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

                                  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 period ended June 28, 1998

                                       OR

[   ]    Transition report  pursuant  to Section  13 or 15(d)  of the Securities
         Exchange Act of 1934

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
 incorporation or organization)                           Identification Number)

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

                         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 June 28,  1998 there were  10,922,056  shares of the  Registrant's  Common
Stock outstanding.

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

                              SPECTRIAN CORPORATION

                                    Form 10-Q

                                      INDEX
                                                                            Page
                                                                             No.

Cover Page                                                                    1

Index                                                                         2

PART I - Financial Information

              ITEM 1 - Consolidated financial statements

                 Consolidated balance sheets -
                    June 28, 1998 and March 31, 1998                          3

                 Consolidated statements of operations -
                    three months ended June 28, 1998 and June 28, 1997        4

                 Consolidated statements of cash flows -
                    three months ended June 28, 1998 and June 28, 1997        5

                 Notes to consolidated financial statements                   6

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


PART II - Other Information


              ITEM 1 - Legal Proceedings                                     18


              ITEM 4 - Submission of Matters to a Vote of Security Holders   19

              ITEM 6 - Exhibits and Reports on Form 8-K                      19

                 Signatures                                                  20



<PAGE>



                      SPECTRIAN CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                                          June 28,    March 31,
Assets                                                     1998          1998
                                                         ---------    ---------
                                                        (unaudited)
Current assets:
   Cash and cash equivalents                             $  22,758    $  31,460
   Short-term investments                                   60,285       68,128
   Accounts receivable, less allowance for doubtful
      accounts of $379 and $376, respectively               27,316       21,123
   Inventories                                              17,430       15,362
   Prepaid expenses and other current assets                 2,941        6,202
                                                         ---------    ---------
        Total current assets                               130,730      142,275

Property and equipment, net                                 34,436       32,776
                                                         ---------    ---------

                                                         $ 165,166    $ 175,051
                                                         =========    =========

Liabilities and Stockholders' Equity

Current liabilities:
   Current portion of debt obligations                   $   1,383    $   1,360
   Accounts payable                                          6,581       10,456
   Accrued liabilities                                      11,635       12,981
                                                         ---------    ---------

        Total current liabilities                           19,599       24,797

Debt obligations, net of current portion                     5,636        5,912
                                                         ---------    ---------
        Total liabilities                                   25,235       30,709
                                                         ---------    ---------

Stockholders' equity:
   Common stock, $0.001 par value, 20,000,000 shares
     authorized;  10,922,056 and 10,904,077 shares
     issued and outstanding, respectively                       11           10
   Additional paid-in capital                              146,954      146,827
   Deferred compensation expense                              --           (609)
   Other comprehensive income                                  213          121
   Accumulated deficit                                      (7,247)      (2,007)
                                                         ---------    ---------
     Total stockholders' equity                            139,931      144,342
                                                         ---------    ---------

                                                         $ 165,166    $ 175,051
                                                         =========    =========

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                      SPECTRIAN CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (unaudited)

                                                            Three months ended
                                                                 June 28,
                                                         ----------------------
                                                           1998          1997
                                                         --------      --------

Revenues                                                 $ 30,784      $ 45,766

Costs and expenses:
   Cost of product sales                                   27,729        32,051
   Research and development                                 5,954         4,241
   Selling, general and administrative                      3,476         3,461
                                                         --------      --------
                                                           37,159        39,753
                                                         --------      --------
     Operating income (loss)                               (6,375)        6,013

Interest income (expense), net                              1,135           (19)
Other income, net                                            --           1,530
                                                         --------      --------

Income (loss) before income taxes                          (5,240)        7,524


Income taxes                                                 --           1,129

                                                         --------      --------
Net income (loss)                                        $ (5,240)     $  6,395
                                                         ========      ========

Net income (loss) per share
      Basic                                              $  (0.48)     $   0.77
      Diluted                                            $  (0.48)     $   0.72

Shares used in computing per share amounts:

      Basic                                                10,917         8,301
      Diluted                                              10,917         8,917


See accompanying notes to consolidated financial statements.

                                        4
<PAGE>

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


                                                             Three months ended
                                                                 June 28,
                                                          ----------------------
                                                              1998         1997
                                                              ----         ----
Cash flows from operating activities:                     
  Net income (loss)                                         $(5,240)    $ 6,395
  Adjustments to reconcile net income (loss) to net
    cash provided by (used for) operating activities:
      Gain on sale of subsidiary                               --        (1,530)
      Depreciation and amortization                           2,846       2,088
      Stock compensation expense                                583        --
      Tax benefit associated with stock options                --         1,129
      Changes in operating assets and liabilities:
        Accounts receivable                                  (6,193)     (7,167)
        Inventories                                          (2,068)     (7,178)
        Prepaid expenses and other assets                     3,261         (77)
        Accounts payable                                     (3,875)      7,762
        Accrued liabilities                                  (1,346)      2,940
                                                            -------     -------
          Net cash provided by (used for)
            operating activities                            (12,032)      4,362
                                                            -------     -------

Cash flows from investing activities:
  Purchase of short-term investments                        (17,062)       --
  Proceeds from sale of short-term investments               24,997        --
  Purchase of property and equipment                         (4,506)     (3,516)
  Proceeds from sale of subsidiary                             --         4,016
                                                            -------     -------
          Net cash provided by investing activities           3,429         500
                                                            -------     -------

Cash flows from financing activities:
  Repayment of debt and capital lease obligations              (253)       (418)
  Proceeds from sales of common stock, net                      154       1,141
                                                            -------     -------
          Net cash provided by (used for)
            financing activities                                (99)        723
                                                            -------     -------

          Net increase (decrease) in cash and cash
            equivalents                                      (8,702)      5,585
          Cash and cash equivalents,
            beginning of period                              31,460       6,240
                                                            -------     -------
          Cash and cash equivalents,
            end of period                                   $22,758     $11,825
                                                            =======     =======


See accompanying notes to consolidated financial statements.



                                       5
<PAGE>





                      SPECTRIAN CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1: Basis of Presentation


         The accompanying  financial statements 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 the  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-15 of the  Company's
Annual  Report on Form 10-K for fiscal  year ended March 31,  1998.  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, 1999,
or any other future period.


NOTE 2: Balance Sheet Components

Balance sheet components are as follows:

                                                 June 28,       March 31,
                                                   1998           1998
                                                -----------   ----------
                                                     (In thousands)
Inventories:
   Raw materials                                  $9,138          $7,395
   Work in progress                                5,829           5,538
   Finished goods                                  2,463           2,429
                                                -----------   ----------
                                                 $17,430         $15,362
                                                ===========   ==========
Property and equipment:                                       
   Machinery and equipment                       $55,506         $51,091
   Land, building and improvements                 2,772           2,829
   Furniture and fixtures                          1,420           1,382
   Leasehold improvements                          1,743           1,633
                                                -----------   ----------
                                                  61,441          56,935
   Less accumulated depreciation and                          
      amortization                                27,005          24,159
                                                -----------   ----------
                                                 $34,436         $32,776
                                                ===========   ==========
Accrued liabilities:                                          
   Employee compensation and benefits            $ 2,234         $ 2,958
   Warranty                                        6,346           7,326
   Other accrued liabilities                       3,055           2,697
                                                -----------   ----------
                                                 $11,635         $12,981
                                                ===========   ==========
                                                           

                                       6
<PAGE>



NOTE 3: Recent Accounting Pronouncements

         In June 1997, the Financial  Accounting Standards Board issued SFAS No.
130,  Reporting  Comprehensive  Income.  SFAS No. 130  establishes  standards of
reporting and display of  comprehensive  income and its components of net income
and "other  comprehensive  income" in a full set of  general  purpose  financial
statements. "Other comprehensive income" refers to revenues, expenses, gains and
losses that are not included in net income but rather are  recorded  directly in
stockholders'  equity in accordance  with SFAS No. 115,  Accounting  for Certain
Debt and Equity  Securities.  SFAS No. 130 is  effective  for annual and interim
periods beginning  December 15, 1997 and for periods ended before that date when
presented  for  comparative  purposes.  The Company has not yet  determined  the
format it will use to display  the  information  required by SFAS No. 130 in the
financial   statements  for  the  fiscal  year  ending  March  31,  1999.  Other
comprehensive  income  consists of  unrealized  gains and losses  related to the
Company's available-for-sale investments.

         In June 1998, the Financial  Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities.  SFAS No. 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other  contracts,
(collectively  referred  to as  derivatives)  and  for  hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value.  The  accounting  for  changes in the fair value of a  derivative
(that is, gains and losses)  depends on the intended use of the  derivative  and
the  resulting  designation.  Under SFAS No. 133, an entity that elects to apply
hedge  accounting  is required to  establish  at the  inception of the hedge the
method it will use for assessing the effectiveness of the hedging derivative and
the measurement  approach for  determining the ineffective  aspect of the hedge.
Those methods must be consistent  with the entity's  approach to managing  risk.
The Company has not yet  determined  the impact of SFAS No. 133 on its financial
condition or results of operations.

NOTE 4: Short-Term Investments

         The Company has classified its  investments in certain debt  securities
as  "available-for-sale."  Such  investments  are recorded at fair market value,
with  unrealized   gains  and  losses  reported  as  a  separate   component  of
stockholders'  equity.  Interest income is recorded using an effective  interest
rate, with the associated premium or discount amortized to interest income.

         As of June 28 and March  31,  1998,  cash  equivalents  and  short-term
investments classified as available-for-sale securities were as follows:

                                                 June 28,        March 31,
                                                   1998             1998
                                              ------------     -----------
                                                     (In thousands)

   Commercial paper                            $   61,073      $   63,341
   U.S. government securities                      23,225          28,158
                                              ------------     -----------
                                               $   84,298      $   91,499
                                              ============     ===========


         As of June 28 and  March  31,  1998 the  estimated  fair  value of each
investment  approximated  the  amortized  cost  and,  therefore,  there  were no
significant  unrealized  gains or  losses.  At June 28,  and March 31,  1998 all
securities  held were due in less than one year and were  classified  as follows
(in thousands):


                                                 June 28,        March 31,
                                                   1998             1998
                                              ------------     -----------
                                                  (In thousands)

   Cash equivalents                            $   24,013      $   23,371
   Short-term investments                          60,285          68,128
                                              ------------     -----------
                                               $   84,298      $   91,499
                                              ============     ===========



                                       7
<PAGE>

NOTE 5: Earnings Per Share Computation


         Basic  earnings  per  share  ("EPS")  excludes   potentially   dilutive
securities  and  is  computed  by  dividing  net  income   available  to  common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted EPS includes potentially dilutive securities and is computed by
dividing net income  available to common  stockholders  by the weighted  average
number of common and dilutive common  equivalent shares  outstanding  during the
period.  Common  equivalent  shares  include the effect of the exercise of stock
options. For the three months ended June 28, 1998, common equivalent shares were
not  included  for  the  calculation  of  diluted  EPS as they  were  considered
antidilutive  due to the net loss the Company  experienced  in that period.  The
Company's  earnings per share for the three months ended June 28, 1997 have been
restated to reflect net income (loss) on both a basic and a diluted basis.

<TABLE>

A reconciliation of basic and diluted earnings per share calculations follows:

<CAPTION>

                                               Three Months Ended                   Three Months Ended
                                                  June 28, 1998                         June 28, 1997
                                     ----------------------------------    ------------------------------
<S>                                     <C>          <C>      <C>           <C>       <C>       <C>

(In thousands except per share data)       Net                Per Share       Net               Per Share
                                          Loss       Shares     Amount        Income  Shares      Amount

                                     ----------------------------------     -----------------------------
Basic EPS                                $(5,240)    10,917    $(0.48)       $6,395    8,301       $0.77
Effect of dilutive securities
                                             ---        ---       ---           ---      616         ---
                                     ---------------------------------     ------------------------------
Diluted EPS                              $(5,240)    10,917    $(0.48)       $6,395    8,917       $0.72
                                     =================================     ==============================

</TABLE>


NOTE 6: Legal Proceedings


         Since December 23, 1997, a number of complaints have been filed against
the Company and certain of its  officers in the Federal  Court for the  Northern
District of California that allege  violations of the federal  securities  laws.
Similar  complaints  have been  filed in  California  state  court  that  allege
violations of California  state  securities laws and California  common law. The
complaints have been consolidated in the federal and state courts, respectively.
The  plaintiffs  in both the federal and state  lawsuits  purport to represent a
class of persons who  purchased the  Company's  securities  during the period of
July 17, 1997 through  October 23, 1997. The complaints  allege that the Company
and certain of its officers misled the investing  public regarding the financial
prospects  of the  Company.  The  Company  believes  that  the  allegations  are
completely without merit and will vigorously defend itself.



                                       8
<PAGE>




                      SPECTRIAN CORPORATION AND SUBSIDIARY

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations




         Certain  statements  in this  "Management  Discussion  and  Analysis of
Financial  Condition and Results of Operations" are forward looking  statements.
These forward looking statements include, but are not limited to: the statements
in the first  paragraph of "Overview"  regarding  outsourcing  and in the second
paragraph of  "Overview"  regarding  customer  orders and the impact of currency
fluctuations  on future  revenues;  the statements  under  "Revenues"  regarding
future revenue growth; the statements in the last paragraph under "Liquidity and
Capital Resources"  regarding the anticipated  spending for capital additions in
fiscal 1999 and beyond, and the sufficiency of the Company's available resources
to meet working capital and capital expenditure requirement;  and the statements
in "Factors Affecting Future Operating  Results." The forward looking statements
contained herein are based on current  expectations and entail various risks and
uncertainties  that could cause actual results to differ  materially  from those
expressed  in  such  forward  looking  statements,  including  those  risks  and
uncertainties  set  forth  below  under  "Factors   Affecting  Future  Operating
Results."


Overview


         The Company  designs,  manufactures  and markets  highly  linear single
carrier and multicarrier  radio frequency ("RF") power amplifiers that support a
broad range of worldwide  analog and digital wireless  transmissions  standards,
including  AMPS,  TDMA,  CDMA and GSM. The  Company,  founded in 1984 to perform
design and engineering  services,  first entered the commercial amplifier market
in 1988 and shipped its first cellular  power  amplifiers in 1990. The Company's
revenues are now derived primarily from sales to a limited number of OEMs in the
wireless infrastructure equipment market, in particular Northern Telecom Limited
("Northern Telecom").  The Company pursues a strategy of vertical integration in
its design and manufacturing processes, including operating its own 4 inch wafer
fabrication facility. As a result, the Company has a higher level of fixed costs
and is dependent upon substantial revenue to achieve profitability. In the first
quarter of fiscal 1999,  fourth quarter of fiscal 1998,  first quarter of fiscal
1997 and third quarter of fiscal 1996,  product orders fell sharply resulting in
substantial losses in those quarters. There can be no assurance that the Company
will  not  experience  such  fluctuations  in  the  future.  For  example,   the
significant  reduction in product  revenue the Company  experienced in the first
quarter of fiscal 1999 and the fourth quarter of fiscal 1998 reflects the impact
of fluctuations in demand with a cost structure that is relatively  fixed in the
short term from the softening demand in the TDMA markets and delays in build-out
of the Korean PCS  systems  due to the  unstable  Asian  financial  markets  and
general economic conditions in Korea and other Asian countries. The Company also
anticipates  lower  product  revenues  over the next two to three  quarters as a
result of such  factors and  anticipates  that  revenues for fiscal 1999 may not
equal, and will not exceed, revenues for fiscal 1998. Since the third quarter of
fiscal  1998,  the  Company has  outsourced  some of its higher  volume  printed
circuit board  sub-assemblies on a turnkey basis. It is the Company's  intention
to continue using an outsourcing strategy wherever it makes economic sense to do
so.

         During the three months ended June 28, 1998, Northern Telecom, QUALCOMM
Incorporated  ("QUALCOMM")  and Nortel  Matra  Communications  ("Nortel  Matra")
accounted for approximately 66%, 14% and 12% of revenues,  respectively.  During
fiscal  1998,   Northern   Telecom,   Nortel  Matra  and  LG   Information   and
Communications  Limited ("LGIC") accounted for approximately 57%, 22% and 14% of
revenues,  respectively. 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 OEM  requirements.  If the  Company  were to lose  Northern
Telecom or any other major OEM customer, or if orders by Northern Telecom or any
other major OEM 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.  In addition,  the recent
financial  market  turmoil  and  economic  downturn in Korea may have a material
adverse  effect on the Company's  sales of its products to LGIC, an OEM based in
Korea,  because a majority  of the  Company's  products  ordered by LGIC to date
relate to the  build-out  of the Korean PCS  system.  In  addition,  because the


                                       9
<PAGE>

Company's products are priced in U.S. dollars,  the currency  instability in the
Korean  and other  Asian  financial  markets  may have the  effect of making the
Company's  products  more  expensive  to LGIC than those of other  manufacturers
whose  products  are  priced  in one  of the  affected  Asian  currencies,  and,
therefore, LGIC may reduce future purchases of the Company's products.

         The Company's vertical  integration strategy entails a number of risks,
including a high level of fixed and variable  costs,  the  management of complex
processes,  dependence  on a single  source  of supply  and a strict  regulatory
environment.  During periods of low demand,  high fixed wafer  fabrication costs
are likely to have a material  adverse  effect on the Company's  operations.  In
addition, the Company's strategy of frequently introducing and rapidly expanding
the  manufacture  of new  products to meet  evolving  OEM  customer and wireless
service  provider needs has caused the Company to experience  high materials and
manufacturing  costs,  including  high  scrap and  material  waste,  significant
material obsolescence,  labor inefficiencies,  high overtime hours,  inefficient
material procurement and an inability to realize economies of scale.

         The  market  for  the  Company's  products  is  becoming   increasingly
competitive.  The Company sells 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 at least one
amplifier  manufacturer for business from Northern Telecom. 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.


Results of Operations

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

                                                          Three Months Ended
                                                                June 28,
                                                         1998            1997
                                                         ----            ----
    Revenues                                            100.0%          100.0%
    Costs and expenses:
      Cost of product sales                              90.1            70.0
      Research and development                           19.3             9.3
      Selling, general and administrative                11.3             7.6
                                                    ------------   -------------
        Total costs and expenses                        120.7            86.9
        Operating income (loss)                         (20.7)           13.1
    Interest income (expense), net                        3.7              --
    Other income                                           --             3.3
                                                    ------------   -------------
      Income (loss) before income taxes                 (17.0)           16.4
    Income taxes                                           --             2.4
                                                    ------------   -------------
        Net income (loss)                               (17.0)%          14.0%
                                                    ============   =============
    Gross margin on sales                                 9.9%           30.0%

         Revenues.  The Company's  revenues  decreased by 32.7% to $30.8 million
for the three months ended June 28, 1998 from $45.8 million for the three months
ended June 28,  1997.  The  decrease in revenues for the three months ended June
28, 1998  reflects a decrease in demand for the  Company's  GSM, TDMA and Korean
PCS CDMA products.

         Cost of Sales.  Cost of sales consists  primarily of raw materials,  RF
semiconductor  fabrication  costs,  amplifier assembly and test costs (including
turnkey assembly  services),  overhead and warranty costs. The Company's cost of
sales  decreased  by 13.5% to $27.7  million for the three months ended June 28,
1998 from $32.1  million for the three months  ended June 28, 1997.  Included in
the cost of sales for the three months ended June 28, 1998 were costs associated
with  restructuring  operations,  discontinuing  older  products and  supporting
warranties  on newer  products.  Gross  margin  on sales  was 9.9% for the three
months  ended June 28, 1998 as compared to 30.0% for the three months



                                       10
<PAGE>

ended June 28, 1997.  The decline in gross margin for the quarter ended June 28,
1998 reflects insufficient  absorption of overhead infrastructure fixed costs at
the lower shipment volume levels as well as declining average sales prices.

         Research and  Development.  Research and development  ("R&D")  expenses
include the cost of designing,  developing or reducing the manufacturing cost of
amplifiers and RF semiconductors.  The Company's R&D expenses increased by 40.4%
to $6.0 million in the three months ended June 28, 1998 from $4.2 million in the
three  months  ended June 28,  1997.  The  increase in R&D spending in the three
months ended June 28, 1998  reflects  higher R&D headcount  with its  associated
expenses and increased investment in semiconductor R&D activities.  R&D expenses
as a  percentage  of revenues  increased to 19.3% in the three months ended June
28,  1998  from  9.3% for the  three  months  ended  June 28,  1997,  reflecting
relatively lower revenue levels and higher absolute dollar spending in the three
months ended June 28, 1998.

         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  remained  constant at $3.5 million for the three months
ended  June 28,  1998 as  compared  to the three  months  ended  June 28,  1997.
Increases  in  SG&A  compensation  and  other  related  expenses  due to  higher
headcount   levels  and  support   costs  related  to  upgrading  the  Company's
information  systems were offset by lower  outside  commissions  paid for Korean
sales for the three months ended June 28, 1998. SG&A expenses as a percentage of
revenues  increased  to 11.3% for the three months ended June 28, 1998 from 7.6%
for the three  months ended June 28,  1997.  The increase of SG&A  expenses as a
percentage of sales was a result of the lower revenue levels in the three months
ended June 30, 1998 versus the same period of a year ago.

         Interest Income  (Expense),  net.  Interest  income,  net for the three
months ended June 28, 1998 was $1.1 million  compared to net interest expense of
$19,000 for the three months  ended June 28, 1997.  The increase in net interest
income was the result of interest  income  earned on  substantially  higher cash
balances and short-term  investments  reflecting primarily the investment of the
proceeds of the Company's August 1997 public offering.

         Other  Income,  net.  Other  income of $1.5 million was recorded in the
three months ended June 28, 1997  representing  the net gain  realized  from the
cash sale of the Company's wholly owned subsidiary, AMT, to the management group
and employees of AMT. No other  expense or other income was recorded  during the
three months ended June 28, 1998,

         Income  Taxes.  Due to the loss incurred in the first quarter of fiscal
1999,  the Company  did not record an income tax  expense  for the three  months
ended June 28, 1998.

Factors Affecting Future Operating Results

         Customer Concentration. The wireless infrastructure equipment market is
dominated by a small number of large original equipment  manufacturers ("OEMs"),
including LM Ericsson Telephone Company ("Ericsson"),  Lucent Technologies, Inc.
("Lucent"),  Motorola Corporation ("Motorola"),  Northern Telecom, Nortel Matra,
Nokia OY  ("Nokia")  and Siemens AG  ("Siemens").  The  Company's  revenues  are
derived primarily from sales to a limited number of these OEMs. During the three
months  ended  June 28,  1998,  Northern  Telecom,  QUALCOMM  and  Nortel  Matra
accounted  for  approximately  66%,  14%  and  12%  of the  Company's  revenues,
respectively.   Furthermore,  a  substantial  portion  of  revenues  from  these
customers  in the three  months  ended June 28,  1998  resulted  from sales of a
limited  number of the Company's  products.  The  Company's  top five  customers
accounted for 98% of its sales for the three months ended June 28, 1998.  During
the three months ended June 28, 1997,  Northern  Telecom,  Nortel Matra and LGIC
accounted for 55%, 27% and 18% of revenues,  respectively. The Company, Northern
Telecom and Nortel Matra have an agreement,  renegotiated annually,  pursuant to
which Northern Telecom and Nortel Matra, a company in which Northern Telecom has
an equity investment,  commit to purchase a certain volume of their annual power
amplifier requirements for specified prices from the Company. The renewal of the
Company's  agreement  with  Northern  Telecom and Nortel Matra for calendar year
1998  was  finalized  in  October  1997.  Based on  lower  RF  amplifier  volume
commitments and reduced  pricing  contained in this agreement and other factors,
the Company  expects that fiscal 1999  revenue will decline from revenue  levels
realized in fiscal 1998.  There can be no assurance  that  Northern  Telecom and
Nortel  Matra  will  enter  into a  contract  with the  Company in the future or
otherwise  agree to purchase the same or similar levels of their power amplifier
requirements from the Company or purchase their power amplifier requirements


                                       11
<PAGE>

at the same or similar  pricing.  Any reduction in the level of purchases of the
Company's  amplifiers  by Northern  Telecom and Nortel  Matra,  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.
Further,  if the Company  were to lose  Northern  Telecom or any other major OEM
customer,  or if orders by Northern Telecom or any other major OEM customer were
to otherwise  materially decrease,  the Company's business,  financial condition
and results of operations would be materially  adversely affected.  In addition,
the recent  financial  market turmoil and economic  downturn in Korea may have a
material  adverse effect on the Company's  sales of its products to LGIC, an OEM
based in Korea,  because a majority of the Company's products ordered by LGIC to
date relate to the build-out of the Korean PCS system. In addition,  because the
Company's products are priced in U.S. dollars,  the currency  instability in the
Korean  and other  Asian  financial  markets  may have the  effect of making the
Company's  products  more  expensive  to LGIC than those of other  manufacturers
whose  products  are  priced  in one  of the  affected  Asian  currencies,  and,
therefore,  LGIC may reduce  future  purchases  of the  Company's  products.  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 Northern  Telecom and other major OEM
customers in future periods which will result in declining  average sales prices
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, yields and costs; competitive
factors  such  as  the   pricing,   availability,   and  demand  for   competing
amplification  products;  changes  in average  sales  prices  and  product  mix;
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 customer specific products;  the
timing  and level of product  and  process  development  costs;  and  changes in
inventory  levels;  and the  relative  strength  or  weakness  of  international
financial  markets.  Anticipated orders from the Company's OEM customers have in
the past failed to  materialize  and delivery  schedules  have been  deferred or
canceled  as a result of changes in OEM  customer  requirements  and the Company
expects this pattern to continue as customer requirements continue to change and
industry  standards  continue  to  evolve.  There can be no  assurance  that the
Company will not experience demand fluctuations in the future, and, in fact, the
Company  has  experienced  reductions  in  product  revenues  in both the fourth
quarter  of  fiscal  1998 and the first  quarter  of fiscal  1999.  The  Company
anticipates continued lower product revenues over the next two to three quarters
as a result of softening demand in the TDMA and GSM markets and delays in Korean
PCS  demand  due to  general  economic  conditions  in  Korea  and  other  Asian
countries.   The  Company   establishes  its  expenditure   levels  for  product
development and other  operating  expenses based on its expected  revenues,  and
expenses are  relatively  fixed in the short term.  As a result,  variations  in
timing of revenues can cause  significant  variations  in  quarterly  results of
operations.  There can be no assurance  that the Company will be profitable on a
quarter to quarter  basis in the  future.  The Company  believes  that period to
period  comparisons of its financial results are not necessarily  meaningful and
should not be relied upon as an  indication  of future  performance.  Due to 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.

         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  amplifiers  from  outside
suppliers.  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 RF 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

                                       12
<PAGE>

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 RF 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. For example, softening of demand in the TDMA and GSM markets or failure
of another  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 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.

         Risks  Associated  with  Internal  Wafer and  Device  Fabrication.  The
Company's  operation of its wafer and device  fabrication  facilities  entails a
number  of  risks,  including  a high  level of fixed and  variable  costs,  the
management of complex  processes,  dependence on a single source of supply and a
strict regulatory  environment.  During periods of low demand,  high fixed wafer
fabrication  costs are likely to have a material adverse effect on the Company's
business,  financial  condition  and  results  of  operations.  The  design  and
fabrication  of  RF  semiconductors  is a  complex  and  precise  process.  Such
manufacturing  is sensitive to a wide variety of factors,  including  variations
and  impurities  in  the  raw  materials,   quality  control  of  the  packages,
difficulties  in the  fabrication  process,  performance  of  the  manufacturing
equipment,  defects in the masks used to print circuits on a wafer and the level
of contaminants in the manufacturing environment. As a result of these and other
factors,  semiconductor  manufacturing yields from time to time in the past have
suffered, and there can be no assurance that the Company will be able to achieve
acceptable production yields in the future. In addition, the Company's wafer and
device  fabrication  facility  represents  a  single  point  of  failure  in its
manufacturing  process that would be costly and time consuming to replace if its
operation were interrupted.  The interruption of wafer fabrication operations or
the loss of employees  dedicated to the wafer and device fabrication  facilities
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.  Any failure to maintain  acceptable  wafer
and  device  production  levels,  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.  RF
semiconductors  as  complex  as those  offered by the  Company  often  encounter
development  delays and may contain  undetected  defects or failures  when first
introduced or after commencement of commercial  shipments.  The Company has from
time to time in the past experienced product quality, performance or reliability
problems.  In addition,  multicarrier power amplifiers have a higher probability
of  malfunction  than single carrier power  amplifiers  because of their greater
complexity. There can be no assurance that defects or failures will not occur in
the  future  relating  to  the  Company's   product  quality,   performance  and
reliability that may have a material  adverse effect on the Company's  business,
financial condition and results of operations.

         Sole  or  Limited  Sources  of  Materials  and  Services.  The  Company
currently  procures from single sources certain  components and services for its
products  including  cast  housings,  printed  circuit  boards,  specialized  RF
components and specialized subassemblies. The Company purchases these components
and services on a purchase order basis.  The Company does not carry  significant
inventories of these components and does not have any long-term supply contracts
with its sole source  vendors.  Although  the Company is  currently  identifying
potential alternative sources of these components,  its reliance on sole sources
entails  certain  risks,  including  reduced  control  over  the  price,  timely
delivery,  reliability  and quality of the  components.  If the Company  were to
change  any of its  sole  source  vendors,  the  Company  would be  required  to
requalify the components  with each new vendor.  Any inability


                                       13
<PAGE>

of the Company to obtain timely  deliveries of components 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
these components, and no assurance can be given that shortages will not occur in
the future.

         Declining  Average  Sales  Prices.  The  Company has  experienced,  and
expects to  continue  to  experience,  declining  average  sales  prices for its
products.  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 among merchant suppliers 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.

         Risks of International  Sales.  Sales outside of the United States were
75%, 88% and 95% of revenues for the three months ended June 28, 1998, the three
months ended June 28, 1997 and fiscal 1998,  respectively.  The Company  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  and   representatives   or  customers,   reduced   protection  for
intellectual   property  rights  in  some  countries,   impact  of  recessionary
environments in economies outside the United States,  political  instability and
generally longer receivables  collection  periods,  as well as tariffs and other
trade barriers. In addition,  because substantially all of the Company's foreign
sales are  denominated  in U.S.  dollars,  increases  in the value of the dollar
relative  to the  local  currency  would  increase  the  price of the  Company's
products in foreign  markets and make the  Company's  products  relatively  more
expensive and less price competitive than competitors'  products that are priced
in local currencies.  There can be no assurance that these factors will not have
a material  adverse  effect on the  Company's  future  international  sales and,
consequently,  on the  Company's  business,  financial  condition and results of
operations.  The Company  anticipates that the recent turmoil in Asian financial
markets and the recent  deterioration of the underlying  economic  conditions in
certain  Asian  countries  will  continue  to 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 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 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 local 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 those Asian countries  currently  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, results of operations and financial condition.

         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,
including  Northern  Telecom,  Nortel


                                       14
<PAGE>

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

         The  Company's  principal   competitors  in  the  market  for  wireless
amplification  products  provided by merchant  suppliers  currently  include AML
Communications,  Amplidyne,  Hewlett-Packard  Wireless Infrastructure  Division,
M/A--COM (a  subsidiary  of AMP),  Microwave  Power  Devices,  NEC and Powerwave
Technologies.  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.  The Company has
been  awarded  17  United  States  patents,  and  has 26  United  States  patent
applications pending, including eight that had been allowed but not yet formally
issued.  The Company  also has been  awarded  four  foreign  patents and has ten
foreign  patent  applications  pending.  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.  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.

                                       15
<PAGE>


         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.  Although recent  deregulation of
international  communications  industries  along  with  recent  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  liability under certain
statutes.  The imposition of such liabilities could materially  adversely affect
the Company's business, financial condition and results of operations.

         Year 2000  Compliance.  Many installed  computer  programs were written
using a two digit date field  rather  than a four digit date field to define the
applicable  year.  Such computer  programs  utilizing a two digit date field may
recognize  a date  using  "00" as the year 1900  rather  than the year 2000 (the
"Year 2000  Issue").  The Year 2000 Issue could  potentially  result in a system
failure or miscalculations  causing  disruptions of operations,  including among
other things, a temporary  inability to process  transactions,  send invoices or
engage in other similar normal business  activities.  The Company has identified
the Year  2000  Issue in  certain  of its  internal  operating  systems  and has
installed  as of July  1998 a new  computer  software  system  that is Year 2000
compliant and which the Company believes will increase operational and financial
efficiencies and information  analysis.  The cost of this project, as it relates
to the Year 2000 Issue, does not have a material effect on the operations of the
Company and is being funded through  operating cash flows and investment  income
from the Company's liquid assets.  The Company has not completed an audit of its
remaining internal systems or products with respect to the Year 2000 Issue.

         Management of Growth;  Dependence on Key  Personnel.  The growth in the
Company's  business  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,  train,  motivate,  manage and retain new  employees  successfully,  to
integrate new  employees  into its overall  operations  and in  particular,  its
manufacturing  operations, to retain the continued service of its key technical,
marketing and management personnel,  and to continue to improve its operational,
financial  and  management   information  systems.   Although  the  Company  has
employment contracts with several of its executive officers, these agreements do
not obligate such  individuals to remain in the  employment of the Company.  The
Company does not maintain key person


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<PAGE>

life insurance on any of its key technical  personnel.  The competition for such
personnel  is  intense,  and the loss of key  employees  could  have a  material
adverse effect on the Company.

         Volatility  of Stock  Price.  The market  price of the shares of Common
Stock has recently been and is likely to continue to be highly volatile,  and is
affected  significantly  by  factors  such  as  fluctuations  in  the  Company's
operating  results,  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,   governmental  regulatory  action,  developments  with
respect to patents or proprietary  rights,  general market  conditions and other
factors.  In  addition,  the  stock  market  has from  time to time  experienced
significant  price and volume  fluctuations  that are unrelated to the operating
performance of particular  companies.  The market price of the Company's  Common
Stock fluctuated substantially during fiscal 1998, from a low of $10.75 on April
1, 1997 to a high of $66.375 on October 1, 1997.  As of June 28, 1998,  the last
reported  sale  price of the Common  Stock as  reported  on the Nasdaq  National
Market was $15.4375.

         Pending  Litigation.  Since  December 23, 1997, a number of  complaints
have been filed  against the Company and certain of its  officers in the Federal
Court for the Northern  District of  California  that allege  violations  of the
federal  securities laws. Similar complaints have been filed in California state
court that allege  violations of California state securities laws and California
common  law.  The  complaints  have been  consolidated  in the federal and state
courts,  respectively.  The  plaintiffs  in both the federal and state  lawsuits
purport to represent a class of persons who purchased  the Company's  securities
during the period of July 17, 1997  through  October 23,  1997.  The  complaints
allege that the Company and certain of its officers misled the investing  public
regarding the financial prospects of the Company.  The Company believes that the
allegations  are  completely  without merit and will  vigorously  defend itself.
Certain   provisions  of  the  Company's   Certificate  of   Incorporation   and
indemnification  agreements  between the Company  and its  officers  require the
Company to advance to such  officers  ongoing  legal  expenses of defending  the
suits and may require the Company to indemnify them against  judgments  rendered
on certain claims.  The Company expects to incur  significant  legal expenses on
its behalf and on behalf of such officers in connection with this litigation. In
addition,  defending this  litigation  has resulted and will likely  continue to
result in the diversion of management's attention from the day to day operations
of the Company's business.  Although the Company does not believe that it or any
of its officers has engaged in any  wrongdoing,  there can be no assurance  that
this stockholder  litigation will be resolved in the Company's favor. An adverse
result,  settlement or prolonged litigation could have a material adverse effect
on the Company's business, financial condition or results of operations.

         Shareholder  Rights  Plan;  Issuance of Preferred  Stock.  The Board of
Directors of the Company adopted a Shareholder  Rights Plan in October 1996 (the
"Rights  Plan").  Pursuant to the Rights Plan,  the Board declared a dividend of
one Preferred  Stock Purchase Right per share of Common Stock (the "Rights") and
each such Right has an exercise price of $126.00.  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.


Liquidity and Capital Resources

         The Company has financed its growth through its initial public offering
in August 1994, a public equity offering in August 1997, private sales of equity
securities,  capital equipment leases,  bank lines of credit and cash flows


                                       17
<PAGE>

from operations.  Cash used by operations was $12.0 million for the three months
ended June 28,  1998 while cash  provided  by  operations  in the  corresponding
period of fiscal  1998 was $4.4  million.  Cash  flow  from  operations  for the
quarter  ended June 28, 1998 was  negatively  impacted by the reduced  level and
timing of shipments  and slower  collections  from the  Company's  international
customers.

         As of June 28, 1998, the Company had working  capital of $111.1 million
including $83.0 million in cash, cash equivalents and short-term investments. In
addition,  the Company has a revolving  line of credit of $10.0  million  with a
bank secured by the  majority of the  Company's  assets.  Under the terms of the
master agreement  governing this credit  instrument,  the Company is required to
maintain certain minimum working  capital,  net worth,  profitability  and other
specific  financial  ratios.  As of June 28, 1998, the Company was in compliance
with all of these  financial  covenants.  There were no  borrowings  outstanding
against this line of credit as of June 28, 1998.

         In April 1998,  the Company  announced a repurchase  program (the "1998
Repurchase  Program")  pursuant to which it may acquire up to one million shares
of  Common  Stock  in open  market  purchases.  To date,  no  shares  have  been
repurchased under the 1998 Repurchase Program.

         In January  1997,  the Company  borrowed $6.0 million under a term loan
secured by certain capital  equipment.  The loan, which expires in January 2002,
requires  the  payment  of monthly  principal  plus  interest  and is subject to
certain minimum working capital,  net worth and other specific financial ratios.
The Company was in compliance with these covenants as of June 28, 1998. In March
1997, the Company also secured a $3.2 million real estate loan, which expires in
April 2007,  for the  purchase  of a light  industrial  building  for its future
facilities expansion.

         Additions to property and equipment  were $4.5 million and $3.5 million
for the  three  months  ended  June 28,  1998 and June 28,  1997,  respectively.
Purchases of equipment and other capital  assets for the three months ended June
28, 1998 included the purchase of new corporate  management  information systems
software,  manufacturing  test and production  equipment required to support new
products  and  test  equipment  to  support  various  research  and  development
projects.

         The Company  anticipates  spending  approximately  $18 million over the
next  twelve  months for  capital  additions  primarily  to upgrade  information
systems  infrastructure,  set up  production  lines for new products and procure
test equipment for development projects.  Based on the Company's current working
capital  position and the available line of credit the Company expects to renew,
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 periods  beyond the next twelve months depend on the Company's
profitability,  timing  and  level  of  capital  expenditures,  working  capital
requirements and rate of growth.


PART II - OTHER INFORMATION

         ITEM 1:  Legal Proceedings

         Since December 23, 1997, a number of complaints have been filed against
the Company and certain of its  officers in the Federal  Court for the  Northern
District of California that allege  violations of the federal  securities  laws.
Similar  complaints  have been  filed in  California  state  court  that  allege
violations of California  state  securities laws and California  common law. The
complaints have been consolidated in the federal and state courts, respectively.
The  plaintiffs  in both the federal and state  lawsuits  purport to represent a
class of persons who  purchased the  Company's  securities  during the period of
July 17, 1997 through  October 23, 1997. The complaints  allege that the Company
and certain of its officers misled the investing  public regarding the financial
prospects  of the  Company.  The  Company  believes  that  the  allegations  are
completely without merit and will vigorously defend itself.



                                       18
<PAGE>



         ITEM 4:  Submission of Matters to a Vote of Security Holders

         On June 26, 1998, the Company held its Annual  Meeting of  Stockholders
for which it solicited votes by proxy pursuant to proxy  solicitation  materials
first distributed on or about May 28, 1998. The following is a brief description
of the matters  voted on at the  meeting and a statement  of the number of votes
cast for and against and the number of abstentions.

1.       Election  of  Garrett A.  Garrettson,  James A.  Cole,  Martin  Cooper,
         Charles D. Kissner, Robert Wilson and Eric A. Young as directors of the
         Company until the next Annual  Meeting of  Stockholders  or until their
         successors are elected.

         NOMINEE                                 IN FAVOR               WITHHELD
         -------                                 --------               --------
         Garrett A. Garrettson                  9,916,125                111,417
         James A. Cole                          9,896,653                130,889
         Charles D. Kissner                     9,911,307                116,235
         Eric A.Young                           9,914,127                113,415
         Robert C. Wilson                       9,913,077                114,465
         Martin Cooper                          9,914,178                113,364

2.       The amendment of the  Certificate  of  Incorporation  of the Company to
         provide that the Company not be governed by the Delaware  anti-takeover
         statute (Section 203 of the Delaware General Corporation Law):

         FOR: 4,511,662 AGAINST: 1,043,046 ABSTAIN: 80,520 NON-VOTES: 4,392,314

         As an  amendment  of the  certificate  of  incorporation  requires  the
         approval of a majority of the outstanding capital stock of the Company,
         this  proposal  failed to obtain the number of votes  necessary for its
         adoption.

3.       The adoption of (i) the 1998 Employee  Stock  Purchase  Plan,  (ii) the
         reservation of 250,000  shares of Common Stock for sale  thereunder and
         (iii) an annual increase in the number of shares of Common Stock by the
         lesser of 300,000 shares or 2% of outstanding shares of Common Stock:

         FOR: 7,153,206   AGAINST: 2,827,835   ABSTAIN: 46,501   NON-VOTES: -0-

4.       The  ratification  of the  appointment  of  KPMG  Peat  Marwick  LLP as
         independent accountants of the Company for the fiscal year ending March
         31, 1999:

         FOR: 9,984,485 AGAINST: 12,062 ABSTAIN: 30,995 NON-VOTES: -0-


ITEM 6:  Exhibits and Reports on Form 8-K

                  (a)      Exhibits

         10.38 Lease Agreement between Registrant and Ellington Development Inc.
               dated April 13, 1998

         27.1  Financial Data Schedule

                                       19
<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.


Dated: August 5, 1998
                                            SPECTRIAN CORPORATION
                                                (Registrant)
               
                                             /S/ BRUCE R. WRIGHT
               
                               -----------------------------------------------
                                               Bruce R. Wright
                           Executive Vice President, Finance and Administration,
                                    Chief Financial Officer and Secretary
                                (Principal Financial and Accounting Officer)






                               INDEX TO EXHIBITS

                                                                  Sequentially
Exhibits                                                          Numbered Pages
--------                                                          --------------


   10.38   Lease Agreement  between  Resistrant and Ellington          21
           Development Inc. dated April 13, 1998

   27.1    Financial Date Schedule                                     32



                                       20