 million as compared to none for the three months ended October
1, 2000.  Other  income for the six months  ended  September  30,  2001 was $2.3
million as compared to none for the six months ended October 1, 2000. Other loss
for the three months ended September 30, 2001 includes a $13.3 million  realized
loss on the sale of Cree  common  stock,  which  was  partially  offset  by $8.3
million of deferred gain recognized in the current period on the sale of UltraRF
and a $2.1 million gain on Cree stock  options.  Other income for the six months
ended  September 30, 2001 includes $15.8 million of deferred gain  recognized in
the current  period on the sale of UltraRF and a $3.9 million gain on Cree stock
options,  partially  offset  by a $17.4  million  realized  loss on sale of Cree
common stock.

         Income Taxes.  The Company did not record income tax expense except for
minimum  state  taxes  and  foreign  taxes in the  three  and six  months  ended
September 30, 2001 and October 1, 2000. Due to the uncertainties surrounding the
realization of the deferred tax assets resulting from the Company's  accumulated
deficit  and net losses in the fiscal  years  ended March 31, 2000 and March 31,
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
carryforward to 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.

                                       20
<PAGE>

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

         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  March 31,  2001 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.

         In October  2001,  the FASB issued  Statement of  Financial  Accounting
Standards No. 144 ("SFAS 144"),  "Accounting  for the  Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001 and  interim  periods  within  those  fiscal  periods.  This  Statement
supersedes FASB Statement No. 121,  "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived  Assets to be Disposed of" and  Accounting  Principals
Board  Opinion No. 30 ("APB 30"),  "Reporting  Results of Operations - Reporting
the Effects of Disposal of a Division of a Business",  however,  this  Statement
retains the requirement of APB 30 to report discontinued  operations  separately
from  continuing  operations  and extends  that  reporting  to a component of an
entity  that  either has been  disposed  of (by sale,  by  abandonment,  or in a
distribution  to  owners)  or is  classified  as held for sale.  This  Statement
addresses  financial  accounting  and  reporting  for the  impairment of certain
long-lived  assets and for long-lived assets to be disposed of. The Company does
not expect the adoption of SFAS 144 to have a material  impact on the  Company's
financial position and results of operations.


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

                                       21
<PAGE>

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

liquidity  at  September  30,  2001  consisted  of  cash  and  cash  equivalent,
restricted cash and short-term debt  investments  which total $105.4 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  and  other  specific  financial  ratios.  The  master
agreement also has certain restrictions on other indebtedness and the payment of
dividends.  At  September  30,  2001,  the  Company was in  compliance  with the
covenants of the master  agreement.  The amount available to borrow at September
30, 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  September  30, 2001 was 6% and 4.6%,  respectively.  The
Company had no borrowings under the line of credit at September 30, 2001.

         The  Company's  working  capital  decreased  by $8.1  million  to $96.9
million as of September 30, 2001 from $104.9  million as of March 31, 2001.  The
decrease was  primarily  attributable  to a $10.9  million  decrease in cash and
short-term investments,  a $17.6 million decrease in accounts receivable, a $1.9
million  decrease in prepaids and other current  assets,  partially  offset by a
$4.8 million increase in net  inventories,  a $13.3 million decrease in accounts
payable,  a $1.6  million  decrease in accrued  liabilities  and a $2.7  million
decrease in short-term deferred gain as a result of fulfilling the $15.8 million
minimum purchase commitments to Cree in the six months ended September 30, 2001,
partially  offset  by the  reclassification  of  $13.1  million  from  long-term
deferred gain to short-term deferred gain.

         Cash used by  operations  was $19.6  million  for the six months  ended
September 30, 2001 compared to cash used by operations  for the six months ended
October  1, 2000 of $0.8  million.  Cash used by  operations  for the six months
ended September 30, 2001 was principally the result of a $20.1 million net loss,
a $15.8  million  recognized  non-cash  gain from the sale of  UltraRF,  a $13.3
million  decrease in accounts  payable due to cash payments and lower production
volumes  associated with lower sales, a $4.8 million increase in net inventories
due to increased finished goods caused by a lower than expected revenue compared
with  the  Company's  revenue  outlook,  a  $1.6  million  decrease  in  accrued
liabilities,  which were partially  offset by a $13.0 million realized loss from
the sale of short-term  investments  which resulted from the  liquidation of all
Cree  common  stock and  options  held as of March  31,  2001,  a $17.6  million
decrease in accounts receivable as a result of cash collected and lower sales, a
$2.7 million  depreciation and amortization  expense, a $2.0 million decrease in
prepaids and other assets,  and a $0.8 million loss on the sale and write-off of
property and equipment.

         Cash used by  operations  for the six months ended  October 1, 2000 was
principally  the result of a $7.7 million net loss,  a $3.8 million  increase in
prepaid  expenses  and other  current  assets and a $2.4  million  reduction  in
accrued  liabilities  which  were  offset  by a  $6.4  million  decrease  in net
inventories,  a $0.8  million  increase in  accounts  payable,  which  increased
proportionately  with production  levels,  and  depreciation and amortization of
$5.7 million.

         The  Company's  investing   activities  during  the  six  months  ended
September 30, 2001 provided cash of  approximately  $44.8 million as compared to
providing  cash of $3.6 million for the six months ended  October 1, 2000.  Cash
provided by investing  activities during the six months ended September 30, 2001
resulted  primarily  from $67.6  million  proceeds  from sale and  maturities of
short-term  investments,  which included  approximately  $44.7 million generated
from the sale of all Cree common  stock and options  held as of March 31,  2001,
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 $24.6
million in purchases of short-term  investments and $1.4 million in additions to
property and equipment. Capital additions for the six months ended September 30,
2001 included  manufacturing  test and production  equipment required to support
new products  and test  equipment to support  various  research and  development
projects.

                                       22
<PAGE>

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

         Cash  provided  by  investing  activities  during the six months  ended
October 1, 2000 resulted  primarily  from $8.2 million in net proceeds from sale
and maturities of short-term  investments  which were  partially  offset by $4.6
million in additions to property and  equipment.  Capital  additions for the six
months  ended  October  1,  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  six  months  ended
September  30,  2001 used cash of  approximately  $0.4  million as  compared  to
providing  $1.7 million of cash for the six months ended  October 1, 2000.  Cash
used by financing  activities during the six months ended September 30, 2001 was
the result of $1.4 million in purchases of treasury  stock,  which was partially
offset by $1.0 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 six months  ended
October 1, 2000 was the result of $2.0 million in proceeds  from the issuance of
common stock,  through the exercise of employee stock options and employee stock
purchase plan activity, which was partially offset by $0.3 million in repayments
of debt and capital lease obligations.

         In September 2001, the Board of Directors  authorized the repurchase of
up to $10 million of the Company's  common stock.  During the three months ended
September 30, 2001, the Company repurchased  approximately 138,000 shares of its
common stock for approximately $1.4 million. 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. As of September 30, 2001, the Company has
an  obligation to purchase an additional  $35.4 million of  semiconductors  from
Cree. 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.

                                       23
<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, Verizon and Samsung. The
wireless infrastructure equipment market is dominated by a small number of large
OEMs  and  wireless  service  providers,   including  Ericsson,  Nokia,  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 the fiscal year ended March 31, 2001 (`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; the relative strength or
weakness  of  international  financial  markets  and the  financial  strength of
domestic 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.  During the six months ended  September 30, 2001, the
Company  experienced  negative sales growth


                                       24
<PAGE>

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

as a result of delays  and  reductions  in  capital  spending  by the  Company's
customers.  There can be no assurance that the Company will not experience  such
fluctuations in the future or that the Company will experience in the 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.  Currently,  the
Company has a  relatively  high level of  inventory  on hand.  Consequently,  if
customer demand falls below the Company's  forecast,  it may experience  charges
related  to the write  down of  inventory.  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.

         Economic Recession or other Economic Conditions. The Company's revenues
are derived  primarily from sales to wireless service  providers and OEMs in the
wireless  infrastructure  equipment  market.  Any  significant  downturn  in the
wireless   infrastructure   equipment   market,  or  domestic  or  international
conditions,  which result in the reduction of capital expenditure budgets or the
delay in  product  orders of the  Company's  customers  would  likely  produce a
decline in demand for the Company's power amplifier products.  Since early 2000,
the wireless  infrastructure  equipment  market has  experienced  a  significant
decline in revenue and product  orders.  In addition,  the terrorist  attacks of
September 11, 2001,  the subsequent  military  response by the United States and
future  events  occurring in response to or in  connection  with the attacks may
negatively impact the economy in general.  If the Company's  customers decide to
delay their product orders or reduce their capital  expenditures  as a result of
any of these  occurrences,  the Company's  results of  operations,  revenues and
financial condition would be 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  SCPAs.  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


                                       25
<PAGE>

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

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. 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 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


                                       26
<PAGE>

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

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 quarter ended December 30, 2001.
Upon  completion of this transfer,  the Company will no longer have  significant
amplifier repair capacity.  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.

                                       27
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

         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
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.  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,  Andrew
Corporation, Celiant Corporation, Fujitsu, Japan Radio Co. Ltd., Hitachi Kokusai
Electric Inc., Mitsubishi,  Hung Chang Co. Ltd., Paradigm Communications,  Inc.,
Powerwave  Technologies Inc.,  Wireless Systems  International Ltd. and Wiseband
Communications  Ltd.

                                       28
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

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 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.

                                       29
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

         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 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


                                       30
<PAGE>

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

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
or divestiture  take place, we can give no assurance that this  transaction will
not  materially  and adversely  affect the Company or that any such  transaction
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 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,  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.

                                       31
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

         Escrow  Funds.  Of the total  consideration  paid to  Spectrian by Cree
under the Asset Purchase Agreement,  191,094 shares of Cree common stock, valued
at  approximately  $6.8  million on December  29,  2000,  were 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 $3.3 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 September 30, 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.


                                       32
<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. 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
September 30, 2001 and March 31, 2001 (dollars in thousands).

                                           September 30,          March 31,
                                               2001                 2001
                                          ---------------     -----------------
           Average fixed interest rate            4.6%                 5.5%
                                              =======             ========

           Amortized cost                     $40,224             $ 38,655
                                              =======             ========
           Fair value                         $40,912             $ 38,919
                                              =======             ========

           Contractual maturity dates:
                Less than 1 year              $10,985             $  8,931
                1 to 5 years                   29,927               29,988
                                              -------             --------
                                              $40,912             $ 38,919
                                              =======             ========


                                       33
<PAGE>

                           PART II - OTHER INFORMATION


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

         The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on  September  7, 2001 at 10:00 a.m.  local  time,  at 350 West Java Drive,
Sunnyvale,  California.  The  Annual  Meeting  was held for the  purpose  of (i)
electing  seven  directors  to  serve  for the  ensuing  year  and  until  their
successors are duly elected and qualified,  (ii) approval of an amendment to the
Company's  Certificate  of  Incorporation  to increase the number of  authorized
shares of Common  Stock  from  20,000,000  shares to  25,000,000  shares,  (iii)
ratifying and approving the  appointment  of  PricewaterhouseCoopers  LLP as the
Company's  independent  accountants  for the fiscal year ending  March 31, 2002,
(iv) considering a stockholder  proposal  regarding a stock repurchase  program,
and (v)  transacting  such other business as may properly come before the Annual
Meeting.


         Proposal No. 1 - Election of Seven Members of the Board of Directors:

         The   following   persons  were  duly  elected  to  the  Board  by  the
stockholders  for a one year term or until  their  successors  are  elected  and
qualified:

                NOMINATION                      FOR              ABSTAINED
         -------------------------------- ------------------ -------------------

         Garrett A. Garrettson                 10,815,140            195,776
         Martin Cooper                         10,954,733             56,183
         Charles D. Kissner                    10,955,333             55,583
         Henry C. Montgomery                   10,954,750             56,166
         Robert W. Shaner                       8,148,015          2,862,901
         Thomas H. Waechter                    10,804,779            206,137
         Robert C. Wilson                      10,954,233             56,683


         Proposal No. 2 - Approval of an Amendment to the Company's  Certificate
of  Incorporation  to Increase the Number of  Authorized  Shares of Common Stock
from 20,000,000 Shares to 25,000,000 Shares:
<TABLE>
<CAPTION>

                                                                                                   BROKER
                     FOR                      AGAINST                  ABSTAINED                  NON-VOTE
         ---------------------------- ------------------------- ------------------------- --------------------------
<S>              <C>                          <C>                        <C>                          <C>
                 10,744,865                   250,548                    15,503                       0
</TABLE>

         Proposal   No.   3   -    Ratification    of   the    Appointment    of
PricewaterhouseCoopers  LLP as the  Company's  Independent  Accountants  for the
Fiscal Year Ending March 31, 2002:

<TABLE>
<CAPTION>
                                                                                                        BROKER
                     NOMINATION                     FOR           AGAINST          ABSTAINED           NON-VOTE
         ------------------------------------ ---------------- --------------- ------------------- -----------------
<S>                                             <C>                <C>               <C>                  <C>
         PricewaterhouseCoopers LLP             10,958,043         43,861            9,012                0
</TABLE>

                                       34
<PAGE>

         Proposal No. 4 - Consideration  on a Stockholder  Proposal  Regarding a
Stock Repurchase Program:

<TABLE>
<CAPTION>
                                                                                                   BROKER
                     FOR                      AGAINST                  ABSTAINED                  NON-VOTE
         ---------------------------- ------------------------- ------------------------- --------------------------
<S>               <C>                        <C>                         <C>                      <C>
                  1,109,123                  6,747,481                   59,809                   3,094,503
</TABLE>

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits.

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

            10.54       Loan  Modification  Agreement  between  the  Company and
                        Silicon Valley Bank dated September 28, 2001.


         (b)   Reports on Form 8-K. The Company did not file any Reports on Form
               8-K during the quarter ended September 30, 2001.


                                       35
<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: November 9, 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)


                                       36
<PAGE>



                                INDEX TO EXHIBITS



  Exhibit                                                        Sequentially
   Number                         Description                    Numbered Page
   ------                         -----------                    -------------

   10.54          Loan   Modification   Agreement   between  the
                  Company   and   Silicon   Valley   Bank  dated
                  September 28, 2001.                                    __


                                       37