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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[X]   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. 
|     
|      |  | For the quarterly period ended March 28, 2003                                            
|      |  |                                                                                          
|      |  | 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 000-30993

PROXIM CORPORATION

(formerly Western Multiplex Corporation)
(Exact name of registrant as specified in its charter)


|                                  |  |                                                
|--------------------------------- |  | -----------------------------------------------
|Delaware
(State of Incorporation) |  | 52-2198231
(I.R.S. Employer
Identification No.)

935 Stewart Drive
Sunnyvale, California 94085
(408) 731-2700
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)

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   [  ]

Indicate by check mark whether the registrant is an accelerated filer (as

defined in Rule 12b-2 of the Exchange Act). Yes   [X]     No   [  ]

The number of shares outstanding of the Companys Class A common stock, par
value $.01 per share, as of March 28, 2003, was 120,335,708. No shares of the
Companys Class B common stock, par value $.01 per share, are outstanding.



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TABLE OF CONTENTS



|                                                                                              |                                                                                                                             |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. Financial Statements                                                                 
|                                                                                              | Condensed Consolidated Balance Sheets at March 28, 2003 and December 31, 2002 (unaudited)                                  
|                                                                                              | Condensed Consolidated Statements of Operations for the three months ended at March 28, 2003 and March 29, 2002 (unaudited)
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the three months ended at March 28, 2003 and March 29, 2002 (unaudited)
|                                                                                              | Notes to Condensed Consolidated Financial Statements (unaudited)                                                           
|ITEM 2 Managements Discussions and Analysis of Financial Condition and Results of Operations
|ITEM 3 Quantitative and Qualitative Disclosures About Market Risk                            
|ITEM 4 Controls and Procedures                                                               
|PART II. OTHER INFORMATION                                                                   
|ITEM 1 Legal Proceedings                                                                     
|ITEM 6 Exhibits and Reports on Form 8-K                                                      
|EXHIBIT 99.1                                                                                 
|EXHIBIT 99.2                                                                                 



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TABLE OF CONTENTS

|        |  |                                                                                                                          |  |  |    |      |  | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------ |  |  | -- | ---- |  | 
|        |  |                                                                                                                          |  |  |    | Page
|        |  |                                                                                                                          |  |  |    |     
|PART I  |  | FINANCIAL INFORMATION                                                                                                    |  |  |    |     
|Item 1  |  | Financial Statements                                                                                                     |  |  |    |     
|        |  | Condensed Consolidated Balance Sheets at March 28,
2003 and December 31, 2002 (unaudited)                                |  |  | 3  |     
|        |  | Condensed Consolidated Statements of Operations for the
three months ended March 28, 2003
and March 29, 2002 (unaudited) |  |  | 4  |     
|        |  | Condensed Consolidated Statements of Cash Flows for the
three months ended March 28, 2003 and March 29,
2002 (unaudited) |  |  | 5  |     
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                         |  |  | 6  |     
|Item 2  |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                                    |  |  | 21 |     
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                               |  |  | 51 |     
|Item 4  |  | Controls and Procedures                                                                                                  |  |  | 51 |     
|PART II |  | OTHER INFORMATION                                                                                                        |  |  |    |     
|Item 1  |  | Legal Proceedings                                                                                                        |  |  | 52 |     
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                         |  |  | 53 |     
|        |  | Signature                                                                                                                |  |  | 54 |     
|        |  | Certifications                                                                                                           |  |  | 55 |     

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PART I.  FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS




PROXIM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)
(Unaudited)

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The accompanying notes are an integral part of these condensed consolidated
financial statements.

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PROXIM CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

|                                                                           |                                             |                          |                     |        |                    |        |            |        |        |        |  
|-------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------------------- | ------ | ------------------ | ------ | ---------- | ------ | ------ | ------ | -
|                                                                           |                                             |                          |                     |        | Three Months Ended
|                                                                           |                                             |                          |                     |        |                   
|                                                                           |                                             |                          |                     |        | March 28,          |        | March 29, 
|                                                                           |                                             |                          |                     |        | 2003               |        | 2002      
|                                                                           |                                             |                          |                     |        |                    |        |           
|Product revenue                                                            |                                             | $                        | 34,029              |        |                    | $      | 25,414     |       
|License revenue                                                            |                                             |                          | 6,000               |        |                    |        |           |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|                                                                           |                                             | Total revenue            |                     |        | 40,029             |        |            |        | 25,414 |       
|Cost of revenue                                                            |                                             |                          | 20,928              |        |                    |        | 14,662     |       
|Restructuring provision for excess and obsolete inventory                  |                                             |                          |                    |        |                    |        | 12,659     |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|                                                                           |                                             |                          | Gross profit (loss) |        |                    | 19,101 |            |        |        | (1,907 | )
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Operating expenses:                                                        |                                             |                          |                     |        |                    |        |            |       
|                                                                           | Research and development                    |                          |                     | 7,883  |                    |        |            | 4,549  |       
|                                                                           | Selling, general and administrative         |                          |                     | 12,095 |                    |        |            | 8,750  |       
|                                                                           | Legal expense                               |                          |                     | 3,000  |                    |        |            |       |       
|                                                                           | Amortization of intangible assets           |                          |                     | 5,500  |                    |        |            | 144    |       
|                                                                           | Amortization of deferred stock compensation |                          |                     |       |                    |        |            | 245    |       
|                                                                           | Restructuring charges                       |                          |                     |       |                    |        |            | 35,378 |       
|                                                                           | In-process research and development         |                          |                     |       |                    |        |            | 4,536  |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|                                                                           |                                             | Total operating expenses |                     |        | 28,478             |        |            |        | 53,602 |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Loss from operations                                                       |                                             |                          | (9,377              | )      |                    |        | (55,509    | )     
|Interest income, net                                                       |                                             |                          | 99                  |        |                    |        | 131        |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Loss before income taxes                                                   |                                             |                          | (9,278              | )      |                    |        | (55,378    | )     
|Income tax provision                                                       |                                             |                          |                    |        |                    |        | 3,224      |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Net loss                                                                   |                                             |                          | (9,278              | )      |                    |        | (58,602    | )     
|Accretion of Series A Preferred Stock redemption obligations               |                                             |                          | (1,525              | )      |                    |        |           |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Net loss attributable to common stockholders                               |                                             | $                        | (10,803             | )      |                    | $      | (58,602    | )     
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Net
loss per share attributable to common stockholders  basic and diluted |                                             | $                        | (0.09               | )      |                    | $      | (0.96      | )     
|                                                                           |                                             |                          |                     |        |                    |        |            |       
|Shares used to compute net loss per share  basic and diluted              |                                             |                          | 120,274,000         |        |                    |        | 61,275,000 |       
|                                                                           |                                             |                          |                     |        |                    |        |            |       

The accompanying notes are an integral part of these condensed consolidated
financial statements.

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PROXIM CORPORATION




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

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The accompanying notes are an integral part of these condensed consolidated
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PROXIM CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1  The Company

Proxim Corporation (the Company) is the company created by the merger of
Proxim, Inc. and Western Multiplex Corporation, or Western Multiplex. On March
26, 2002, Western Multiplex merged with Proxim, Inc. located in Sunnyvale,
California which designs, manufactures and markets high performance wireless
local area networking, or WLAN, and building-to-building network products based
on radio frequency, or RF, technology and changed its name to Proxim
Corporation. On August 5, 2002, the Company completed the acquisition of the
802.11 WLAN systems business of Agere Systems, Inc., or Agere, including its
ORiNOCO product line. In accordance with accounting principles generally
accepted in the United States of America, the results of operations for the
periods presented include the results of the merged or acquired businesses
beginning from the respective dates of completion.

Western Multiplex was founded in 1979 in Sunnyvale, California, as a
vendor of radio components and related services. In 1992, Western Multiplex
changed its strategy, and became a designer and manufacturer of broadband
wireless systems and launched its Lynx broadband wireless systems. These
point-to-point systems are primarily used by wireless operators to connect
their base stations to other base stations and to existing wire line networks.
In 1999, Western Multiplex introduced its Tsunami point-to-point broadband
wireless systems, which primarily enable service providers, businesses and
other enterprises to expand or establish private networks by bridging data and
voice network traffic among multiple facilities. Based on Western Multiplexs
core technologies and the technology acquired through its purchase of
WirelessHome Corporation, or WirelessHome, in March 2001, Western Multiplex
developed point-to-multipoint systems designed to enable service providers,
businesses and other enterprises to connect multiple facilities within a
geographic area to a central hub. Western Multiplex began shipping its first
generation of these products at the end of the fourth quarter of 2001.

Risks and Uncertainties

The Company depends on single or limited source suppliers for several key
components used in the Companys WLAN products. The Company depends on single
sources for proprietary application specific integrated circuits, or ASICs, and
assembled circuit boards for these products. Any disruptions in the supply of
these components or assemblies could delay or decrease our revenues. In
addition, even for components with multiple sources, there have been, and may
continue to be, shortages due to capacity constraints caused by high demand. In
connection with the Companys acquisition of Ageres 802.11 WLAN systems
business, the Company entered into a three-year strategic supply agreement with
Agere, pursuant to which Agere will provide the Company with 802.11 chips,
modules and cards. Other than this agreement, the Company does not have any long-term
arrangements with any other suppliers.

The Company relies on contract and subcontract manufacturers for turnkey
manufacturing and circuit board assemblies which subjects the Company to
additional risks, including a potential inability to obtain an adequate supply
of finished assemblies and assembled circuit boards and reduced control over
the price, timely delivery and quality of such finished assemblies and
assembled circuit boards. If the Companys Sunnyvale facility were to become
incapable of operating, even temporarily, or were unable to operate at or near
the Companys current or full capacity for an extended period, the Companys
business and operating results could be materially adversely affected.

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The Company believes that its existing cash balances, anticipated cash
flows from operations and available borrowings under its line of credit
arrangements will be sufficient to meet its anticipated capital requirements
for the next 12 months, for additional risks regarding the
Companys line of credit see Note 13. If the Company has a need for additional capital
resources, the Company may be required to sell additional equity or debt
securities, secure additional lines of credit or obtain other third party
financing. The timing and amount of such capital requirements cannot be
determined at this time and will depend on a number of factors, including
demand for the Companys existing and new products, and changes in the
Companys industry. There can be no assurance that such additional financing
will be available on satisfactory terms when needed, if at all. To the extent
that additional capital is raised through the sale of additional equity or
convertible debt securities, the issuance of such securities would result in
additional dilution to the Companys stockholders. In addition, failure to
raise such additional financing, if needed, may result in the Company not being
able to achieve its long-term business objectives.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet
as of March 28, 2003, the condensed consolidated statements of operations and
cash flows for the three months ended March 28, 2003 and March 29, 2002, are
unaudited, but include all adjustments (consisting of normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the financial position, operating results and cash flows for the periods
presented.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates and such differences may be material to the
financial statements.

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The balance sheet at December 31, 2002 has been derived from Proxim
Corporations audited consolidated financial statements as of that date.
Certain information and footnote information normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. Results for
any interim period are not necessarily indicative of results for any future
interim period or for the entire year. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2002.

Principles of Consolidation

The condensed consolidated financial statements include the financial
statements of Proxim Corporation and all of its subsidiaries. The financial
condition and results of operations for the three months ended March 28, 2003
and March 29, 2002 include the results of acquired subsidiaries from their
effective dates. All significant intercompany transactions and balances are
eliminated in consolidation.

Note 2  Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No.146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. The principal
difference between SFAS No. 146 and EITF Issue No. 94-3 relates to SFAS
No.146s timing for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. Under EITF Issue No. 94-3 a liability for an exit cost as
generally defined in EITF Issue No. 94-3 was recognized at the date of an
entitys commitment to an exit plan. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. SFAS No. 146 is
applied prospectively upon adoption and, as a result, would not have any impact
on the Companys consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee and further requires a
guarantor to provide additional disclosures regarding guarantees. The
Interpretations provisions for initial recognition and measurement should be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. The disclosure requirements are effective for financial statements of
periods that end after December 15, 2002. The adoption of the disclosure
provisions within this Interpretation did not have a material effect on the
Companys consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003. The
Company believes that the adoption of this Interpretation will have no material
impact on its consolidated financial statements.

Note 3  Recent Significant Business Combinations

Acquisition of the 802.11 WLAN
systems business of Agere Systems, Inc.

On August 5, 2002, the Company completed its acquisition of the 802.11
WLAN systems business of Agere, including its ORiNOCO product line, for $65.0
million in cash. To finance the acquisition, Warburg Pincus Private Equity
VIII, L.P., Broadview Capital Partners L.P. and affiliated entities agreed to
collectively invest $75.0 million in the Company. These investors received
1,640,000 shares of Series A mandatorily redeemable convertible preferred stock
(Preferred Stock, Note 11) in the amount of $41.0 million, with a conversion
price of approximately $3.06 per share, and warrants to purchase approximately
6.7 million shares of Common Stock valued at $12.3 million. The value of the
warrants was recorded as a reduction of the Preferred Stock carrying value and
recorded as additional paid-in capital. During the quarter ended September 27,
2002, a deemed Preferred Stock dividend

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representing the beneficial conversion feature of the Preferred Stock of
$2.7 million was reflected in the determination of the loss attributable to
Common stockholders. The remaining $34.0 million was in the form of convertible
notes. Upon the receipt of approval of the Companys stockholders at a special
meeting held on October 8, 2002, the notes issued to these investors were
converted into 1,360,000 shares of Preferred Stock and warrants to purchase
approximately 5.6 million shares of Common Stock valued at
approximately $1.7 million. The
value of the warrants was recorded as a reduction of the Preferred Stock
carrying value and recorded as additional paid-in capital in the quarter ended
December 31, 2002. In total, the investors were granted warrants to acquire
12,271,345 shares of Common Stock for approximately $3.06 per share,
valued at approximately $14.0 million. The
Preferred Stock and warrants issued to the investors represent approximately
25% of Proxims outstanding common stock on an as-converted and as-exercised
basis including dividends. In addition, in connection with the transaction, the
Company entered into a patent cross-license agreement and settled all
outstanding patent-related litigation with Agere, and entered into a three-year
strategic supply agreement, pursuant to which Agere will provide 802.11 chips,
modules and cards to the Company at specified prices. Total consideration of
$70.0 million for the acquisition comprised:



| |  |  | $65.0 million in cash; and                      
| | - |  | ------------------------------------------------
|
| |  |  | transaction costs of approximately $5.0 million.

The purpose of the acquisition was to gain key technology and establish a
leadership position in the broadband wireless access systems market.

The total purchase price was allocated to the tangible and identifiable
intangible assets, goodwill acquired and liabilities assumed on the basis of
their relative fair values as follows (in thousands):

|                                             |  |   |        |  
|-------------------------------------------- |  | - | ------ | -
|Inventory, net                               |  | $ | 557    |  
|Property and equipment                       |  |   | 163    |  
|Core technology                              |  |   | 8,521  |  
|Developed technology                         |  |   | 16,994 |  
|Customer relationships                       |  |   | 8,995  |  
|Tradename                                    |  |   | 5,909  |  
|Liabilities assumed                          |  |   | (4,589 | )
|Acquired in-process research and development |  |   | 10,364 |  
|Goodwill                                     |  |   | 23,086 |  
|                                             |  |   |        |  
|                                             |  | $ | 70,000 |  
|                                             |  |   |        |  

The liabilities assumed consisted principally of restructuring charges
related to severance pay totaling $2.3 million for 55 employees, warranty
expense and other current liabilities.

The core and developed technology acquired include Enterprise Access
Points, Radio Backbone Systems, Broadband Gateways and Network Management
products. These products have already achieved technological feasibility in the
marketplace. The fair value assigned to the core technology and developed
technology totaled $8.5 million and $17.0 million respectively, and is being
amortized over the expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to the ORiNOCO customer base. In valuing the ORiNOCO customer
base, the Company employed an income approach similar to that used in valuing
the technology. The customer base includes original equipment manufacturers
(OEM) such as Avaya, Dell Computer, Fujitsu and Hewlett-Packard. The fair
value assigned to the ORiNOCO customer base totaled $9.0 million and is being
amortized over the expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to the ORiNOCO tradename. In valuing the tradename, the Company
utilized the relief from royalty methodology, which assumes that the value of
the asset equals the amount a third party would pay to use the asset and
capitalize on the related benefits of the asset. Therefore, a revenue stream
for the asset was estimated based on the revenue from the technology over the
next five years, which represents the developed, core and in-process revenue
stream. The Company then applied a 2.0% royalty rate to the forecasted revenue
to estimate the pre-tax income associated with the asset. The fair value
assigned to the tradename totaled $5.9 million and because the Company will
continue to use the ORiNOCO tradename the intangible asset will not be
amortized.

Purchased in-process research and development, or IPR&D, consisted of next
generation Enterprise Access Points, Radio Backbone Systems, Broadband Gateways
and Network Management products, which had not yet reached technological
feasibility and

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had no alternative future use as of the date of acquisition. As of the
valuation date, the 802.11 WLAN systems business of Agere was developing next
generation Enterprise Access Points, Radio Backbone Systems, Broadband Gateways
and Network Management products. These products are under development and
require additional hardware and software development. The value of the IPR&D
was determined by estimating the net cash flows from potential sales of the
products resulting from completion of this project, reduced by the portion of
net cash flows from the revenue attributable to core and developed technology.
The resulting cash flows were then discounted back to their present value using
a discount rate of 50%. The fair value assigned to the IPR&D totaled $10.4
million and was expensed at the time of the acquisition.

Core technology, developed technology and customer relationships are being
amortized on a straight-line basis over the following estimated periods of
benefit:

|                       |  |         |  | 
|---------------------- |  | ------- |  | 
|Core technology        |  | 5 years
|Developed technology   |  | 2 years
|Customer relationships |  | 3 years

Merger with Proxim, Inc.

On March 26, 2002, the merger between Western Multiplex Corporation and
Proxim, Inc. was completed, resulting in Proxim Corporation as the combined
company. The combined company provides broadband, or high speed, wireless
access products to service providers, businesses and other enterprises as well
as high performance WLAN products based on RF technology. The merger was
accounted for as a purchase transaction with Proxim, Inc. as the purchased
entity. Total consideration of $172.6 million for the merger was adjusted to
$175.3 million in the third quarter of 2002 and comprised:



| |  |  | 59,506,503 shares of Class A common stock valued at approximately $133.3 million;                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | options and warrants having an assumed value of approximately $25.3 million; and                                         
|
| |  |  | transaction costs originally estimated at $14.0 million that were adjusted in the third quarter of 2002 to $16.7 million.

The total purchase price was allocated to the tangible and identifiable
intangible assets, goodwill acquired and liabilities assumed
on the basis of their relative fair values as follows (in thousands):

|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Cash and cash equivalents                    |  | $ | 35,961  |  
|Marketable securities                        |  |   | 991     |  
|Accounts receivable, net                     |  |   | 8,914   |  
|Inventory, net                               |  |   | 12,834  |  
|Other current assets                         |  |   | 1,150   |  
|Other long-term assets                       |  |   | 2,000   |  
|Plant and equipment                          |  |   | 3,958   |  
|Core technology                              |  |   | 18,010  |  
|Developed technology                         |  |   | 12,042  |  
|Patents                                      |  |   | 3,210   |  
|Liabilities assumed                          |  |   | (8,199  | )
|Acquired in-process research and development |  |   | 4,536   |  
|Goodwill                                     |  |   | 79,847  |  
|                                             |  |   |         |  
|                                             |  | $ | 175,254 |  
|                                             |  |   |         |  

The liabilities assumed consist principally of accounts payable, accrued
compensation and benefits and other current liabilities.

The core and developed technology acquired include 900MHz, RangeLAN,
Harmony, 802.11a and Skyline products for the enterprise/commercial markets;
Symphony HomeRF, HomeRF 2.0 and Netline products for the home/SOHO markets; and
Stratum and Stratum MP products for the building-to-building markets. These
products have already achieved technological feasibility in the marketplace.
The fair value assigned to the core technology and developed technology totaled
$18.0 million and $12.0 million respectively, and is being amortized over the
expected life of its cash flows.

As of the valuation date, it was assumed that there was some value
attributable to patents and patent applications of Proxim, Inc. The Company
assumed that the patents and patent applications will continue to be used but
will be phased out over time as new technology is developed. To value the
patents and patent applications, we utilized the relief from royalty
methodology. The relief from royalty methodology assumes that the value of the
asset equals the amount a third party would pay to use the asset and capitalize
on

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the related benefits of the asset. Therefore, a revenue stream for the
asset is estimated, and then an estimated royalty rate is applied to the
forecasted revenue to estimate the pre-tax income associated with the asset.
The pre-tax income is then tax-affected to estimate the after-tax net income
associated with the asset. Finally, the after tax net income is discounted to
the present value using an appropriate rate of return that considers both the
risk of the asset and the associated cash flow estimates. The resulting cash
flows were then discounted back to their present value using a discount rate of
25%. The fair value assigned to the patents totaled $3.2 million and is being
amortized over the expected life of its cash flows.

Purchased IPR&D consisted of 802.11a and HomeRF 2.0 wireless networking
products under development, which had not yet reached technological feasibility
and had no alternative future use as of the date of acquisition. As of the
valuation date, Proxim, Inc. was developing 802.11a WLAN adapters in PCI and
Mini PCI form factors and a connectorized access point as well as a HomeRF 2.0
voice data module, voice data gateway and voice data gateway and answer
machine. These products are under development and require additional software
development including NT 4.0 and Macintosh drivers along with additional
functional testing. The value of the IPR&D was determined by estimating the net
cash flows from potential sales of the products resulting from completion of
this project, reduced by the portion of net cash flows from the revenue
attributable to core and developed technology. The resulting cash flows were
then discounted back to their present value using a discount rate of 30%. The
fair value assigned to the IPR&D totaled $4.5 million and was expensed at the
time of the acquisition.

Core technology, developed technology and patents are being amortized on a
straight-line basis over the following estimated periods of benefit:

|                     |  |         |  | 
|-------------------- |  | ------- |  | 
|Core technology      |  | 5 years
|Developed technology |  | 3 years
|Patents              |  | 5 years

Pro Forma Financial Information

The following table represents unaudited pro forma financial information
for the three months ended March 29, 2002 had Proxim Corporation, Proxim, Inc.,
nBand and the 802.11 WLAN systems business of Agere been combined as of January
1, 2002. The pro forma financial information is presented for illustrative
purposes only and is not necessarily indicative of the combined financial
position or results of operations of future periods or the results that
actually would have resulted had Proxim Corporation, Proxim, Inc., nBand and
the 802.11 WLAN systems business of Agere been a combined company during the
specified period. The pro forma results include the effects of the amortization
of identifiable intangible assets and adjustments to the income tax provision
or benefits and accretion of Preferred Stock redemption obligations. The pro
forma combined results exclude the $4.5 million charge for acquired in-process
technology from Proxim, Inc. (in thousands except share data):

|                                                                         |  |                    |         |  
|------------------------------------------------------------------------ |  | ------------------ | ------- | -
|                                                                         |  | Three months ended
|                                                                         |  | March 29, 2002    
|                                                                         |  |                   
|Revenue                                                                  |  | $                  | 50,406  |  
|Net loss attributable to common stockholders                             |  | $                  | (91,345 | )
|Basic and diluted net loss per share attributable to common stockholders |  | $                  | (0.77   | )
|                                                                         |  |                    |         |  
|Shares used to compute basic and diluted net loss per share              |  |                    | 118,798 |  
|                                                                         |  |                    |         |  

Goodwill and Other Intangible Assets

In December 2002, due to the recent significant decline in forecasted
revenue and the cash flows therefrom, the Company made a complete assessment of
the carrying value of all goodwill and other intangible assets in accordance
with SFAS No. 142. The Company first determined the fair value of its equity to
be less than the carrying value of goodwill. As such, an impairment charge was
recognizable in accordance with SFAS No. 142 as of December 31, 2002. The
Company then quantified the goodwill impairment as the amount by which the
carrying amount of goodwill exceeded the estimated fair value of goodwill. The
carrying value of goodwill determined by discounted cash flow method, totaling
$138.8 million as of December 31, 2002, exceeded the estimated fair value of
$9.7 million resulting in a charge for the impairment of goodwill of $129.1
million.

Goodwill, net of impairment charge and accumulated amortization, consist
of the following as of March 28, 2003 and December
31, 2002 (in thousands):

|               |              |  |        |        | 
|-------------- | ------------ |  | ------ | ------ | 
|               |              |  | Amount
|               |              |  |       
|Goodwill, net: |              |  |        |       
|               | GTI          |  | $      | 17,126 | 
|               | WirelessHome |  |        | 18,775 | 
|               | Proxim, Inc  |  |        | 79,847 | 

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| |                                  |  |        |          |  
| | -------------------------------- |  | ------ | -------- | -
| |                                  |  | Amount
| |                                  |  |       
| | 802.11 WLAN systems business     |  | $      | 23,086   |  
| |                                  |  |        |         
| | Total goodwill before impairment |  |        | 138,834  |  
| | Less: impairment charge          |  |        | (129,108 | )
| |                                  |  |        |         
| | Goodwill, net                    |  | $      | 9,726    |  
| |                                  |  |        |         

Acquired intangible assets, net of accumulated amortization, consist of
the following (in thousands):

|                                 |                              |  |           |        |              |  |   |        | 
|-------------------------------- | ---------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                                 |                              |  | March 28, |        | December 31,
|                                 |                              |  | 2003      |        | 2002        
|                                 |                              |  |           |        |             
|Acquired intangible assets, net: |                              |  |           |        |              |  |   |       
|                                 | WirelessHome and other       |  | $         |       |              |  | $ | 136    | 
|                                 | Proxim, Inc                  |  |           | 25,004 |              |  |   | 27,068 | 
|                                 | 802.11 WLAN systems business |  |           | 31,422 |              |  |   | 34,722 | 
|                                 |                              |  |           |        |              |  |   |       
|                                 | Intangible assets, net       |  | $         | 56,426 |              |  | $ | 61,926 | 
|                                 |                              |  |           |        |              |  |   |       

Acquired intangible assets by categories as of March 28, 2003 consist of
the following (in thousands):

|                               |                        |  |                |        |              |  |   |        | 
|------------------------------ | ---------------------- |  | -------------- | ------ | ------------ |  | - | ------ | 
|                               |                        |  | Gross carrying |        | Accumulated 
|                               |                        |  | amounts        |        | amortization
|                               |                        |  |                |        |             
|Amortized intangible assets:   |                        |  |                |        |              |  |   |       
|                               | Core Technology        |  | $              | 26,531 |              |  | $ | 4,739  | 
|                               | Developed Technology   |  |                | 29,036 |              |  |   | 9,797  | 
|                               | Customer Relationships |  |                | 8,995  |              |  |   | 1,998  | 
|                               | Patents                |  |                | 3,439  |              |  |   | 950    | 
|                               |                        |  |                |        |              |  |   |       
|                               | Total                  |  | $              | 68,001 |              |  | $ | 17,484 | 
|                               |                        |  |                |        |              |  |   |       
|Unamortized intangible assets: |                        |  |                |        |              |  |   |       
|                               | Tradename              |  | $              | 5,909  |              |  |   |        | 
|                               |                        |  |                |        |              |  |   |       

Purchased In-Process Research and Development

Purchased in-process research and development consisted primarily of
acquired technology that has not reached technological feasibility.

The amount expensed to purchased in-process research and development in
the third quarter of 2002 related to next generation Enterprise Access Points,
Radio Backbone Systems, Broadband Gateways and Network Management products
acquired in the acquisition of Ageres 802.11 WLAN systems business. The amount
expensed to purchased in-process research and development in the second quarter
of 2002 related to technology for next generation ASICs acquired in the nBand
acquisition. The amount expensed to purchased in-process research and
development in the first quarter of 2002 related to 802.11a and HomeRF 2.0
wireless networking products acquired in relations to the Proxim, Inc. merger.
The following table summarizes the key assumptions underlying the valuation for
the Companys purchase transactions completed in 2002 (in thousands):

|                             |  |      |      |                     |  |                     |       |                        |  |  |      |  
|---------------------------- |  | ---- | ---- | ------------------- |  | ------------------- | ----- | ---------------------- |  |  | ---- | -
|                             |  |      |      |                     |  | Estimated Cost to   |       | Risk-Adjusted Discount
|                             |  |      |      |                     |  | complete Technology |       | Rate for In-Process   
|                             |  |      |      |                     |  | at                  |       | Research and          
|                             |  | Year |      | Time of Acquisition |  | Development        
|                             |  |      |      |                     |  |                    
|802.11 WLAN systems business |  |      | 2002 |                     |  | $                   | 1,322 |                        |  |  | 50.0 | %
|Proxim, Inc                  |  |      | 2002 |                     |  | $                   | 2,387 |                        |  |  | 30.0 | %

The discount rates reflect the risk of the respective technology and are
representative of the implied transaction rates.

The Company does not expect to achieve a material amount of expense
reductions or synergies as a result of integrating the acquired in-process
technology. Therefore, the valuation assumptions do not include any anticipated
synergies or cost saving associated with the transactions. The Company expects
that products incorporating the acquired technology will be completed and begin
to generate cash flows in 2003. Actual results have been consistent in all
material respects, with its assumptions at the effective time of the
transactions.

Development of this technology remains a significant risk due to the
remaining effort to achieve technological feasibility, rapidly changing
customer markets, uncertain standards for new products, and significant
competitive threats. The nature of the efforts to develop the acquired
technology into commercially viable products consists principally of developing
a new operating system,

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developing a new processor and interface, planning and testing activities
necessary to determine that the product can meet market expectations, including
functionality and technical requirements. Failure to bring these products to
market in a timely manner could result in a loss of market share, or a lost
opportunity to capitalize on emerging markets, and could have a material
adverse impact on the value of assets acquired.

Note 4  Balance Sheet Components

|                             |                                                          |                                                 |                          |                                                              |          |                |        |              |          |        |        |  
|---------------------------- | -------------------------------------------------------- | ----------------------------------------------- | ------------------------ | ------------------------------------------------------------ | -------- | -------------- | ------ | ------------ | -------- | ------ | ------ | -
|                             |                                                          |                                                 |                          |                                                              |          | March 28,      |        | December 31,
|                             |                                                          |                                                 |                          |                                                              |          | 2003           |        | 2002        
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          |                                                 |                          |                                                              |          | (in thousands)
|Investments:                 |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             | Corporate bonds and time deposits                        |                                                 | $                        | 2,489                                                        |          |                | $      | 2,489        |         
|                             | Equity investment in a wireless company listed in Canada |                                                 |                          | 1,001                                                        |          |                |        | 513          |         
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          |                                                 | 3,490                    |                                                              |          |                | 3,002  |             
|                             | Less: long-term portion                                  |                                                 |                          | (2,489                                                       | )        |                |        | (2,489       | )       
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             | Current portion                                          |                                                 | $                        | 1,001                                                        |          |                | $      | 513          |         
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Accounts receivable, net:    |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | Gross accounts receivable                       |                          | $                                                            | 54,378   |                |        | $            | 52,750   |       
|                             |                                                          | Less: deferred revenue                          |                          |                                                              | (15,493  | )              |        |              | (14,715  | )     
|                             |                                                          |                                                 |                          | allowances for bad debts, sales returns and price protection |          |                | (9,730 | )            |          |        | (7,500 | )
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 29,155                   |                                                              |          | $              | 30,535 |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Inventory, net:              |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | Raw materials                                   |                          | $                                                            | 39,416   |                |        | $            | 37,472   |       
|                             |                                                          | Work-in-process                                 |                          |                                                              | 6,661    |                |        |              | 5,820    |       
|                             |                                                          | Finished goods                                  |                          |                                                              | 15,197   |                |        |              | 17,523   |       
|                             |                                                          | Consignment inventories                         |                          |                                                              | 9,528    |                |        |              | 8,829    |       
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          |                                                 | 70,802                   |                                                              |          |                | 69,644 |             
|                             |                                                          | Less: reserve for excess and obsolete inventory |                          |                                                              | (31,034  | )              |        |              | (32,845  | )     
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 39,768                   |                                                              |          | $              | 36,799 |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Property and equipment, net: |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | Computer and test equipment                     |                          | $                                                            | 18,371   |                |        | $            | 18,102   |       
|                             |                                                          | Furniture and fixtures                          |                          |                                                              | 909      |                |        |              | 890      |       
|                             |                                                          | Leasehold improvements                          |                          |                                                              | 327      |                |        |              | 265      |       
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          |                                                 | 19,607                   |                                                              |          |                | 19,257 |             
|                             |                                                          | Less: accumulated depreciation                  |                          |                                                              | (10,215  | )              |        |              | (9,147   | )     
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 9,392                    |                                                              |          | $              | 10,110 |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Goodwill, net:               |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | Goodwill                                        |                          | $                                                            | 148,433  |                |        | $            | 148,433  |       
|                             |                                                          | Less: Impairment charge                         |                          |                                                              | (129,108 | )              |        |              | (129,108 | )     
|                             |                                                          |                                                 | Accumulated amortization |                                                              |          | (9,599         | )      |              |          | (9,599 | )     
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 9,726                    |                                                              |          | $              | 9,726  |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Intangible assets, net:      |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | Core technology                                 |                          | $                                                            | 26,531   |                |        | $            | 26,531   |       
|                             |                                                          | Developed technology                            |                          |                                                              | 29,036   |                |        |              | 29,036   |       
|                             |                                                          | Customer relationships                          |                          |                                                              | 8,995    |                |        |              | 8,995    |       
|                             |                                                          | Tradename                                       |                          |                                                              | 5,909    |                |        |              | 5,909    |       
|                             |                                                          | Patents                                         |                          |                                                              | 3,439    |                |        |              | 3,439    |       
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          |                                                 | 73,910                   |                                                              |          |                | 73,910 |             
|                             |                                                          | Less: Accumulated amortization                  |                          |                                                              | (17,484  | )              |        |              | (11,984  | )     
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 56,426                   |                                                              |          | $              | 61,926 |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|Accrued liabilities:         |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             | Restructuring accruals, current portion                  |                                                 | $                        | 3,926                                                        |          |                | $      | 3,871        |         
|                             | Accrued unconditional purchase order commitments         |                                                 |                          | 1,509                                                        |          |                |        | 1,509        |         
|                             | Accrued compensation                                     |                                                 |                          | 3,803                                                        |          |                |        | 3,921        |         
|                             | Accrued warranty costs                                   |                                                 |                          | 1,991                                                        |          |                |        | 2,041        |         
|                             | Other                                                    |                                                 |                          | 5,898                                                        |          |                |        | 5,575        |         
|                             |                                                          |                                                 |                          |                                                              |          |                |        |             
|                             |                                                          | $                                               | 17,127                   |                                                              |          | $              | 16,917 |             
|                             |                                                          |                                                 |                          |                                                              |          |                |        |              |         

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The following is a summary of the movements in allowance for bad debt,
sales returns and price protection and product warranty costs during the three
months ended March 28, 2003 (in thousands):

|                                   |  |                     |       |          |  |   |       |  
|---------------------------------- |  | ------------------- | ----- | -------- |  | - | ----- | -
|                                   |  | Allowance for bad   |       |          |  |  
|                                   |  | debt, sales returns |       | Product  |  |  
|                                   |  | and price           |       | warranty
|                                   |  | protection          |       | costs   
|                                   |  |                     |       |         
|Balance as of December 31, 2002    |  | $                   | 7,500 |          |  | $ | 2,041 |  
|Additional provision               |  |                     | 2,230 |          |  |   |      |  
|Settlements made during the period |  |                     |      |          |  |   | (50   | )
|                                   |  |                     |       |          |  |   |       |  
|Balance as of March 28, 2003       |  | $                   | 9,730 |          |  | $ | 1,991 |  
|                                   |  |                     |       |          |  |   |       |  

Note 5  Revenue Information and Concentration of Credit Risks:

The Companys products are grouped into two product lines: WWAN and WLAN
product lines. The WWAN product line includes point-to-point Lynx and Tsunami
products and point-to-multipoint Tsunami products. The WLAN product line
includes 802.11a and ORiNOCO products and license revenue. Prior to the March
26, 2002 merger with Proxim, Inc., the Company did not have a WLAN product
line. Historical WLAN revenue prior to March 26, 2002 of the former Proxim,
Inc., and prior to August 5, 2002, for the ORiNOCO products acquired from Agere
is not reported in the table below. Revenue information by product line is as
follows (in thousands):

|             |               |      |                    |        |           |   |        |        | 
|------------ | ------------- | ---- | ------------------ | ------ | --------- | - | ------ | ------ | 
|             |               |      | Three Months Ended
|             |               |      |                   
|             |               |      | March 28,          |        | March 29,
|Product Line |               | 2003 |                    | 2002  
|             |               |      |                    |       
|WWAN         |               | $    | 16,607             |        |           | $ | 24,350 |       
|WLAN         |               |      | 23,422             |        |           |   | 1,064  |       
|             |               |      |                    |        |           |   |        |       
|             | Total revenue |      | $                  | 40,029 |           |   | $      | 25,414 | 
|             |               |      |                    |        |           |   |        |       

The Company sells its products worldwide through a direct sales force,
independent distributors, and value-added resellers. It currently operates in
two geographic regions: North America and International. Revenue outside of the
North America are primarily export sales denominated in United States dollars.
Disaggregated financial information regarding the Companys revenue by
geographic region is as follows (in thousands):

|                  |               |      |                    |        |           |   |        |        | 
|----------------- | ------------- | ---- | ------------------ | ------ | --------- | - | ------ | ------ | 
|                  |               |      | Three Months Ended
|                  |               |      |                   
|                  |               |      | March 28,          |        | March 29,
|Geographic Region |               | 2003 |                    | 2002  
|                  |               |      |                    |       
|North America     |               | $    | 23,122             |        |           | $ | 14,132 |       
|International     |               |      | 16,907             |        |           |   | 11,282 |       
|                  |               |      |                    |        |           |   |        |       
|                  | Total revenue |      | $                  | 40,029 |           |   | $      | 25,414 | 
|                  |               |      |                    |        |           |   |        |       

On March 17, 2003 the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.
As part of the confidential settlement agreement, the two companies have
entered into a patent cross-license agreement for their respective patent
portfolios and Intersil agreed to make a one-time payment of $6.0 million to
the Company. The Company included the license revenue of $6.0 million in the
WLAN product line and the North America geographic region in the above
analysis. The Company recognizes license revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and the collection of the related receivable is reasonable assured.
Additionally, we recorded a charge of $3.0 million in the first quarter of 2003
for legal fees and other litigation-related expenses associated with this
settlement and the defense of the Companys intellectual property.

One customer accounted for 25.7% of total revenue for the first quarter of
2002. One customer accounted for 15.0% of total revenue for the first quarter
of 2003.

Note 6  Restructuring Provision for Excess and Obsolete Inventory

In the quarter ended March 29, 2002, the Company recorded a provision for
excess and obsolete inventory, including purchase commitments, totaling $12.7
million as part of the restructuring charge, of which $7.7 million related to
excess and obsolete inventory

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and $5.0 million related to purchase commitments. To mitigate the
component supply constraints that have existed in the past, the Company had
built inventory levels for certain components with long lead times and entered
into longer-term commitments for certain components. The excess inventory
charges were due to the following factors:



| |  |  | A sudden and significant decrease in demand for certain Lynx and Tsunami license-exempt point-to-point products;                                                                  
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Notification from customers that they would not be ordering as much as they had previously indicated;                                                                             
|
| |  |  | Managements strategy to discontinue the Lynx and Tsunami
point-to-point licensed products in order to concentrate on the
license-exempt products; and                            
|
| |  |  | Managements strategy to discontinue certain Lynx and Tsunami
license-exempt products in order to concentrate on selling next
generation Lynx and Tsunami license-exempt products.

Due to these factors, inventory levels exceeded the Companys requirements
based on current 12-month sales forecasts. The additional excess and obsolete
inventory charge was calculated based on the inventory levels in excess of the
estimated 12-month demand for each specific product family. The Company does
not currently anticipate that the excess inventory subject to this reserve will
be used at a later date based on our current 12-month demand forecast. The
Company uses a 12-month demand forecast because the wireless communications
industry is characterized by rapid technological changes such that if the
Company has not sold a product after a 12-month period it is unlikely that the
product will be sold. The following is a summary of the movements in the
reserve for excess and obsolete inventory during three months ended March 28,
2003 (in thousands):

|                                |  |   |        |  
|------------------------------- |  | - | ------ | -
|Balance as of December 31, 2002 |  | $ | 32,845 |  
|Inventory scrapped              |  |   | (1,811 | )
|                                |  |   |        |  
|Balance as of March 28, 2003    |  | $ | 31,034 |  
|                                |  |   |        |  

Note 7  Restructuring Charges

Prior to the Companys adoption of SFAS No. 146 on January 1, 2003, the
Company accounted for restructuring charges under the provisions of Emerging
Issues Task Force (EITF) No. 94-3Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring) and Staff Accounting Bulletin (SAB) No.
100 regarding the accounting for and disclosure of certain expenses commonly
reported in connection with exit activities and business combinations.

During the year ended December 31, 2002, the Company recorded $43.2
million of restructuring charges, including $35.4 million, $3.6 million, $2.3
million and $1.9 million in the first, second, third and fourth quarters of
2002, respectively, related to closure of certain facilities, discontinued
product lines and severance pay. The charges include $40.8 million of cash
provisions, which include severance of $7.4 million for 194 employees, $33.1
million for future lease commitments, net of estimated future sublease
receipts, and exit costs related to the closure of four facilities, $0.3
related to consulting fees. The charge also includes $2.4 million of non-cash
provisions related to fixed assets that will no longer be used at the
facilities. The estimated future sublease receipts are based on current
comparable rates for leases in the respective markets. If facility rental rates
continue to decrease in these markets or if it takes longer than expected to
sublease these facilities, the actual costs for closures of facilities could
exceed the original estimate of $33.1 million.

The following table summarizes the restructuring activities in 2002 and
the three months ended March 28, 2003 (in thousands):

|                                   |  |           |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|---------------------------------- |  | --------- | ------ | ---------- |  | ----- | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|                                   |  | Severance |        | Facilities |  | Other |        | Total
|                                   |  |           |        |            |  |       |        |      
|Balance as of December 31, 2001    |  | $         | 198    |            |  | $     | 52     |       |  | $ | 180    |   |  | $ | 430     |  
|Reclassifications among categories |  |           |       |            |  |       | 180    |       |  |   | (180   | ) |  |   |        |  
|Balance acquired with Proxim, Inc. |  |           |       |            |  |       | 1,066  |       |  |   |       |   |  |   | 1,066   |  
|Provision charged to operations    |  |           | 7,395  |            |  |       | 33,080 |       |  |   | 2,702  |   |  |   | 43,177  |  
|Non-cash charges utilized          |  |           |       |            |  |       |       |       |  |   | (2,405 | ) |  |   | (2,405  | )
|Cash payments                      |  |           | (7,593 | )          |  |       | (3,928 | )     |  |   | (297   | ) |  |   | (11,818 | )
|                                   |  |           |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2002    |  |           |       |            |  |       | 30,450 |       |  |   |       |   |  |   | 30,450  |  
|Cash payments                      |  |           |       |            |  |       | (959   | )     |  |   |       |   |  |   | (959    | )
|                                   |  |           |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of March 28, 2003       |  | $         |       |            |  | $     | 29,491 |       |  | $ |       |   |  | $ | 29,491  |  
|                                   |  |           |        |            |  |       |        |       |  |   |        |   |  |   |         |  

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Note 8  Income Taxes

The income tax provision for the three months ended March 29, 2002 is
primarily due to establishing a valuation allowance to offset deferred tax
assets brought forward from December 31, 2001. As a result of the losses
incurred, there is significant uncertainty whether a benefit of the deferred
tax assets would be realized. The Company will carry back losses to prior years
and claim income tax refunds totaling $10.4 million, of which $8.7 million was
received through March 28, 2003. Accordingly, the Company believes that it is
necessary to establish a full valuation allowance of approximately $11.3
million, of which $1.3 million was reversed against additional paid-in capital.

Note 9  Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per share attributable to common stockholders
are presented in conformity with SFAS No. 128, Earnings Per Share. Basic
earnings per share under SFAS No. 128 were computed using the weighted average
number of shares outstanding of 120,274,000 and 61,275,000 for the three months
ended March 28, 2003 and March 29, 2002, respectively. Diluted earnings per
share is determined in the same manner as basic earnings per share except that
the number of shares is increased assuming dilutive stock options and warrants
using the treasury stock method. For the three months ended March 28, 2003 and
March 29, 2002, the incremental shares from the assumed exercise of stock
options and warrants were not included in computing diluted per share amounts
as the effect would be antidilutive.

Note 10  Comprehensive Loss

The total comprehensive loss for the three months ended March 28, 2003 and
March 29, 2002 are as follows (in thousands):

|                                             |                          |   |                    |         |           |   |         |         |   |  |  |  |  |  |  |  |  |  | 
|-------------------------------------------- | ------------------------ | - | ------------------ | ------- | --------- | - | ------- | ------- | - |  |  |  |  |  |  |  |  |  | 
|                                             |                          |   | Three Months Ended
|                                             |                          |   |                   
|                                             |                          |   | March 28,          |         | March 29,
|                                             |                          |   | 2003               |         | 2002     
|                                             |                          |   |                    |         |          
|Net loss attributable to common stockholders |                          | $ | (10,803            | )       |           | $ | (58,602 | )      
|Unrealized gain (loss) on investments        |                          |   | 488                |         |           |   | (44     | )      
|                                             |                          |   |                    |         |           |   |         |        
|                                             | Total comprehensive loss |   | $                  | (10,315 | )         |   | $       | (58,646 | )
|                                             |                          |   |                    |         |           |   |         |        

Note 11  Mandatorily Redeemable Convertible Preferred Stock

Mandatorily Redeemable Convertible Preferred Stock, or Preferred Stock, at
March 28, 2003 consists of the following:

|         |  |            |           |             |  |            |           |            |  |             |            |               |  |                 |            | 
|-------- |  | ---------- | --------- | ----------- |  | ---------- | --------- | ---------- |  | ----------- | ---------- | ------------- |  | --------------- | ---------- | 
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | Total number of
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | shares of      
|         |  |            |           |             |  |            |           |            |  |             |            |               |  | Common Stock   
|         |  |            |           |             |  |            |           |            |  | Liquidation |            | Issuable upon
|         |  | Authorized |           | Outstanding |  | Preference |           | Conversion
|         |  |            |           |             |  |            |           |           
|Series A |  |            | 3,000,000 |             |  |            | 3,000,000 |            |  | $           | 78,000,000 |               |  |                 | 25,524,395 | 
|         |  |            |           |             |  |            |           |            |  |             |            |               |  |                 |            | 

In August 2002, in connection with the acquisition of the 802.11 WLAN
systems business of Agere Systems, Inc., Warburg Pincus Private Equity VIII,
L.P., Brodview Capital Partners L.P. and affiliated entities agreed to
collectively invest $75.0 million in the Company. These investors received
1,640,000 shares of Series A Preferred Stock in the amount of $41.0 million,
with a conversion price of approximately $3.06 per share, and warrants to
purchase approximately 6.7 million shares of our Common Stock valued at
approximately $12.3 million. The value of the warrants was recorded as a
reduction of the Series A Preferred Stock carrying value and recorded as
additional paid-in capital. During the quarter ended September 27, 2002, a
deemed preferred stock dividend representing the beneficial conversion feature
of the Series A Preferred Stock of $2.7 million was also recorded to increase
the loss attributable to holders of the Companys Common Stock.

Upon receipt of approval of the Companys stockholders at a special
meeting held on October 8, 2002, the notes issued to these investors were
converted into 1,360,000 shares of Series A Preferred Stock and the Company
granted to these investors additional warrants to purchase approximately 5.6
million shares of our common stock value at approximately $1.7 million. The
value of the warrants was recorded as a reduction of the Preferred Stock
carrying value and recorded as additional paid-in capital. In total, the
investors were granted warrants to acquire 12,271,345 shares of Common Stock
for approximately $3.06 per share value at approximately $14.0 million. The
Series A Preferred Stock and warrants issued to the investors represent
approximately 25% of the Companys outstanding Common Stock on an as-converted
and as-exercised basis as of March 28, 2003. In summary, the issuance of

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Preferred Stock, convertible notes and related warrants and the subsequent
conversion, accretion and interest accrual were recorded as follows (in
thousands):

|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  
|---------------------------------------------------------------- |  | ----------- | ------- | --------- |  | ------- | ------- | ----------- |  | ---------- | ------ | - |  | - | ------ | -
|                                                                 |  |             |         |           |  |         |         |             |  | Additional |        |   |  |  
|                                                                 |  | Convertible |         | Preferred |  | Paid-In |         | Accumulated
|                                                                 |  | Notes       |         | Stock     |  | Capital |         | Deficit    
|                                                                 |  |             |         |           |  |         |         |            
|Issuance of Series A Preferred Stock                             |  | $           |        |           |  | $       | 41,000  |             |  | $          |       |   |  | $ |       |  
|Issuance of convertible notes                                    |  |             | 34,000  |           |  |         |        |             |  |            |       |   |  |   |       |  
|Issuance of warrants                                             |  |             |        |           |  |         | (13,993 | )           |  |            | 13,993 |   |  |   |       |  
|Conversion of convertible notes                                  |  |             | (34,000 | )         |  |         | 34,000  |             |  |            |       |   |  |   |       |  
|Deemed Preferred Stock dividend                                  |  |             |        |           |  |         |        |             |  |            | 2,740  |   |  |   | (2,740 | )
|Accretion of Preferred Stock redemption obligations              |  |             |        |           |  |         | 2,936   |             |  |            | (1,046 | ) |  |   | (1,890 | )
|Accrued interest on convertible notes
payable in Preferred Stock |  |             |        |           |  |         | 469     |             |  |            |       |   |  |   |       |  
|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  
|Balance as of December 31, 2002                                  |  |             |        |           |  |         | 64,412  |             |  |            | 15,687 |   |  |   | (4,630 | )
|Accretion of Preferred Stock redemption obligations              |  |             |        |           |  |         | 2,290   |             |  |            | (765   | ) |  |   | (1,525 | )
|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  
|Balance as of March 28, 2003                                     |  | $           |        |           |  | $       | 66,702  |             |  | $          | 14,922 |   |  | $ | (6,155 | )
|                                                                 |  |             |         |           |  |         |         |             |  |            |        |   |  |   |        |  

Note 12  Deferred stock compensation

Pro forma fair value disclosure under SFAS No. 123 and 148

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 148, Accounting for Stock-based Compensation, Transition and Disclosure,
the Company is required to disclose the effects on reported net loss and basic
and diluted net loss per share as if the fair value based method had been
applied to all awards.

The weighted average estimated grant date fair value, as defined by SFAS
No.123, for stock options granted under its stock option plans during the
quarter ended March 28, 2003 and March 29, 2002 was $0.60 and $2.51 per share,
respectively. The weighted average estimated grant date fair value of stock
purchase rights granted pursuant to its employee stock purchase plan during the
quarter ended March 28, 2003 and March 29, 2002 was $1.26 and $2.30 per share,
respectively. The estimated grant date fair value disclosed by the Company is
calculated using the Black-Scholes option pricing model. The Black-Scholes
model, as well as other currently accepted option valuation models, was
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from its stock
option and purchase awards. These models also require highly subjective
assumptions, including future stock price volatility and expected time until
exercise, which greatly affect the calculated grant date fair value.

The following weighted average assumptions are used in the estimated grant
date fair value calculations for its stock option and purchase awards:

|                                |  |                    |      |           |  |  |      |  
|------------------------------- |  | ------------------ | ---- | --------- |  |  | ---- | -
|                                |  | Three Months Ended
|                                |  |                   
|                                |  | March 28,          |      | March 29,
|                                |  | 2003               |      | 2002     
|                                |  |                    |      |          
|Risk-free interest rate         |  |                    | 3.12 | %         |  |  | 4.46 | %
|Average expected life of option |  | 4 years            |      | 4 years  
|Dividend yield                  |  |                    | 0    | %         |  |  | 0    | %
|Volatility of common stock      |  |                    | 1.32 |           |  |  | 1.18 |  

Had the Company recorded compensation based on the estimated grant date
fair value, as defined by SFAS No. 123, for awards granted under its stock
option plans and stock purchase plan, the net loss attributable to common
stockholders and net loss per share attributable to common stockholders would
have been (in thousands, except per share data):

|          |                                                                           |  |                    |         |           |  |   |         |  
|--------- | ------------------------------------------------------------------------- |  | ------------------ | ------- | --------- |  | - | ------- | -
|          |                                                                           |  | Three Months Ended
|          |                                                                           |  |                   
|          |                                                                           |  | March 28,          |         | March 29,
|          |                                                                           |  | 2003               |         | 2002     
|          |                                                                           |  |                    |         |          
|Net loss: |                                                                           |  |                    |         |           |  |   |        
|          | Net loss attributed to common stockholders as reported                    |  | $                  | (10,803 | )         |  | $ | (58,602 | )
|          | Less: Stock-based compensation expense
determined under fair value method |  |                    | (4,554  | )         |  |   | (13,794 | )
|          |                                                                           |  |                    |         |           |  |   |        
|          | Pro forma net loss attributed to common stockholders                      |  | $                  | (15,357 | )         |  | $ | (72,396 | )
|          |                                                                           |  |                    |         |           |  |   |         |  

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|             |                                                                          |  |                    |       |           |  |   |       |  
|------------ | ------------------------------------------------------------------------ |  | ------------------ | ----- | --------- |  | - | ----- | -
|             |                                                                          |  | Three Months Ended
|             |                                                                          |  |                   
|             |                                                                          |  | March 28,          |       | March 29,
|             |                                                                          |  | 2003               |       | 2002     
|             |                                                                          |  |                    |       |          
|As reported: |                                                                          |  |                    |       |           |  |   |      
|             | Basic and diluted net loss attributable to common stockholders per share |  | $                  | (0.09 | )         |  | $ | (0.96 | )
|Pro forma:   |                                                                          |  |                    |       |           |  |   |      
|             | Basic and diluted net loss attributable to common stockholders per share |  | $                  | (0.13 | )         |  | $ | (1.19 | )

The pro forma effect on net loss and net loss per share for the quarter
ended March 28, 2003 and March 29, 2002 is not representative of the pro forma
effect on net loss in future years because it does not take into consideration
pro forma compensation expense related to grants made prior to 1996.

Note 13  Commitments and Contingencies

The Company occupies its facilities under several non-cancelable operating
lease agreements expiring at various dates through November 2010, and requiring
payment of property taxes, insurance, maintenance and utilities. Future minimum
lease payments under non-cancelable operating leases at March 28, 2003 were as
follows (in thousands):

|                                     |  |   |        | 
|------------------------------------ |  | - | ------ | 
|Nine months ending December 31, 2003 |  | $ | 7,113  | 
|Year ending December 31:             |  |   |        | 
|2004                                 |  |   | 10,051 | 
|2005                                 |  |   | 9,938  | 
|2006                                 |  |   | 8,791  | 
|2007                                 |  |   | 8,477  | 
|Thereafter                           |  |   | 19,181 | 
|                                     |  |   |        | 
|Total minimum lease payments         |  | $ | 63,551 | 
|                                     |  |   |        | 

For the year ended December 31, 2002 the Company recorded a restructuring
charge relating to the committed future lease payments for closed facilities,
net of estimated future sublease receipts, of $34.3 million, was included in
the above disclosures.

In December 2002, the Company entered into a secured credit facility, and
then subsequently amended the credit facility in March 2003. Under the secured
credit facility the Company can borrow up to $20.0 million pursuant to a
revolving loan which will mature on April 1, 2004. The amount that the Company
may borrow under the secured credit facility (Line of Credit) is determined
by a borrowing base equal to 80% of eligible accounts receivable from account
debtors who are not distributors plus 50% of eligible accounts receivable from
account debtors who are distributors. If the outstanding principal amount of
the loan exceeds the Companys borrowing base from time to time, the Company
will be required to immediately pay to the lender such excess. The Company is
required to comply with financial covenants that limit its maximum quarterly
adjusted net loss and require that it maintains unrestricted cash balances on
deposit at the lender in an amount not less than the outstanding principal
balance under the Line of Credit plus $7.5 million until December 31, 2003,
increasing to $10.0 million beginning January 1, 2004. If the Company fails to
comply with these financial covenants, the lender will be entitled to assume
collection of the Companys accounts receivable and the Company will be
required to meet a minimum tangible net worth requirement and certain other
terms of the facility will change. Obligations under the Line of Credit are
secured by a security interest on substantially all of the assets of the
Company, except for intellectual property. If the Company breaches the
financial covenants, obligations under the Line of Credit will also be secured
by a security interest on its intellectual property.

The Line of Credit requires the consent of the Companys lender in order
to incur debt, grant liens, make acquisitions or merge, make certain restricted
payments and sell assets. The events of default under the secured credit
facility include the failure to pay amounts due, including principal and
interest, within three days after it becomes due, failure to observe or perform
covenants (subject to grace periods in certain cases), bankruptcy and
insolvency events, defaults under certain of the Companys other obligations
and the occurrence of a material adverse change in the Companys business.

The Company is seeking to renegotiate a material lease on a building in
Sunnyvale, California that is in excess of the requirements of the business for
the foreseeable future. This building was vacated in July 2002, and the net
expected lease costs were included in the restructuring charge recorded in the
second quarter of 2002, totaling over $29 million through the term of the lease
in 2010, net of expected sublease proceeds. The rent rates of this lease are
substantially greater than the current local market lease rates and this unused
space represents a negative cash flow of approximately $800,000 per quarter.
The Company has not been able to sublease the building since it was vacated in
July 2002.

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To date, the building owner has not been responsive to the Companys
requests to renegotiate the lease. Since November 2002, the Company has ceased
making direct lease payments and the building owner has been utilizing the
Companys cash security deposits to cover the monthly payments. The building
owner could elect to stop using the Companys security deposits for this
purpose at any time, and the lease further obligates the Company to replenish
the security deposits. These deposits, supplemented by a letter of credit,
however, could cover lease rent payments until December 2003. The building
owner also has the option to terminate the remaining rent under the lease and
sue the Company for the net present value of the lease less the present value
of the amount for which the Company shows the building owner could have leased
the building to another party, plus the building owner s releasing costs. The
building owner has notified the Company of its defaults, but has not elected to
terminate the lease at this time. Instead, the building owner has threatened
legal action to force the Company to directly pay the monthly rent since
November 2002, as well as interest and penalties. Accordingly, the Company has
an opportunity to cure its breach by restoring the security deposits as
required by the lease, paying interest and penalties, and remaining current on
future rent obligations under the lease. In the event that the building owner
were to terminate the lease and sue the Company for breach, it would be in
breach of its Line of Credit, and its borrowing rights could be limited or
terminated. In this event, the Company would not have enough cash available to
meet the potential damages sought under the lease, and the Company could be
required to seek protection from the bankruptcy courts. At this time, the
Company cannot determine whether the building owner is willing to renegotiate
the current lease or will pursue remedies through the courts.

Note 14  Legal Proceedings

The Companys involvement in patent and International Trade Commission
litigation with respect to alleged infringement of certain of its United States
patent rights related to direct sequence wireless local area networking
technology has resulted in, and could in the future continue to result in,
substantial costs and diversion of management resources. In addition, this
litigation, if determined adversely to us, could result in the payment of
substantial damages and/or royalties or prohibitions against utilization of
essential technologies, and could materially and adversely affect our business,
financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9, 2001,
Proxim, Inc. filed to remove Compex from the ITC complaint as Compex entered
into an agreement with Proxim, Inc. to license these patents. Intersil and
Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc. sought
declaratory judgment for non-infringement, invalidity and unenforceability of
certain Agere patents, as well as damages for violation of the antitrust laws
of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

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On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a permanent injunction against Proxim, Inc. based on
alleged patent infringement counterclaims. On December 18, 2001, Proxim, Inc.
filed an answer and counterclaims seeking declaratory judgments for
non-infringement, invalidity and unenforceability of the four asserted Symbol
patents, injunctive and monetary relief for Symbols infringement of a Proxim,
Inc. patent, monetary relief for Symbols false patent marking, and injunctive
and monetary relief for Symbols unfair competition under the Lanham Act,
common law unfair competition and tortious interference.

On August 5, 2002, in connection with the Companys acquisition of the
802.11 WLAN systems business from Agere, the Company announced that we had
entered into a cross-license agreement with Agere whereby, in part, the Company
and Agere agreed to settle the pending patent-related litigation between the
two companies.

On March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.
As part of the confidential settlement agreement, the two companies have
entered into a patent cross license agreement for their respective patent
portfolios and Intersil agreed to make a one-time payment of $6.0 million to
the Company, see Note 5 to the condensed consolidated financial
statements for details.

The Company is party to disputes, including legal actions, with a number
of suppliers and vendors. These disputes relate primarily to excess materials
and order cancellation claims that resulted from the declines in demand for our
products during 2001 and 2002 and the commensurate reductions in manufacturing
volumes. The Company has recorded reserves related to these disputes to the
extent that management believes that the Company is liable. The Company intends
to vigorously defend itself in these matters.

The results of any litigation matters are inherently uncertain. In the
event of any adverse decision in the described legal actions or disputes, or
any other related litigation with third parties that could arise in the future
with respect to patents or other intellectual property rights relevant to our
products, the Company could be required to pay damages and other expenses, to
cease the manufacture, use and sale of infringing products, to expend
significant resources to develop non-infringing technology, or to obtain
licenses to the infringing technology. These matters are in the early stages of
litigation and, accordingly, the Company cannot make any assurance that these
matters will not materially and adversely affect the Companys business,
financial condition, operating results, or cash flows.

Note 15  Supplemental Cash Flow Data

The Company acquired cash of $28,975,000 in connection with its merger
with Proxim, Inc. in the first quarter ended March 29, 2002, described below
(in thousands):

|                                             |  |                    |          |  
|-------------------------------------------- |  | ------------------ | -------- | -
|                                             |  | Three months ended
|                                             |  | March 29, 2002    
|                                             |  |                   
|Purchase price                               |  | $                  | 172,589  |  
|Common stock issued                          |  |                    | (158,589 | )
|Accrued transactions costs                   |  |                    | (7,014   | )
|                                             |  |                    |          |  
|Cash paid                                    |  |                    | 6,986    |  
|Less: cash acquired                          |  |                    | (35,961  | )
|                                             |  |                    |          |  
|Net cash received from business combinations |  | $                  | (28,975  | )
|                                             |  |                    |          |  

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

Except for any historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q contain certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the Companys financial
condition, results of operations, cash flows, revenues, financing plans,
business strategies and market acceptance of its products. The words
anticipate, believe, estimate, expect, plan, intend, and similar
expressions, are intended to identify these forward-looking statements. These
forward-looking statements are found at various places throughout this
Quarterly Report. We caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date they were made. We
do not undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report or to reflect the occurrence of unanticipated events.
Forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to those discussed below under Risk Factors and elsewhere
in this Report.

The following discussion should be read together with our financial
statements, notes to those financial statements included elsewhere in this
Quarterly Report on Form 10-Q, our financial statements, notes to those
financial statements and Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Companys Annual Report on Form 10-K
filed with the Securities and Exchange Commission.

Overview

Proxim Corporation is the company created by the March 26, 2002 merger of
Proxim, Inc. and Western Multiplex Corporation. In accordance with accounting
principles generally accepted in the United States of America, the results of
operations for the periods presented include the results of the merged or
acquired businesses beginning on the respective dates of completion.

Western Multiplex was founded in 1979 in Sunnyvale, California as a vendor
of radio components and related services. In 1992, Western Multiplex changed
its strategy, becoming a designer and manufacturer of broadband wireless
systems and launched our Lynx broadband wireless products. These point-to-point
systems are primarily used by wireless operators to connect their base stations
to other base stations and to existing wire line networks. In 1999, Western
Multiplex introduced its Tsunami point-to-point broadband wireless systems,
which primarily enable service providers, businesses and other enterprises to
expand or establish private networks by bridging Internet traffic among
multiple facilities. Based on Western Multiplexs core technologies and the
technology acquired through its purchase of WirelessHome Corporation in March
2001, Western Multiplex has developed point-to-multipoint systems that enable
service providers, businesses and other enterprises to connect multiple
facilities within a geographic area to a central hub. Western Multiplex began
shipping its first generation of these products at the end of the fourth
quarter of 2001. In March 2002, Western Multiplex merged with Proxim, Inc.
located in Sunnyvale, California which designs, manufactures and markets high
performance WLAN and building-to-building network products based on RF
technology and changed the Western Multiplex name to Proxim Corporation. In
April 2002, we acquired nBand Communications Inc., a start-up developer of next
generation advanced application specific integrated circuits, or ASICs
technology.

On August 5, 2002, we completed our acquisition of the 802.11 WLAN systems
business of Agere Systems, including its ORiNOCO product line, for $65 million
in cash. To finance the acquisition, Warburg Pincus Private Equity VIII, L.P.,
Broadview Capital Partners L.P. and affiliated entities agreed to collectively
invest $75.0 million in the Company. These investors received 1,640,000 shares
of Series A mandatorily redeemable convertible preferred stock (Preferred
Stock) in the amount of $41.0 million, with a conversion price of
approximately $3.06 per share, and warrants to purchase approximately 6.7
million shares of common stock valued at approximately $12.3 million. The value
of the warrants was recorded as a reduction of the Preferred Stock carrying
value and recorded as additional paid-in capital. During the quarter ended
September 27, 2002, a deemed preferred stock dividend representing the
beneficial conversion feature of the Preferred Stock of approximately $2.7
million was reflected in the determination of the loss attributable to common
stockholders. The investors were also issued $34.0 million of convertible
notes. Upon the receipt of approval of our stockholders at a special meeting
held on October 8, 2002, the notes issued to these investors were converted
into 1,360,000 shares of Preferred Stock and warrants to purchase approximately
5.6 million shares of common stock valued at approximately $1.6 million. The value of the
warrants were recorded as a reduction of the Preferred Stock carrying value and
recorded as additional paid-in capital in the quarter ended December 31, 2002.
In total, the investors were granted warrants to acquire 12,271,345 shares of
common stock for approximately $3.06 per share valued at approximately $14.0 million. The
Preferred Stock and warrants issued to the investors represent approximately
25% of our outstanding common stock on an as-converted and as-exercised basis
including dividends. In addition, in connection with the transaction, we
entered into a patent cross-license agreement and settled all outstanding
patent-related

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litigation with Agere, and have entered into a three-year strategic supply
agreement, pursuant to which Agere will provide 802.11 chips, modules and cards
to us at specified prices.

The financial statements include the results of acquired subsidiaries from
their respective dates of acquisition.

Revenue.We generate revenue primarily from the sale of our Lynx and
Tsunami systems for our WWAN product line, and the sale of 802.11a standards
based products, acquired in the Proxim, Inc. acquisition, and ORiNOCO products
acquired from Agere, for our WLAN product line. We introduced the Tsunami
products during the fourth quarter of 1999. While our Tsunami products and Lynx
products have similar pricing for comparable models, our Lynx product line
contributes the largest part of our revenue. We began selling our Tsunami
point-to-multipoint systems in 2001. We also generate a small percentage of our
revenue from the sale of services and parts and rentals of our systems. We sell
worldwide to service providers, businesses and other enterprises directly
through our sales force and indirectly through distributors, value-added
resellers and system integrators. Shipments to certain distributors are made
under terms allowing certain rights of return, protection against subsequent
price declines on our products held by our distributors and co-op marketing
programs. Product revenue on shipments to distributors for both WWAN and WLAN
products which have rights of return and price protection is deferred until
shipment to the end customers by the distributors.

Effective June 29, 2002, we began to recognize sales of our WWAN products
to distributors with rights of return upon shipment by the distributors to the
end user customer. Formerly, we recognized revenue for sales of WWAN products
to distributors with rights of return upon shipment to the distributor and
provided reserves for the estimated amount of product returns. The combination
of the changes resulting from the acquisition of the Agere Systems 802.11 WLAN
business and the adoption of one uniform method is consistent with our plans to
sell bundled and integrated WLAN and WWAN products. This change in accounting
methodology was treated as a change in estimate, and was made on a prospective
basis starting in the third quarter of 2002. Revenue from services, such as
pre-installation diagnostic testing and product repair services, is recognized
over the period for which the services are performed, which is typically less
than one month. Revenue from product rentals is recognized rateably over the
period of the rental.

Revenue consists of product revenues, reduced by estimated sales returns
and allowances, and license revenue related to the settlement of outstanding
patent litigation in the first quarter of 2003. Provisions for estimated sales
returns and allowances, which are based on historical trends, contractual terms
and other available information, are recorded at the time revenue is
recognized.

Our sales force focuses on key strategic accounts and also develops
relationships with end users that purchase our products through distributors
and value-added resellers. Distributors sell our products to end users, and
value-added resellers not only sell our products to end users, but also assist
end users in network design, installation and testing. We market our products
through strategic relationships we have with systems integrators, which design
and install networks that incorporate our systems. Additionally, we sell
directly to OEM customers. We sell both design-in products for integration into
their wireless computing platforms and branded products as private label
models. Any significant decline in direct sales to end users or in sales to our
distributors or value-added resellers, or the loss of any of our distributors,
value-added resellers or OEM customers, could materially adversely affect our
revenue.

During 2002, we sold our products to approximately 170 customers in 45
countries. International sales accounted for approximately 42% and 38% of our
total revenue in the three months ended March 28, 2003 and the year ended
December 31, 2002, respectively. We expect international sales to vary but
remain significant as a percentage of overall sales in the future. Currently,
all of our sales are denominated in U.S. dollars. Accordingly, we are not
directly exposed to currency exchange risks other than the risk that exchange
rate fluctuations may make our products more expensive for customers outside
the United States and, as a result, could decrease international sales. In
addition, we face risks inherent in conducting global business. These risks,
which are more fully described herein, include extended collection time for
receivables, reduced ability to enforce obligations and reduced protection for
our intellectual property.

As we have increased sales through our distributors and value-added
resellers beginning from the quarter ended March 29, 2002, we have experienced
a decline in the average selling prices of our products. This is because the
prices of the products that we sell indirectly through distributors and
value-added resellers are typically lower than the prices of the products we
sell directly through our sales force to end users. We have also lowered our
prices for older products as we introduce additional products that provide
faster data rates. These newer products have higher prices than our older
products. Our international sales also have lower average selling prices when
compared to our United States and Canadian selling prices. This is primarily
due to our higher reliance on distributors and value-added resellers for
international sales, and also because our lower speed products, with
significantly lower prices, are being sold in larger quantities internationally
than domestically. If indirect sales and sales in our international markets
increase, we would expect that our average selling prices to further decline.

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Cost of revenue.Cost of revenue consists primarily of outsourced
manufacturing costs, component costs, labor and overhead costs, costs of
acquiring finished parts from original equipment manufacturers and original
design manufacturers, customer service and warranty costs and the provision for
excess and obsolete invetnory. We currently outsource the majority of our
manufacturing and supply chain management to a limited number of independent
contract manufacturers, who obtain components for our products from suppliers.
Accordingly, a significant portion of our cost of revenue consists of payments
to these contract manufacturers and component suppliers. The remainder of our
cost of revenue is related to our in-house manufacturing operations, which
consist primarily of quality control, final assembly, testing and product
integration. We expect to realize lower per unit product costs as we continue
to outsource more of our in-house manufacturing as well as have our products
produced at lower cost off-shore locations. However, we cannot assure you when
or if cost reductions will occur. The failure to achieve these cost reductions
could materially adversely affect our gross margins and operating results.

Gross profit.Our gross profit is affected by both the average selling
prices of our systems and our cost of revenue. Historically, decreases in our
average selling prices have generally been offset by reductions in our per unit
product cost. We cannot assure you, however, that we will achieve any
reductions in per unit product cost in the future or that any reductions will
offset a reduction in our average selling prices. Gross profit will be affected
by a variety of factors, including manufacturing efficiencies, the degree to
which our manufacturing is outsourced, the location of manufacturing, cost
reduced product designs, future manufacturing licenses of our products, product
mix, competitive pricing pressures, the degree of customization of individual
products required by OEM customers and component and assembly costs.

Research and development.Research and development expenses consist
primarily of salaries and related personnel expenses, prototype development
expenses, consultant fees and allocated overhead related to the design,
development, testing and enhancement of our products and underlying
technologies. We expense all research and development expenses as incurred. We
expect to decrease our research and development expenses during the next two
quarters in order to reduce our breakeven point.

Selling, general and administrative.Selling, general and administrative
expenses consist primarily of salaries, commissions, product marketing, sales
support functions, advertising, trade show and other promotional expenses and
allocated overhead. We intend to decrease our selling, general and
administrative expenditures during the next two quarters in order to reduce our
breakeven point.

Stock option programs.We have implemented stock option programs for
employees and members of our board of directors to attract and retain highly
skilled and qualified business and technical personnel. Prior to our initial
public offering, we recorded deferred stock compensation on certain options for
the difference between the exercise price and the deemed fair value of our
common stock on the date the stock options were granted. This amount was
included as a reduction of stockholders equity and was amortized by charges to
operations over the vesting period. The amortization expense related to options
awarded to employees in all operating expense categories. As of December 31,
2002, all deferred stock compensation was amortized, and accordingly, no
amortization is required subsequent to December 31, 2002.

Critical Accounting Policies, Judgments and Estimates

Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to customer programs and incentives, product returns, bad debts,
inventories, equity investments, goodwill, intangible assets, income taxes,
financing operations, warranty obligations, excess component order cancellation
costs, restructuring, long-term service contracts, pensions and other
post-retirement benefits, and contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements.

Revenue Recognition

Effective June 29, 2002, we began to recognize sales of our WWAN products
to distributors with rights of return upon shipment by the distributors to the
end user customer. Formerly, we recognized revenue for sales of WWAN products
to distributors with rights

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of return upon shipment to the distributor and provide reserves for the
estimated amount of product returns. The combination of the changes resulting
from the then-proposed acquisition of the Agere Systems 802.11 WLAN business
and the adoption of one uniform method was consistent with our plans to sell
bundled and integrated WLAN and WWAN products as we have been using this
methodology on our WLAN products following the merger with Proxim, Inc. on
March 26, 2002. This change in accounting methodology was treated as a change
in estimate, and was made on a prospective basis starting in the third quarter
of 2002. Deferred gross profit on these distributors sales at March 28, 2003
was $6.0 million. In addition to the deferral of product revenue, we reported
accounts receivable net of deferred revenue and carried the value of the
related products as consigned inventory. As of March 28, 2003, accounts
receivable was reduced by $15.5 million to $29.2 million and we recorded
consigned inventory of $9.5 million which increased total inventory to $39.8
million.

Allowance for Doubtful Accounts, Returns and Discounts

We record estimated reductions to revenue for sales return, customer
programs and incentive offerings including special pricing agreements, price
protection and promotions. If market conditions were to decline, we may take
actions to increase customer incentive offerings possibly resulting in an
incremental reduction of revenue at the time the incentive is offered.

We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

Warranty Provision

We provide for the estimated cost of product warranties at the time
revenue is recognized. While we engage in extensive product quality programs
and processes, including actively monitoring and evaluating the quality of our
component suppliers, our warranty obligation is affected by product failure
rates and material usage and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage or service
delivery costs differ from our estimates, revisions to the estimated warranty
liability would be required.

Valuation of Inventories

We write down our inventory for estimated excess and obsolete or
unmarketable inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and
market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs, including adverse
purchase order commitments, may be required.

Valuation of Minority Interest Investments

We hold minority interests in companies having operations or technology in
areas within our strategic focus, one of which is publicly traded and has
highly volatile share prices. We record an investment impairment charge when we
believe an investment has experienced a decline in value that is other than
temporary. Future adverse changes in market conditions or poor operating
results of underlying investments could result in losses or an inability to
recover the carrying value of the investments that may not be reflected in an
investments current carrying value, thereby possibly requiring an impairment
charge in the future.

Valuation of Deferred Tax Assets

We record a valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While we have considered
future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event we were to
determine that we would be able to realize our deferred tax assets in the
future in excess of our recorded amount, an adjustment to the deferred tax
asset would increase income in the period such determination was made.
Likewise, should we determine that we would not be able to realize all or part
of our net deferred tax asset in the future, an adjustment to the deferred tax
asset would be charged to income in the period such determination was made.

Restructuring Costs and Impairment of Goodwill and Intangible Assets

In response to changes in industry and market conditions, we may be
required to strategically realign our resources and consider restructuring,
disposing of, or otherwise, exiting businesses. Any decision to limit
investment in or to dispose of or otherwise, exit

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businesses may result in the recording of special charges, such as
inventory and technology related write-offs and workforce reduction costs,
charges relating to consolidation of excess facilities, or claims from third
parties who were resellers or users of discontinued products. Estimates
relating to the liabilities for excess facilities are affected by changes in
real estate market conditions. Estimates with respect to the useful life or
ultimate recoverability of our carrying basis of assets, including purchased
intangible assets, could change as a result of such assessments and decisions.
Additionally, we are required to perform goodwill impairment tests on an annual
basis and between annual tests in certain circumstances. There can be no
assurance that future goodwill impairment tests will not result in a charge to
earnings.

Patent Litigation and Infringement Costs

We have been involved in litigation in the normal course of business. The
results of any litigation matter are inherently uncertain. In the event of any
adverse decision in litigation with third parties that was pending as of March
28, 2003 and those that could arise in the future with respect to patents,
other intellectual property rights relevant to our products and defective
products, we could be required to pay damages and other expenses, to cease the
manufacture, use and sale of infringing products, to expand significant
resources to develop non-infringing technology, or to obtain licenses to the
infringing technology. These charges may occur in any particular quarter
resulting in variability in our operating results.

Results of Operations

The following table provides results of operations data as a percentage of
revenue for the periods presented:

|                                                             |                                             |                          |               |      |                    |       |           |       |       |       | 
|------------------------------------------------------------ | ------------------------------------------- | ------------------------ | ------------- | ---- | ------------------ | ----- | --------- | ----- | ----- | ----- | 
|                                                             |                                             |                          |               |      | Three Months Ended
|                                                             |                                             |                          |               |      |                   
|                                                             |                                             |                          |               |      | March 28,          |       | March 29,
|                                                             |                                             |                          |               |      | 2003               |       | 2002     
|                                                             |                                             |                          |               |      |                    |       |          
|Product revenue                                              |                                             |                          | 85.0          | %    |                    |       | 100.0     | %    
|License revenue                                              |                                             |                          | 15.0          |      |                    |       |          |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|                                                             |                                             |                          | Total revenue |      |                    | 100.0 |           |       |       | 100.0 | 
|Cost of revenue                                              |                                             |                          | 52.3          |      |                    |       | 57.7      |      
|Restructuring provision for excess and obsolete inventory    |                                             |                          |              |      |                    |       | 49.8      |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|                                                             |                                             | Gross profit (loss)      |               |      | 47.7               |       |           |       | (7.5  | )    
|                                                             |                                             |                          |               |      |                    |       |           |      
|Operating expenses:                                          |                                             |                          |               |      |                    |       |           |      
|                                                             | Research and development                    |                          |               | 19.7 |                    |       |           | 17.9  |      
|                                                             | Selling, general and administrative         |                          |               | 30.2 |                    |       |           | 34.4  |      
|                                                             | Legal expense                               |                          |               | 7.5  |                    |       |           |      |      
|                                                             | Amortization of intangible assets           |                          |               | 13.7 |                    |       |           | 0.6   |      
|                                                             | Amortization of deferred stock compensation |                          |               |     |                    |       |           | 1.0   |      
|                                                             | Restructuring charges                       |                          |               |     |                    |       |           | 139.2 |      
|                                                             | In-process research and development         |                          |               |     |                    |       |           | 17.8  |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|                                                             |                                             | Total operating expenses |               |      | 71.1               |       |           |       | 210.9 |      
|Loss from operations                                         |                                             |                          | (23.4         | )    |                    |       | (218.4    | )    
|Interest income, net                                         |                                             |                          | 0.2           |      |                    |       | 0.5       |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|Loss before income taxes                                     |                                             |                          | (23.2         | )    |                    |       | (217.9    | )    
|Income tax provision                                         |                                             |                          |              |      |                    |       | 12.7      |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|Net loss                                                     |                                             |                          | (23.2         | )    |                    |       | (230.6    | )    
|Accretion of Series A Preferred Stock redemption obligations |                                             |                          | (3.8          | )    |                    |       |          |      
|                                                             |                                             |                          |               |      |                    |       |           |      
|Net loss attributable to common stockholders                 |                                             |                          | (27.0         | )%   |                    |       | (230.6    | )%   
|                                                             |                                             |                          |               |      |                    |       |           |      

Comparison of the Three Months Ended March 28, 2003 and March 29, 2002

Revenue

We classify our products into two product lines: Wireless Wide Area
Network, or WWAN, product line, and; Wireless Local Area Network, or WLAN,
product line. The WWAN product line includes point-to-point Lynx and Tsunami
products and point-to-multipoint Tsunami products. The WLAN product line
includes 802.11a and ORiNOCO products and license revenue of $6 million related
to the settlement agreement with Intersil. Prior to the March 26, 2002 merger
with Proxim, Inc., the Company did not have a WLAN product line. Historical
WLAN revenue prior to March 26, 2002 of the former Proxim, Inc. and prior to
August 5, 2002 for the ORiNOCO products acquired from Agere are not reported in
the table below.

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Revenue information by product line is as follows (in thousands):

|             |               |      |                    |        |              |      |           |        |  |   |        |        | 
|------------ | ------------- | ---- | ------------------ | ------ | ------------ | ---- | --------- | ------ |  | - | ------ | ------ | 
|             |               |      | Three Months Ended
|             |               |      |                   
|             |               |      | March 28,          |        | December 31, |      | March 29,
|Product Line |               | 2003 |                    | 2002   |              | 2002
|             |               |      |                    |        |              |     
|WWAN         |               | $    | 16,607             |        |              | $    | 26,156    |        |  | $ | 24,350 |       
|WLAN         |               |      | 23,422             |        |              |      | 23,795    |        |  |   | 1,064  |       
|             |               |      |                    |        |              |      |           |        |  |   |        |       
|             | Total revenue |      | $                  | 40,029 |              |      | $         | 49,951 |  |   | $      | 25,414 | 
|             |               |      |                    |        |              |      |           |        |  |   |        |       

We sell our products worldwide through a direct sales force, independent
distributors, and value-added resellers. We currently operate in two geographic
regions: North America and International. Revenue outside of the North America
is primarily export sales denominated in United States dollars. Disaggregated
financial information regarding our revenue by geographic region is as follows
(in thousands):

|                  |               |      |                    |        |              |      |           |        |  |   |        |        | 
|----------------- | ------------- | ---- | ------------------ | ------ | ------------ | ---- | --------- | ------ |  | - | ------ | ------ | 
|                  |               |      | Three Months Ended
|                  |               |      |                   
|                  |               |      | March 28,          |        | December 31, |      | March 29,
|Geographic Region |               | 2003 |                    | 2002   |              | 2002
|                  |               |      |                    |        |              |     
|North America     |               | $    | 23,122             |        |              | $    | 33,199    |        |  | $ | 14,132 |       
|International     |               |      | 16,907             |        |              |      | 16,752    |        |  |   | 11,282 |       
|                  |               |      |                    |        |              |      |           |        |  |   |        |       
|                  | Total revenue |      | $                  | 40,029 |              |      | $         | 49,951 |  |   | $      | 25,414 | 
|                  |               |      |                    |        |              |      |           |        |  |   |        |       

Revenue increased 57.5% from $25.4 million in the first quarter of 2002 to
$40.0 million in the first quarter of 2003. Revenue increased primarily due to
the contribution of sales of WLAN products sales totaling $16.4 million
acquired in both the merger with Proxim, Inc. on March 26, 2002 and the
acquisition of the ORiNOCO product line from Agere on August 5, 2002, and the
license revenue of $6.0 million from the Intersil settlement,
see Note 5 and 14 to the condensed consolidated financial
statements for details. This was partially offset by a decrease in
WWAN product sales of $7.7 million due to the impact of the weak U. S. economy
compounded by war-delayed purchasing decisions.

Revenue decreased 19.9% from $50.0 million in the three months ended
December 31, 2002 to $40.0 million in the three months ended March 28, 2003.
Revenue decreased primarily due to the decrease in WWAN and WLAN product sales
of $15.9 million due to the impact of the weak U. S. economy compounded by
war-delayed purchasing and partially offset by the $6.0 million settlement with
Intersil related to license revenue.

Cost of revenue

Cost of revenue increased 42.7% from $14.7 million in the first quarter
2002 to $20.9 million in the first quarter of 2003. As a percentage of
revenue, cost of revenue decreased from 57.7% in the first quarter of 2002 to
52.3% in the first quarter of 2003. Included in revenue in the first quarter of
2003 was the $6.0 million settlement with Intersil related to license revenue.
Excluding license revenue as a percentage of product revenue, non-GAAP cost of
revenue increased from 57.7% in the first quarter of 2002 to 61.5% in the first
quarter of 2003. The increase in cost of revenue as a percentage of product revenue for the first quarter of 2003 compared to the first quarter of
2002 was primarily attributable to the contribution of sales from WLAN products
acquired in both the merger with Proxim, Inc. and the acquisition of the 802.11
WLAN systems business from Agere Systems. WLAN products generally carry lower
gross margins as a percentage of revenue than WWAN products.

Restructuring provision for excess and obsolete inventory

We recorded a provision for excess and obsolete inventory, including
purchase commitments, totaling $12.7 million in the first quarter of 2002 as
part of our restructuring charge, of which $7.7 million related to excess and
obsolete inventory and $5.0 million related to purchase commitments. To
mitigate the component supply constraints that have existed in the past, we
built inventory levels for certain components with long lead times and entered
into longer-term commitments for certain components. The excess inventory
charges were due to the following factors:



| |  |  | A sudden and significant decrease in demand for certain Lynx and Tsunami license-exempt point-to-point products;                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Notification from customers that they would not be ordering as much as they had previously indicated;                                                 
|
| |  |  | Managements strategy to discontinue the Lynx and Tsunami
point-to-point licensed products in order to concentrate on the
license-exempt products; and

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| |  |  | Managements strategy to discontinue certain Lynx and Tsunami
license-exempt products in order to concentrate on selling next
generation Lynx and Tsunami license-exempt products.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to these factors, inventory levels exceeded the our requirements based
on current 12-month sales forecasts. The additional excess and obsolete
inventory charge was calculated based on the inventory levels in excess of the
estimated 12-month demand for each specific product family. We do not currently
anticipate that the excess inventory subject to this reserve will be used at a
later date based on our current 12-month demand forecast. We use a 12-month
demand forecast because the wireless communications industry is characterized
by rapid technological changes such that if we have not sold a product after a
12-month period it is unlikely that the product will be sold.

The following is a summary of the movements in the reserve for excess and
obsolete inventory for the three months ended March 28, 2003 (in thousands):

|                                |  |   |        |  
|------------------------------- |  | - | ------ | -
|Balance as of December 31, 2002 |  | $ | 32,845 |  
|Inventory scrapped              |  |   | (1,811 | )
|                                |  |   |        |  
|Balance as of March 28, 2003    |  | $ | 31,034 |  
|                                |  |   |        |  

Research and development

Research and development expenses increased 73.3% from $4.5 million in the
first quarter of 2002 to $7.9 million in the first quarter of 2003. The
increases in research and development expense was primarily attributable to the
cost of increased personnel, including employees added as a result of both the
Proxim, Inc. merger and the acquisition of the 802.11 WLAN systems business of
Agere, prototype spending for the development of new products and enhancements
to existing products. As a percentage of revenue, research and development
expense increased from 17.9% in the first quarter of 2002 to 19.7% in the first
quarter of 2003. The percentage increase was primarily due to increased
personnel expenses.

Selling, general and administrative

Selling, general and administrative expenses increased 38.2% from $8.8
million in the first quarter of 2002 to $12.1 million in the first quarter of
2003. The increase in selling, general and administrative expense was primarily
attributable to increases in sales and marketing personnel expenses, including
employees added as a result of both the Proxim, Inc. merger and the acquisition
of the 802.11 WLAN systems business of Agere, advertising, tradeshow, and
public relations expenses. As a percentage of revenue, selling, general and
administrative expenses decreased from 34.4% in the first quarter of 2002 to
30.2% in the first quarter of 2003. The percentage decrease was primarily due
to an increase in revenue offset by increased personnel and program expenses.

Amortization of intangible assets

Amortization of intangible assets increased from $144,000 in the first
quarter of 2002 to $5.5 million in the first quarter of 2003. Amortization of
intangible assets increased primarily due to the intangible assets acquired
from both the merger with Proxim, Inc. on March 26, 2002 and the acquisition of
the 802.11 WLAN systems business of Agere on August 5, 2002.

Amortization of deferred stock compensation

Amortization of deferred stock compensation was $245,000 in the first
quarter of 2002. All deferred stock compensation was amortized in 2002 and
accordingly no amortization of deferred stock compensation was recorded in the
quarter ended March 28, 2003.

Restructuring charges

During 2002, we recorded $43.2 million of restructuring charges, including
$35.4 million, $3.6 million, $2.3 million and $1.9 million in the first,
second, third and fourth quarters of 2002, respectively, related to closure of
certain facilities, discontinued product lines and severance pay. The charges
included $40.8 million of cash provisions, which included severance of $7.4
million for 194 employees, $33.1 million related to excess facilities and for
future lease commitments and exit costs related to the closure of four
facilities and $0.3 related to consulting fees. The charge also included $2.4
million of non-cash provisions related to fixed assets that will no longer be
used at the facilities.

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No restructuring charges were recorded in the quarter ended March 28,
2003. However, as a result of the reduced demand for our products during the first
quarter of 2003 and the limited business visibility, we are planning to take
actions to reduce our operating expenses during the second quarter of 2003, and
decrease our quarterly revenue breakeven point. Management is also reviewing
the revenue outlook for the second and third quarters of 2003, including the
expected product mix and gross margins, and evaluating alternative expense
savings measures in an effort to return us to profitability during
these periods.
This review, evaluation and implementation will be completed by the second
quarter of 2003 and in accordance with SFAS No. 146 will result in a
significant restructuring charge related primarily to severance
payments and
closure of certain facilities.

The following table summarizes the restructuring activities in 2002 and
the three months ended March 28, 2003 (in thousands):

|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|---------------------------------- |  | ---------- | ------ | ---------- |  | ----- | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|                                   |  | Severances |        | Facilities |  | Other |        | Total
|                                   |  |            |        |            |  |       |        |      
|Balance as of December 31, 2001    |  | $          | 198    |            |  | $     | 52     |       |  | $ | 180    |   |  | $ | 430     |  
|Reclassifications among categories |  |            |       |            |  |       | 180    |       |  |   | (180   | ) |  |   |        |  
|Balance acquired with Proxim, Inc. |  |            |       |            |  |       | 1,066  |       |  |   |       |   |  |   | 1,066   |  
|Provision charged to operations    |  |            | 7,395  |            |  |       | 33,080 |       |  |   | 2,702  |   |  |   | 43,177  |  
|Non-cash charges utilized          |  |            |       |            |  |       |       |       |  |   | (2,405 | ) |  |   | (2,405  | )
|Cash payments                      |  |            | (7,593 | )          |  |       | (3,928 | )     |  |   | (297   | ) |  |   | (11,818 | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of December 31, 2002    |  |            |       |            |  |       | 30,450 |       |  |   |       |   |  |   | 30,450  |  
|Cash payments                      |  |            |       |            |  |       | (959   | )     |  |   |       |   |  |   | (959    | )
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  
|Balance as of March 28, 2003       |  | $          |       |            |  | $     | 29,491 |       |  | $ |       |   |  | $ | 29,491  |  
|                                   |  |            |        |            |  |       |        |       |  |   |        |   |  |   |         |  

In-process research and development

The amount expensed to purchased in-process research and development, or
IPR&D, in the first quarter of 2002 related to 802.11a and HomeRF 2.0 WLAN
products in development by Proxim, Inc. at the time of the merger, which had
not yet reached technological feasibility and had no alternative future use. As
of the valuation date, Proxim, Inc. was developing 802.11a WLAN adapter in PCI
and Mini PCI form factors and a connectorized access point along with HomeRF
2.0 voice data module, voice data gateway and voice data gateway and answer
machine. These products are under development and require additional software
development including NT 4.0 and Macintosh drivers along with additional
functional testing. The value of the IPR&D was determined by estimating the net
cash flows from potential sales of the products resulting from completion of
this project, reduced by the portion of net cash flows from the revenue
attributable to core and developed technology. The resulting cash flows were
then discounted back to their present value using a discount rate of 30%. At
the time of the acquisition, the fair value assigned to the IPR&D totaled $4.5
million and was expensed at the time of the acquisition. No IPR&D charges were
recorded in the quarter ended March 28, 2003.

Interest income, net

Interest income, net, decreased from $131,000 in the first quarter of 2002
to $99,000 in the first quarter of 2003 due to lower applicable return rates
and lower cash and investments balances.

Income tax provision

The income tax provision for the three months ended March 29, 2002 is
primarily due to establishing a valuation allowance to offset deferred tax
assets brought forward from December 31, 2001. As a result of the losses
incurred there is significant uncertainty whether a benefit from the deferred
tax assets will be realized. Our ability to carry back losses to prior years
has allowed us to claim income tax refunds totaling $10.4 million, of which
$8.7 million was received through March 28, 2003. Accordingly, we believe that
it is necessary to establish a full valuation allowance of $11.3 million for
our deferred tax assets.

Accretion of Series A Preferred Stock redemption obligations

The accretion of Series A Preferred Stock represents the quarterly
adjustments to the carrying value of the Preferred Stock, on an
effective-interest basis, so that the carrying value will equal the redemption
amount at the earliest redemption date. The accretion was recorded to increase
the net loss attributable to common stockholders.

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Liquidity and Capital Resources

Cash and cash equivalents decreased by $1.1 million from $16.5 million at
December 31, 2002 to $15.4 million at March 28, 2003. Cash and cash equivalents
increased by $26.8 million from $16.6 million at December 31, 2001 to $43.4
million at March 29, 2002

Net cash used in operating activities was $0.9 million for three months
ended March 28, 2003, primarily due to the net loss after the effect of
non-cash charges and an increase in inventory, partially offset by a decrease
in accounts receivable and other assets, and an increase in accounts payable
and accrued liabilities. Net cash used in operating activities was $4.8 million
in the three months ended March 29, 2002 primarily due to net loss after the
effect of non cash charges, an increase in inventories, accounts receivable and
other assets, partially offset by an increase in accounts payable and accrued
liabilities.

Net cash used in investing activities was $350,000 in the three months
ended March 28, 2003 which represents capital spending. Net cash provided by
investing activities was $31.5 million in the three months ended March 29, 2002
due to $29.0 million in cash provided by merger with Proxim, Inc. and $3.1
million in net proceeds from the sale of investment securities partially offset
by $0.6 million in capital spending.

Net cash provided by financing activities was $136,000 in the three months
ended March 28, 2003 due to issuance of common stock as a result of the
exercise of employee stock options and the employee stock purchase plan
purchases. Net cash provided by financing activities was $154,000 in the three
months ended March 29, 2002 due to issuance of common stock as a result of the
exercise of employee stock options and the employee stock purchase plan
purchases and proceeds of notes receivable.

We occupy our facilities under several non-cancelable operating lease
agreements expiring at various dates through November 2010, and require payment
of property taxes, insurance, maintenance and utilities. Future payments under
contractual obligations as of March 28, 2003, were as follows (in thousands):

|                                       |  |                        |         |           |  |       |       |       |  |        |        |  |  |   |       |  |  |   |         | 
|-------------------------------------- |  | ---------------------- | ------- | --------- |  | ----- | ----- | ----- |  | ------ | ------ |  |  | - | ----- |  |  | - | ------- | 
|                                       |  | Payments due by period
|                                       |  |                       
|                                       |  | Total amounts          |         | Less than |  | 1-3   |       | 4-5   |  | Over 5
|                                       |  | Committed              |         | 1 year    |  | years |       | years |  | years 
|                                       |  |                        |         |           |  |       |       |       |  |       
|Operating leases                       |  | $                      | 63,551  |           |  | $     | 7,113 |       |  | $      | 10,051 |  |  | $ | 9,938 |  |  | $ | 36,449  | 
|Purchase order commitments             |  |                        | 1,509   |           |  |       | 1,509 |       |  |        |       |  |  |   |      |  |  |   |        | 
|Redemption of Series A Preferred Stock |  |                        | 106,899 |           |  |       |      |       |  |        |       |  |  |   |      |  |  |   | 106,899 | 
|                                       |  |                        |         |           |  |       |       |       |  |        |        |  |  |   |       |  |  |   |         | 
|                                       |  | $                      | 171,959 |           |  | $     | 8,622 |       |  | $      | 10,051 |  |  | $ | 9,938 |  |  | $ | 143,348 | 
|                                       |  |                        |         |           |  |       |       |       |  |        |        |  |  |   |       |  |  |   |         | 

For the year ended December 31, 2002, we recorded a restructuring charge
related to the committed future lease payments for closed facilities, net of
estimated future sublease receipts of $34.3 million was included in the above
disclosures. As of March 28, 2003, we had unconditional purchase order
commitments of $1.5 million for excess and obsolete inventory, which were
included as accrued liabilities.

We are required to redeem all outstanding shares of Series A Preferred
Stock for cash in August 2007 if they have not yet been previously converted
into Common Stock.

In December 2002, we entered into a secured credit facility, and we
subsequently amended the credit facility in March 2003. Under the secured
credit facility we can borrow up to $20.0 million pursuant to a revolving loan
which will mature on April 1, 2004. The amount that we may borrow under the
secured credit facility is determined by a borrowing base equal to 80% of
eligible accounts receivable from account debtors who are not distributors plus
50% of eligible accounts receivable from account debtors who are distributors.
If the outstanding principal amount of the loan exceeds our borrowing base from
time to time, we will be required to immediately pay to the lender such excess.
We are required to comply with financial covenants that limit our maximum
quarterly adjusted net loss and require that we maintain unrestricted cash
balances on deposit at the lender in an amount not less than the outstanding
principal balance under the credit facility plus $7.5 million until December
31, 2003, increasing to $10 million beginning January 1, 2004. If we fail to
comply with these financial covenants, the lender will be entitled to assume
collection of our accounts receivable and we will be required to meet a minimum
tangible net worth requirement and certain other terms of the facility will
change. Obligations under the secured credit facility are collaterized by a
security interest in substantially all of the assets of Proxim, except for
intellectual property. If we breach the financial covenants, obligations under
the secured credit facility will also be secured by a security interest on our
intellectual property. As of March 28, 2003 we failed to comply the our
financial covenants and if we draw on the line the lender is entitled to assume
collection of our accounts receivable and the secured credit facility will now
be secured by our intellectual property.

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The secured credit facility requires the consent of our lender in order to
incur debt, grant liens, make acquisitions or merge, make certain restricted
payments and sell assets. The events of default under the secured credit
facility include the failure to pay amounts due, including principal and
interest, within three days after it becomes due, failure to observe or perform
covenants (subject to grace periods in certain cases), bankruptcy and
insolvency events, defaults under certain of our other obligations and the
occurrence of a material adverse change in our business.

Proxim is seeking to renegotiate a material lease on a building in
Sunnyvale, California that is in excess of the requirements of the business for
the foreseeable future. This building was vacated in July 2002, and the net
expected lease costs were included the restructuring charge recorded in the
second quarter of 2002, totaling over $29 million through the term of the lease
in 2010, net of expected sublease proceeds. The rent rates of this lease are
substantially greater than the current local market lease rates and this unused
space represents a negative cash flow of approximately $800,000 per quarter.
The Company has not been able to sublease the building since it was vacated in
July 2002.

To date, the building owner has not been responsive to our requests to
renegotiate the lease. Since November 2002, we have ceased making direct lease
payments and the building owner has been utilizing our cash security deposits
to cover the monthly payments. The building owner could elect to stop using our
security deposits for this purpose at any time, and the lease further obligates
us to replenish the security deposits. These deposits, supplemented by a letter
of credit, however, could cover lease rent payments until December 2003. The
building owner also has the option to terminate the remaining rent under the
lease and sue us for the net present value of the lease less the present value
of the amount for which we show the building owner could have leased the
building to another party, plus the building owners releasing costs. The
building owner has notified us of our defaults, but has not elected to
terminate the lease at this time. Instead, the building owner has threatened
legal action to force us to directly pay the monthly rent since November, as
well as interest and penalties. Accordingly, we have an opportunity to cure our
breach by restoring the security deposits as required by the lease, paying
interest and penalties, and remaining current on future rent obligations under
the lease. In the event that the building owner were to terminate the lease and
sue us for breach, we would be in breach of the covenants of our Bank Line of
Credit, and our borrowing rights could be limited or terminated. In this event,
we would not have enough cash available to meet the potential damages sought
under the lease, and we could be required to seek protection from the
bankruptcy courts. At this time, we cannot determine whether the building owner
is willing to renegotiate the current lease or will pursue remedies through the
courts.

We have taken steps to reduce our expenses from operations by decreasing
research and development and general and administrative expenses in order to
begin generating cash flow from operations in 2003. These steps were taken in
October 2002, and we recorded approximately $1.9 million of restructuring
charges related primarily to severance payments in the fourth quarter of 2002.

As a result of the reduced demand for our products during the first
quarter of 2003 and the limited business visibility, we are planning to take
further actions to reduce our operating expenses during the second quarter of
2003, and decrease our quarterly revenue breakeven point. We plan to record
significant restructuring charge in the second quarter of 2003 primarily related
to severance payments and closure of certain facilities. Additionally, we will
restructure our domestic sales organization to focus on WLAN and WWAN sales and
we plan to reduce consignment inventories held by distributors by implementing
varies sales promotions within the sales channel.

We believe that our current available cash and investments combined with
our available borrowings will be sufficient to finance our working capital and
capital expenditure requirements for at least the next 12 months. Our
management intends to invest any cash in excess of current operating
requirements in interest-bearing investment-grade securities. Our future
capital requirements will depend upon many factors, including management of
working capital, the success of marketing, sales and distribution efforts, the
timing of research and product development efforts and expansion of our
marketing efforts.

There can be no assurance that additional capital beyond the amounts
currently forecasted by us will not be required nor that any such required
additional capital will be available on reasonable terms, if at all, at such
time or times as required by us. We may need to raise additional funds if our
estimates change or prove inaccurate or in order for us to take advantage of
unanticipated opportunities or to strengthen our financial position. Our
ability to raise funds may be adversely affected by a number of factors
relating to Proxim, as well as factors beyond our control, including the
continued weakness of the wireless communications industry, volatility and
uncertainty in the capital markets, our ability to remain listed on the Nasdaq
National Market, our ability to pay obligations as they become due, as well as
increased market uncertainty following the terrorist attacks of September 11,
2001 and the ongoing U.S. war on terrorism. In addition, recent uncertainty
associated with international epidemics of severe acute respiratory syndrome,
or SARS, has adversely affected economic conditions. There can be no assurance
that any financing will be available on terms acceptable to us,

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if at all, and any need to raise additional capital through the issuance
of equity or convertible debt securities may result in additional, and perhaps
significant dilution.

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No.146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. The principal
difference between SFAS No. 146 and EITF Issue No. 94-3 relates to SFAS
No.146s timing for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. Under EITF Issue No. 94-3 a liability for an exit cost as
generally defined in EITF Issue No. 94-3 was recognized at the date of an
entitys commitment to an exit plan. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. SFAS No. 146 is
applied prospectively upon adoption and, as a result, would not have any impact
on our consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee and further requires a
guarantor to provide additional disclosures regarding guarantees. The
Interpretations provisions for initial recognition and measurement should be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. The disclosure requirements are effective for financial statements of
periods that end after December 15, 2002. The adoption of this Interpretation
did not have a material effect on our consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003. We
believe that the adoption of this Interpretation will have no material impact
on our consolidated financial statements.

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.

If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline and you could
lose all or part of your investment.

This Form 10-Q also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this Form
10-Q.

We may not achieve certain benefits and synergies expected from our March
26, 2002 merger with Proxim, Inc. or the August 5, 2002 acquisition of the
802.11 WLAN systems business of Agere, either of which may have a material
adverse effect on our business, financial condition and operating results
and/or could result in the loss of key personnel.

We will need to continue to overcome significant ongoing challenges in
order to realize any benefits or synergies from our merger with Proxim, Inc.
and our acquisition of the 802.11 WLAN systems business of Agere, including
Ageres ORiNOCO product line. Such challenges include the timely, efficient and
successful execution of a number of post-transaction events, including:



| |  |  | integrating the operations of these businesses, particularly geographically dispersed operations;
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | integrating the management information systems, accounting systems and reporting process;        

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| |  |  | retaining and assimilating the key personnel of each company;                          
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | retaining existing customers of each company and attracting additional customers;      
|
| |  |  | retaining strategic partners of each company and attracting new strategic partners; and
|
| |  |  | creating uniform standards, controls, procedures, policies and information systems.    

The execution of these post-transaction events will involve considerable risks and may not be successful. These risks include:



| |  |  | the potential disruption of our ongoing business and distraction of our management;                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | unanticipated expenses, including possible restructuring charges, and
potential delays related to integration of technology and other
resources of these companies;
|
| |  |  | the impairment of relationships with employees, suppliers and
customers as a result of any integration of new management personnel;
and                            
|
| |  |  | potential unknown liabilities associated with the transactions and
the combined operations.                                                                        

In addition, termination of employees in connection with our restructuring
efforts following these transactions may expose us to claims seeking damages
for wrongful terminations. In that regard, we are party to disputes, including
legal actions, with a number of former employees. These disputes relate
primarily to claims for wrongful termination and severance benefits due to
several reductions in force we have implemented in 2001 and 2002 following the
merger with Proxim, Inc. and the acquisition of Ageres 802.11 WLAN systems
business.

As a result of the merger between Proxim, Inc. and Western Multiplex, and
the acquisition of Agere Systems 802.11 WLAN systems business during 2002, we
identified a requirement to consolidate and integrate our management
information systems. We are implementing a new enterprise resource planning and
financial accounting and planning system during the second quarter of 2003, and
integrating this new system with our customer relationship management system
and our product management system, as well as creating electronic interfaces to
certain supply chain partners information systems and certain customers
information systems. Implementation of the new management information system,
including the integration with other systems is a very complex process that
requires significant financial resources and personnel time, as well as
unifying operating policies and procedures to ensure that the total system
operates efficiently and effectively. Delays or errors in the implementation
could result in additional costs and cause disruptions to our business, which
could adversely affect our ability to accurately report our financial results
on a timely basis and could have a material adverse effect on our business,
financial condition and operating results.

The combined company may not succeed in addressing these risks or any
other problems encountered in connection with our merger with Proxim, Inc. or
our acquisition of Ageres 802.11 WLAN systems business.

We are not profitable and may not be profitable in the future.

We had a $244.5 million and $10.8 million net loss attributable to holders
of our Common Stock for the year ended December 31, 2002 and the three months
ended March 28, 2003, respectively. We cannot assure you that our revenue will
increase or continue at current levels or growth rates or that we will achieve
profitability or generate cash from operations in future periods. In view of
the rapidly evolving nature of our business and the limited histories of
Western Multiplex, Proxim, Inc. and the Agere 802.11 WLAN systems business we
acquired in producing many of their products, period-to-period comparisons of
operating results are not necessarily meaningful and you should not rely on
them as indicating what our future performance will be.

We expect that we will continue to incur significant sales, marketing,
product development and administrative expenses. As a result, we will need to
generate significant revenue to achieve profitability and we cannot assure you
that we will achieve profitability in the future. Any failure to significantly
increase our revenue or control costs as we implement our product and
distribution strategies would harm our business, operating results and
financial condition.

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The market price of our Common Stock may further decline as a result of
our merger with Proxim, Inc. or our acquisitions of Ageres 802.11 WLAN systems
business.

The market price of our Common Stock declined following our acquisitions
in 2002 and may further decline as a result of these transactions for a number
of reasons, including if:



| |  |  | the integration of these businesses is not completed in a timely and
efficient manner;                                                                                              
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the combined company does not achieve the perceived benefits of these
transactions as rapidly or to the extent anticipated by financial
analysts, industry analysts or investors; or
|
| |  |  | the effect of these transactions on our financial results is not
consistent with the expectations of financial analysts, industry
analysts or investors.                            

In this regard, our financial results for the third quarter of 2002 did
not meet the expectations of financial analysts and the market price of our
Common Stock declined.

Our merger with Proxim, Inc. and our acquisition of Ageres 802.11 WLAN systems
business may adversely affect our financial results.

We incurred transaction costs of approximately $16.7 million in connection
with our merger with Proxim, Inc. and approximately $5 million in connection
with the Agere asset purchase. If the benefits of these transactions do not
exceed the associated costs, including costs associated with integrating these
businesses and dilution to our stockholders resulting from the issuance of
shares in connection with the merger and the asset purchase and related
financing, our financial results, including earnings per share, could be
materially harmed. As a result of the reduced demand for our products during
the first quarter of 2003 and the limited business visibility, we are planning
to take further actions to reduce our operating expenses during the second
quarter of 2003, and decrease our quarterly revenue breakeven point. We plan
to record significant restructuring charge in the second quarter of 2003 primarily
related to severance payments and closure of certain facilities.
Additionally, we will restructure our domestic sales organization to focus on WLAN and WWAN
sales and we plan to reduce consignment inventories held by distributors by
implementing varies sales promotions within the sales channel.

Products sales could decline if customer relationships are disrupted by our
merger with Proxim, Inc. and our acquisition of Ageres 802.11 WLAN systems
business.

The merger with Proxim, Inc. or the Agere asset purchase may have the
effect of disrupting customer relationships. Former customers of Western
Multiplex, Proxim, Inc. and Agere may not continue their current buying
patterns following these transactions. Customers may defer purchasing decisions
as they evaluate the likelihood of successful integration of the combined
company or may instead purchase products of competitors. Any significant delay
or reduction in orders for our products could cause our products sales to
decline.

We have a limited operating history with some of our current product lines,
which makes your evaluation of our business difficult and will affect many
aspects of our business.

Proxim, Inc. produced its 802.11a products for a limited amount of time
and Western Multiplex had just begun production of its Tsunami
point-to-multipoint product prior to the merger. Agere also had a limited
operating history with its 802.11 WLAN equipment. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in developing industries, particularly companies in
relatively new and rapidly evolving markets. These risks include:



| |  |  | an evolving and unpredictable business model;     
| | - |  | --------------------------------------------------
|
| |  |  | uncertain acceptance of new products and services;
|
| |  |  | competition; and                                  
|
| |  |  | challenges in managing growth.                    

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We cannot assure you that we will succeed in addressing these risks. If we
fail to do so, our revenue and operating results could be materially harmed.

We may experience fluctuations in operating results and may not be able to
adjust spending in time to compensate for any unexpected revenue shortfall
which may cause operating results to fall below expectations of securities
analysts and investors.

Our operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which will be outside our control. We
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues in relation to planned expenditures could materially harm our
operating results and financial condition, and may cause our operating results
to fall below the expectations of securities analysts and investors. If this
happens, the trading price of our Common Stock could decline significantly.

Factors that may harm operating results include:



| |  |  | the effectiveness of our distribution channels and the success in
maintaining our current distribution channels and developing new
distribution channels;                                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to effectively manage the development of new business segments and markets;                                                                                                                           
|
| |  |  | seasonal factors that may affect capital spending by customers;                                                                                                                                                   
|
| |  |  | our ability to successfully manage the integration of operations;                                                                                                                                                 
|
| |  |  | the sell-through rate of our ORiNOCO products (acquired in our
acquisition of Ageres 802.11 WLAN systems business) through consumer
retail channels;                                                             
|
| |  |  | market adoption of radio frequency, or RF, standards-based products
(such as those compliant with the IEEE 802.11b, IEEE 802.11a, IEEE
802.11g, IEEE 802.16 or Bluetooth specifications);                         
|
| |  |  | our ability to develop, introduce, ship and support new products and
product enhancements and to manage product transitions;                                                                                      
|
| |  |  | the sell-through rate of our WLAN and WWAN products through commercial distribution channels;                                                                                                                     
|
| |  |  | market demand for our point-to-point Lynx and Tsunami systems;                                                                                                                                                    
|
| |  |  | market demand for our point-to-multipoint systems;                                                                                                                                                                
|
| |  |  | our ability to effectively manage
product transitions from one generation of product platforms to newer
product platform designs, including inventories on hand, product
certifications, and customer transitions;
|
| |  |  | the mix of products sold because our products generate different gross margins;                                                                                                                                   
|
| |  |  | a decrease in the average selling prices of our products;                                                                                                                                                         
|
| |  |  | our ability to upgrade and develop our systems and infrastructure;                                                                                                                                                
|
| |  |  | difficulties in expanding and conducting international operations; and                                                                                                                                            
|
| |  |  | general economic conditions and economic conditions specific to the wireless communications industry.                                                                                                             

Historically, Proxim, Inc., Western Multiplex and the 802.11 WLAN system
business do not operate with a significant order backlog and a substantial
portion of their revenues in any quarter are derived from orders booked and
shipped in that quarter. Accordingly, a significant component of our revenue
expectations will be based almost entirely on internal estimates of future
demand and not on firm customer orders. Planned operating expense levels are
relatively fixed in the short term and are based in large part on these
estimates. If orders and revenue do not meet expectations, our operating
results could be materially adversely affected. In this regard, we did not
achieve our revenue targets in the third quarter of 2002 and the first quarter
of 2003, and we incurred a net loss attributable to the holders of our Common
Stock of $35.1 million and $10.8 in the third quarter of 2002 and the first
quarter of 2003, respectively.

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We have adopted a uniform sell-through method of revenue recognition that may
result in greater variability in our revenue recognition and therefore
increased fluctuations in our operating results.

Effective at the beginning of the third quarter of 2002, we adopted a
uniform sell-through revenue recognition methodology for products that are sold
through distribution channels with rights of return under accounting principles
generally accepted in the United States of America. After the merger of Proxim,
Inc. and Western Multiplex, we maintained the historical revenue recognition
methods used by the two companies prior to the merger for the respective
product lines: a sell-through method for our WLAN, products, and a sell-in
method for our WWAN products. We have adopted the sell-through method on a
uniform basis because, following the acquisition of Ageres 802.11 WLAN systems
business, which also uses the sell-through method, the WLAN business is
expected to represent more than half of Proxims revenues, and adopting one
uniform method is consistent with the Companys plans to sell bundled and
integrated WLAN and WWAN products. The adoption of the sell-through method of
revenue recognition for WWAN products could result in greater variability in
our revenue recognition, and, therefore, increased fluctuations in our
operating results, because sell-through shipments to customers may not be as
predictable as sell-in shipments to distributors.

Our operating results have been, and could further be, adversely affected as a
result of purchase accounting treatment and the impact of amortization and
impairment of intangible assets relating to the merger and the Agere asset
purchase.

In accordance with generally accepted accounting principles, we accounted
for our merger with Proxim, Inc. and the Agere asset purchase using the
purchase method of accounting. Under the purchase method of accounting, we have
recorded the market value of our Common Stock issued in connection with the
business combination with Proxim, Inc. and the Agere asset purchase, the Common
Stock that became options to purchase Proxim Corporation Common Stock and the
amount of direct transaction costs as the cost of combining with Proxim, Inc.
and the Agere asset purchase. We have allocated the cost of the individual
assets acquired and liabilities assumed, including various identifiable
intangible assets (such as acquired technology and acquired trademarks and
trade names) and in-process research and development, based on their respective
fair values at the date of the completion of the merger. Intangible assets are
required to be amortized prospectively over their estimated useful lives. Any
excess of the purchase price over those fair market values has been accounted
for as goodwill. We are not required to amortize goodwill against income but
goodwill and other non-amortizable intangible assets will be subject to
periodic reviews for impairment.

In this regard, due to the decline in forecasted revenue in future
periods, we took a charge of $129.1 million related to the impairment of
goodwill in accordance with SFAS No. 142 in the fourth quarter of 2002. The
impairment charged was measured as the amount that the carrying amount exceeded
its estimated fair value. If we are required to recognize additional impairment
charges, the charge will negatively impact reported earnings in the period of
the charge.

Shares eligible for future sale, including shares owned by our principal
stockholders, may cause the market price of our Common Stock to drop
significantly, even if our business is doing well.

The potential for sales of substantial amounts of our Common Stock into
the public market may adversely affect the market price of our Common Stock. To
finance our acquisition of Ageres 802.11 WLAN systems business, we entered
into a securities purchase agreement with Warburg Pincus and Broadview Capital,
who agreed to collectively invest $75.0 million in the Company. These investors
received 1,640,000 shares of Series A Preferred Stock in the amount of $41.0
million, with a conversion price of approximately $3.06 per share, and warrants
to purchase approximately 6.7 million shares of our Common Stock valued at
approximately $12.3 million. The value of the warrants was recorded as a
reduction of the Series A Preferred Stock carrying value and recorded as
additional paid-in capital. During the quarter ended September 27, 2002, a
deemed preferred stock dividend representing the beneficial conversion feature
of the Series A Preferred Stock of $2.7 million was also recorded to increase
the loss attributable to holders of our Common Stock. The remaining $34.0
million of the funding for the acquisition was in the form of convertible
notes. Upon receipt of approval of our stockholders at a special meeting held
on October 8, 2002, the notes issued to these investors were converted into
1,360,000 shares of Series A Preferred Stock and we granted to these investors
additional warrants to purchase approximately 5.6 million shares of our common
stock valued at $1.7 million. The value of the warrants was recorded as a
reduction of the Preferred Stock carrying value and recorded as additional
paid-in capital in the quarter ended December 31, 2002. In total, the
investors were granted warrants to acquire 12,271,345 shares of Common Stock
for approximately $3.06 per share. The Series A Preferred Stock and warrants
issued to the investors represent approximately 25% of our outstanding Common
Stock on an as-converted and as-exercised basis as of December 31, 2002. The
initial liquidation preference of $25.00 per share attributable to the Series A
Preferred Stock bears interest at an annual rate of 8% through the third
anniversary of the date of issuance, resulting in an increase in the number of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
over time, to an aggregate of approximately 31.1 million. We agreed to file a
registration statement with the Securities and Exchange Commission to

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register this Common Stock. Upon the effectiveness of the registration
statement, the investors will have the right to resell the Common Stock.

In addition, approximately 32.1 million of our outstanding shares of
Common Stock are held by affiliates of Ripplewood Investments L.L.C. and an
aggregate of approximately 6.0 million of our outstanding shares of Common
Stock are held by Jonathan Zakin, who is our Chairman, and his affiliates. The shares of Common Stock held by these
stockholders are restricted securities within the meaning of Rule 144 under
the Securities Act and are eligible for resale subject to the volume, manner of
sale, holding period and other limitations of Rule 144 or in a registered
offering. In the event that the affiliates of Ripplewood Investments L.L.C.
distribute shares that they hold to their members and partners that are not
affiliates of the Company, those distributed shares could be immediately sold
without regard to any volume limitations. In connection with the execution of
the merger agreement between Proxim, Inc., Western Multiplex and certain other
parties, the affiliates of Ripplewood Investments L.L.C. that now hold shares
of Proxim Corporation Common Stock entered into a stockholders agreement that
set limitations on their ability to transfer their shares, including
distributions to members and partners, for a limited period of time and
provided registration rights with respect to their shares. In exchange for a
voting agreement in connection with the Agere asset purchase, and effective as
of August 27, 2002, we released the affiliates of Ripplewood Investments L.L.C.
from the resale restrictions set forth in such stockholders agreement. If
affiliates of Ripplewood Investments L.L.C. distribute all or a significant
number of our shares, the market price of our Common Stock may decline
significantly.

In addition to outstanding shares eligible for sale, as of December 31,
2002, options and warrants to acquire 44.2 million shares of our Common Stock
were outstanding. Also, as of December 31, 2002, approximately an additional
21.7 million shares of our Common Stock were reserved for issuance to our
employees under existing and/or assumed stock option plans.

Competition within the wireless networking industry is intense and is expected
to increase significantly. Our failure to compete successfully could materially
harm our prospects and financial results.

The market for broadband wireless systems and wireless local area
networking and building-to-building markets are extremely competitive and we
expect that competition will intensify in the future. Increased competition
could adversely affect our business and operating results through pricing
pressures, the loss of market share and other factors. The principal
competitive factors affecting wireless local area networking and fixed wireless
markets include the following: data throughput; effective RF coverage area;
interference immunity; network security; network scalability; price;
integration with voice technology; wireless networking protocol sophistication;
ability to support industry standards; roaming capability; power consumption;
product miniaturization; product reliability; ease of use; product costs;
product features and applications; product time to market; product
certifications; changes to government regulations with respect to each country
served and related to the use of radio spectrum; brand recognition; OEM
partnerships; marketing alliances; manufacturing capabilities and experience;
effective distribution channels; and company reputation.

We could be at a disadvantage when compared to competitors, particularly
Alcatel, Business Networks AB, Cisco Systems, D-Link, Intel Corporation and
LinkSys (announced to be acquired by Cisco Systems on March 20, 2003, subject
to regulatory approvals), that have broader distribution channels, brand
recognition, extensive patent portfolios and more diversified product lines. We
have several competitors in our commercial wireless business, including without
limitation, Alvarion (the merger of Breezecom and Floware), Ceragon Networks,
Cisco Systems, DMC Stratex Networks, Enterasys Networks, Harris Corporation,
Intel Corporation, Intersil Corporation, Nokia Corporation, Symbol Technologies
and 3Com Corporation.

We also face competition from a variety of companies that offer different
technologies in the emerging home networking market, including several
companies developing competing wireless networking products. Additionally,
numerous companies have announced their intention to develop competing products
in both the commercial wireless and home networking markets, including several
Asia-based companies offering low-price IEEE 802.11b products. We could also
face future competition from companies that offer products which replace
network adapters or offer alternative communications solutions, or from large
computer companies, PC peripheral companies, as well as other large networking
equipment companies that integrate network adapters into their products.
Furthermore, we could face competition from certain of our OEM customers, which
have, or could acquire, wireless engineering and product development
capabilities, or might elect to offer competing technologies. We can offer no
assurance that we will be able to compete successfully against these
competitors or those competitive pressures we face will not adversely affect
our business or operating results.

Many of our present and potential competitors have substantially greater
financial, marketing, technical and other resources with which to pursue
engineering, manufacturing, marketing, and distribution of their products.
These competitors may succeed in establishing technology standards or strategic
alliances in the WLAN and building-to-building markets, obtain more rapid
market

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acceptance for their products, or otherwise gain a competitive advantage.
We can offer no assurance that we will succeed in developing products or
technologies that are more effective than those developed by our competitors.
Furthermore, we compete with companies that have high volume manufacturing and
extensive marketing and distribution capabilities, areas in which we have only
limited experience. We can offer no assurance that we will be able to compete
successfully against existing and new competitors as wireless markets evolve
and the level of competition increases.

Wireless networking markets are subject to rapid technological change and to
compete, we must continually introduce new products that achieve broad market
acceptance.

We have expended substantial resources in developing products that are
designed to conform to the IEEE 802.11 standards and the HomeRF specification.
There can be no assurance, however, that the IEEE 802.11 compliant products and
Symphony HomeRF products will have a meaningful commercial impact. In 1999, the
IEEE approved a new 2.4 GHz WLAN standard, designated as 802.11b. Based on
direct sequence spread spectrum technology, this new standard increased the
nominal data rate from 2 Mbps to 11 Mbps. In addition, we developed
higher-speed frequency hopping technology based on the FCC Part 15 rule change
adopted in August 2000, that allowed for wider band hopping channels and
increased the data rate from 1.6 Mbps to up to 10 Mbps based on the HomeRF 2.0
standard. There can be no assurance that any such new products will compete
effectively with IEEE 802.11b standard compliant products. In this regard, we
have discontinued the development and production of HomeRF and HomeRF 2.0
products due to the widespread market adoption of products based on the IEEE
802.11b standard. In August 2002, we completed the acquisition of Ageres
802.11 WLAN systems business, including its ORiNOCO product line, and we are
now selling a full line of 802.11b products.

In 1999, a group of computer and telecommunications industry leaders, led
by Ericsson, began developing a short range RF method to connect mobile devices
without cables called Bluetooth. Based on low power 2.4 GHz frequency hopping
spread spectrum technology, numerous organizations are planning to deploy
Bluetooth technology in a wide variety of mobile devices such as cellular
telephones, notebook computers and handheld computers. We have not developed
products that comply with Bluetooth. While Bluetooth technology is available to
develop or acquire in the market, there can be no assurance that we will
develop or acquire such technology, or that if we do develop or acquire such
technology, that such products will be competitive in the market.

In 2000, the IEEE approved a new 5 GHz WLAN standard designated as
802.11a. This new standard is based on Orthogonal Frequency Division
Multiplexing, or OFDM, technology with multiple data rates ranging from below
10 Mbps to approximately 50 Mbps. In 1999, the European Telecommunications
Standards Institute Project BRAN (Broadband Radio Access Networks) committee
approved a new 5 GHz WLAN standard designated as HiperLAN2, also based on OFDM
technology. We are currently shipping commercial units of 802.11a products, and
certain competitors are also shipping 802.11a products.

The IEEE is evaluating a number of improvements and enhancements to the
802.11a at 5 GHz and 802.11b at 2.4 GHz standards. The 802.11g proposal is a
high speed extension of 802.11b, offering up to 54 Mbps of throughput, that is
expected to be approved during 2003 and commercial products are expected to be
available in 2003. Certain competitors are shipping pre-standard versions of
802.11g products. In addition, we have begun commercial shipment of dual-band
adapters that comply with both the 802.11b and the 802.11a standards and we
plan to ship a new dual-band 802.11a, b and g WLAN solution in the second
quarter of 2003 that complies with the 802.11b and the 802.11a standards and
the 802.11g draft standard. The 802.11e proposal is a quality of service
enhancement to the 802.11a and 802.11b protocol for streaming multimedia
support. The 802.11i proposal addresses enhanced security for both 802.11a and
802.11b. The 802.11h proposal addresses dynamic frequency selection and
transmit power control for worldwide radio regulation.

In January 2003, the IEEE ratified a new WWAN standard designated as
802.16. This new standard specifies a common broadband wireless access platform
for WWAN point-to-multipoint devices. In April 2003, we joined the newly
expanded Worldwide Interoperability for Microwave Access Forum, or WiMAX Forum,
as a principal member and obtained a seat on the board of directors. The WiMAX
Forum is a nonprofit corporation formed to promote and certify the
compatibility and interoperability of WWAN point-to-multipoint devices using
the IEEE 802.16 specifications.

Given the emerging nature of the WLAN and WWAN markets, there can be no
assurance that the products and technology, or our other products or
technology, will not be rendered obsolete by alternative or competing
technologies. In addition, when we announce new products or product
enhancements that have the potential to replace or shorten the life cycle of
our existing products, customers may defer purchasing our existing products.
These actions could materially adversely affect our operating results by
unexpectedly decreasing sales, increasing our inventory levels of older
products and exposing us to greater risk of product obsolescence. As the market
for our wireless networking products is evolving, we believe our ability to
compete successfully in this market is dependent upon the continued
compatibility and interoperability of our products with products and
architectures offered by other vendors. To

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remain competitive, we need to introduce products in a timely manner that
incorporate or are compatible with these new technologies as they emerge. If we
are unable to enter a particular market in a timely manner with internally
developed products, we may license technology from other businesses or acquire
other businesses as an alternative to internal research and development.

To remain competitive, we will need to expand and adapt our organization.
Failure to effectively manage growth could result in an inability to support
and maintain our operations.

We anticipate that we will need to expand and adapt our organization in
order to address new market opportunities for our products. This could place a
significant strain on our management, operational and financial resources. We
cannot assure you that:



| |  |  | our personnel, systems, procedures and controls will be adequate to support our future operations;           
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | our management will be able to identify, hire, train, motivate or manage required personnel; or              
|
| |  |  | our management will be able to successfully identify and exploit existing and potential market opportunities.

We announced a reorganization of our corporate structure on December 9,
2002, consolidating our operating divisions from four to two. We cannot assure
you that this reorganization will be successful or will not impair our ability
to manage our business. In addition, we could experience lower earnings as a
result of expenses associated with growing our operations, whether through
internal development or through acquisitions.

We will depend on international sales and our ability to sustain or expand
international sales is subject to many risks, which could adversely affect our
operating results.

During the year ended December 31, 2002, international sales accounted for
approximately 38% of our total sales. Revenue from shipments by Western
Multiplex to customers outside of the United States, principally to a limited
number of distributors, represented 24% and 33% of total revenue during the
calendar years 2001 and 2000, respectively. Revenue from shipments by Proxim,
Inc. to customers outside the United States, principally to a limited number of
distributors and OEM customers, represented 33% and 18% of total revenue during
the calendar years 2001 and 2000, respectively. Ageres sales of its ORiNOCO
products included sales to a number of international customers, and we expect
that we will continue to sell these products to a significant percentage of
international customers. We expect that our revenue from shipments to
international customers will vary as a percentage of total revenue.

There are certain risks inherent in doing business in international
markets, including the following:



| |  |  | uncertainty of product acceptance by customers in foreign countries;                                        
| | - |  | ------------------------------------------------------------------------------------------------------------
|
| |  |  | difficulty in assessing the ability to collect on orders to be shipped in an uncertain economic environment;
|
| |  |  | difficulty in collecting accounts receivable;                                                               
|
| |  |  | export license and documentation requirements;                                                              
|
| |  |  | unforeseen changes in regulatory requirements;                                                              
|
| |  |  | difficulties in staffing and managing multinational operations;                                             
|
| |  |  | governmental restrictions on the repatriation of funds into the United States;                              
|
| |  |  | foreign currency fluctuations;                                                                              
|
| |  |  | longer payment cycles for international distributors;                                                       
|
| |  |  | tariffs, duties taxes and other trade barriers;                                                             
|
| |  |  | difficulties in finding foreign licensees or joint venture partners; and                                    

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| |  |  | potential political and economic instability.
| | - |  | ---------------------------------------------

There is a risk that such factors will harm our ability to continue to
successfully operate internationally and our efforts to expand international
operations. In this regard, our revenue levels have been affected, in part, by
reduced ability to ship our products to international customers in cases where
collectibility, based on a number of factors, could not be reasonably assured.

While we may extend limited credit terms, fluctuations in currency
exchange rates could cause our products to become relatively more expensive to
customers in a particular country, leading to a reduction in sales or
profitability in that country. There can be no assurance that foreign markets
will continue to develop or that we will receive additional orders to supply
our products to foreign customers. Our business and operating results could be
materially adversely affected if foreign markets do not continue to develop or
if we do not receive additional orders to supply our products for use by
foreign customers.

To successfully expand international sales, we will need to recruit
additional international sales and support personnel and expand our
relationships with international distributors and value-added resellers. This
expansion will require significant management attention and financial
resources. We may incur these additional costs and add these management burdens
without successfully expanding sales. This failure would harm our operating
results.

Uncertainties and heightened
security associated with the aftermath of war in Iraq and the ongoing
war on terrorism may continue to adversely affect domestic and
international demand for our products, result in a further
deterioration of global economic conditions, and increase shipment
times and costs for our products.

The economic uncertainty resulting
from hostilities in Iraq may continue to negatively impact consumer
and business confidence. The continued worsening of the U.S. economy
has caused and may continue to cause U.S. businesses to slow spending
on products and to delay sales cycles. Similarly, a continued
worsening in the global economy could cause foreign businesses to
slow or halt spending on our products. We manufacture a substantial
portion of our products outside the U.S., and we may experience
delays in the delivery of our products or increased shipping costs as
a result of increased security measures. This economic uncertainty
may make it more difficult to continue to implement our business
strategy and could adversely impact future operating results.

The outbreak of SARS may negatively
impact our operations and operating results, given the importance of
our business presence in Asia.

The recent outbreak of severe acute
respiratory syndrome (SARS) that began in Asia and has since spread
to Canada and other areas of the world could have a negative impact
on our operations and operating results. In particular, we have major
third party contract manufacturers, component parts suppliers,
customers and sales personnel located in the affected areas of Asia,
and our normal operating processes could be hindered by a number of
SARS-related factors, including but not limited to:



| |  |  | disruptions in the ability of our
third-party contract manufacturers located in affected locations to
deliver products to us and our customers in a timely and efficient
manner;                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | disruptions in the ability of our
third party component parts suppliers located in affected locations
including their ability to deliver parts to us and our contract
manufacturers in a timely and efficient manner;
|
| |  |  | disruptions in the introduction of
planned new product releases;                                                                                                                                                     
|
| |  |  | disruptions to our sales
activities and order flows in affected locations;                                                                                                                                           
|
| |  |  | disruptions to our customers
operations, demand for products and funding in affected locations; and                                                                                                                 
|
| |  |  | reduced or restricted business
travel between ourselves, customers, contract manufacturers and
suppliers.                                                                                                            
|

If the number of cases continues to
rise or spread to other areas or travel and shipping restriction are
imposed, our business, financial condition, operating results and
cash flows could be materially and adversely harmed.

Our revenue may decline and our ability to achieve profitability may be
threatened if the demand for wireless services in general and broadband
wireless access systems in particular does not continue to grow.

Our success is dependent on the continued trend toward wireless
telecommunications and data communications services. If the rate of growth
slows and service providers reduce their capital investments in wireless
infrastructure or fail to expand into new geographic markets, our revenue may
decline. Unlike some competitors such as Alcatel, Cisco Systems, Intel
Corporation, Linksys and Nortel Networks Corporation, among others, our
principal product offerings rely on wireless technologies. Accordingly, we
would experience a greater impact from a decline in the demand for wireless
services than some of our most important competitors. In addition, wireless
access solutions are unproven in the marketplace and some of the wireless
technologies, such as our Tsunami point-to-multipoint technology and 802.11a
and HomeRF 2.0 technologies in which we are currently investing substantial
capital, have only been commercially introduced in the last few years. If
wireless access technology turns out to be unsuitable for widespread commercial
deployment, it is unlikely we could generate enough sales to achieve and
sustain profitability. We have listed below, in order of importance, the
factors that we believe are key to the success or failure of broadband wireless
access technology:



| |  |  | its reliability and security and the perception by end users of its reliability and security;                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | its capacity to handle growing demands for faster transmission of increasing amounts of data, voice and video;                       
|
| |  |  | the availability of sufficient frequencies for network service providers to deploy products at commercially reasonable rates;        
|
| |  |  | its cost-effectiveness and performance compared to other forms of
broadband access, whose prices and performance continue to improve;
|
| |  |  | its suitability for a sufficient number of geographic regions; and                                                                   
|
| |  |  | the availability of sufficient site locations for network service
providers to install products at commercially reasonable rates.    

We have experienced the effects of many of the factors listed above in
interactions with customers selecting wireless versus wire line technology. For
example, because of the frequency with which individuals using cellular phones
experience fading or a loss of signal, customers often hold the perception that
all broadband wireless technologies will have the same reliability constraints
even though the wireless technology we use does not have the same problems as
cellular phones. In some geographic areas, because of adverse weather
conditions that affect wireless transmissions, but not wire line technologies,
we are not able to sell products as successfully as competitors with wire line
technology. In addition, future legislation, legal decisions and regulation
relating to the wireless telecommunications industry may slow or delay the
deployment of wireless networks.

We may also lose customers to different types of wireless technologies.
Many of our products operate in the unlicensed frequency bands, in compliance
with various governmental regulations. In addition, many of the emerging
wireless standards utilize these

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unlicensed frequency bands. The proliferation and market acceptance of
unlicensed wireless products increases the probability of interference among
unlicensed devices. Increasing interference can adversely affect the operation
of our unlicensed products, resulting in customers selecting alternative
products that do not operate in these unlicensed frequency bands. For example,
we have only a limited offering of products that operate in licensed radio
spectrums. Some customers, however, may want to operate in licensed radio
spectrums because they sometimes offer less interference than license free
radio spectrums or have other advantages.

Our business will depend on rapidly evolving telecommunications and Internet
industries.

Our future success is dependent upon the continued growth of the data
communications and wireless industries, particularly with regard to Internet
usage. The global data communications and Internet industries are evolving
rapidly and it is difficult to predict potential growth rates or future trends
in technology development. We cannot assure you that the deregulation,
privatization and economic globalization of the worldwide telecommunications
market that has resulted in increased competition and escalating demand for new
technologies and services will continue in a manner favorable to us or our
business strategies. In addition, there can be no assurance that the growth in
demand for wireless and Internet services, and the resulting need for high
speed or enhanced data communications products and wireless systems, will
continue at its current rate or at all.

The combined company may be dependent on and receive a significant percentage
of its revenue from a limited number of OEM customers.

A limited number of OEM customers may contribute a significant percentage
of our revenue. Sales to one Proxim, Inc. customer in calendar year 2000
represented approximately 12% of total revenue. Ageres sales of its ORiNOCO
products included sales to OEM customers. We expect that sales to a limited
number of OEM customers will continue to account for a significant portion of
our revenue for the foreseeable future. Proxim, Inc. also experienced
quarter-to-quarter variability in sales to each of its major OEM customers.
Sales of many of Proxim, Inc.s wireless networking products depended upon the
decision of a prospective OEM customer to develop and market wireless solutions
that incorporated Proxim, Inc.s wireless technology. OEM customers orders are
affected by a variety of factors, including the following:



| |  |  | new product introductions;                                   
| | - |  | -------------------------------------------------------------
|
| |  |  | end user demand for OEM customers products;                 
|
| |  |  | OEM customers product life cycles;                          
|
| |  |  | inventory levels;                                            
|
| |  |  | market and OEM customers adoption of new wireless standards;
|
| |  |  | manufacturing strategies;                                    
|
| |  |  | lengthy design-in cycles;                                    
|
| |  |  | pricing;                                                     
|
| |  |  | regulatory changes;                                          
|
| |  |  | contract awards; and                                         
|
| |  |  | competitive situations.                                      

Proxim, Inc.s agreements with OEM customers typically did not require
minimum purchase quantities. The loss of one or more of, or a significant
reduction in orders from, our major OEM customers could materially and
adversely affect our operating results or stock price. In this regard, in the
first quarter of 2001, Intel Corporation, a HomeRF OEM customer, announced that
it would offer competing IEEE 802.11b products for its next generation of
consumer wireless networking devices. This announcement resulted in a decrease
in the market price of Proxim, Inc.s common stock. In addition, there can be
no assurance that we will become a qualified supplier for new OEM customers or
that we will remain a qualified supplier for existing OEM customers.

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Our WWAN business derives a substantial portion of its revenue from a limited
number of distributors. Therefore, a decrease or loss in business from any of
them may cause a significant delay or decline in our revenue and could harm our
reputation.

Our WWAN business has historically generated a significant amount of
revenue from a limited number of distributors. The loss of business from any of
these distributors or the delay of significant orders from any of them, even if
only temporary, could significantly reduce our revenue, delay recognition of
revenue, harm our reputation or reduce our ability to accurately predict cash
flow. One distributor accounted for approximately 23% of our total revenue in
the year ended December 31, 2002. For the year ended December 31, 2001,
approximately 52% of WWAN revenue was derived from three distributors, and
approximately 30% of our revenue was derived from one of the three
distributors. We do not have long-term contracts with any of these
distributors. While we expect to have a more diversified and expansive end
customer base, the future success of our business will depend significantly on
the timing and size of future purchase orders, if any, from a limited number of
distributors. In addition, as we continued the development of our distribution
channels, we may consolidate demand through fewer, larger distributors in order
the effectively manage a growing base of VARs, resellers and sub-distributors.

We depend on limited suppliers for key components that are difficult to
manufacture, and because we may not have long-term arrangements with these
suppliers, we could experience disruptions in supply that could decrease or
delay the recognition of revenues.

We depend on single or limited source suppliers for several key components
used in our products. Proxim, Inc. and Agere depended on single sources for our
proprietary application specific integrated circuits, or ASICs, and assembled
circuit boards. Any disruptions in the supply of these components or assemblies
could delay or decrease our revenues. In addition, even for components with
multiple sources, there have been, and may continue to be, shortages due to
capacity constraints caused by high demand. In connection with our acquisition
of Ageres 802.11 WLAN systems business, we have entered into a three-year
strategic supply agreement with Agere, pursuant to which Agere will provide us
with 802.11 chips, modules and cards. Other than this agreement, we do not have
any long-term arrangements with our suppliers. If, for any reason, a supplier
fails to meet our quantity or quality requirements, or stops selling components
to us or our contract manufacturers at commercially reasonable prices, we could
experience significant production delays and cost increases, as well as higher
warranty expenses and product reputation problems. Because the key components
and assemblies of our products are complex, difficult to manufacture and
require long lead times, we may have difficulty finding alternative suppliers
to produce our components and assemblies on a timely basis. We have experienced
shortages of some of these components in the past, which delayed related
revenue, and we may experience shortages in the future. In addition, because
the majority of our products have a short sales cycle of between 30 and 90
days, we may have difficulty in making accurate and reliable forecasts of
product needs. As a result, we could experience shortages in supply, which
could delay or decrease revenue because our customers may cancel their orders
or choose a competitor for their future needs.

We have limited manufacturing capabilities and we will need to increasingly
depend on contract manufacturers for our manufacturing requirements.

We have limited manufacturing capability and limited experience in large
scale or foreign manufacturing. There can be no assurance that we will be able
to develop or contract for additional manufacturing capacity on acceptable
terms on a timely basis. In addition, in order to compete successfully, we will
need to achieve significant product cost reductions. Although we intend to
achieve cost reductions through engineering improvements, production economies,
and manufacturing at lower cost locations including outside the United States,
there can be no assurance that we will be able to do so. In order to remain
competitive, we must continue to introduce new products and processes into our
manufacturing environment, and there can be no assurance that any such new
products will not create obsolete inventories related to older products. For
example, as a part of our restructuring charge in the first quarter of 2002, we
increased our provision for obsolete and excess inventory, including purchase
commitments, totaling $12.7 million, of which $7.7 million related to excess
inventory and $5.0 million related to purchase commitments. The provision
related to a decrease in demand for certain products as well as our strategy to
discontinue certain products in order to concentrate on selling next generation
products.

Proxim, Inc. relied on contract and subcontract manufacturers for turnkey
manufacturing and circuit board assemblies which subjects us to additional
risks, including a potential inability to obtain an adequate supply of finished
assemblies and assembled circuit boards and reduced control over the price,
timely delivery and quality of such finished assemblies and assembled circuit
boards. If our Sunnyvale facility were to become incapable of operating, even
temporarily, or were unable to operate at or near our current or full capacity
for an extended period, our business and operating results could be materially
adversely affected.

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Proxim, Inc. outsourced manufacturing for its HomeRF products with
Flextronics International, Inc., a turnkey contract manufacturer. Western
Multiplex depended on three domestic contract manufacturers to produce the
majority of its products, and it depended on one of these manufacturers for the
entire production of its Tsunami point-to-multipoint product. Changes in our
manufacturing operations to incorporate new products and processes, or to
manufacture at lower cost locations outside the United States, could cause
disruptions, which, in turn, could adversely affect customer relationships,
cause a loss of market opportunities and negatively affect our business and
operating results. In addition, our reliance on a limited number of
manufacturers involves a number of risks, including the risk that these
manufacturers may terminate their relationship with us, may choose not to
devote adequate capacity to produce our products or may delay production of our
products. If any of these risks are realized, we could experience an
interruption in supply, which could have an adverse impact on the timing and
amount our revenues. During the fourth quarter of 2002, we began to transition
manufacturing of our Tsunami point-to-multipoint products from a domestic
contract manufacturing to off-shore contract manufacturing. There can be no
assurance that we will be able to effectively transition these products, which,
in turn, could adversely affect customer relationships, cause a loss of market
opportunities and negatively affect our business and operating results.

Our reliance on contract manufacturers could subject us to additional
costs or delays in product shipments as demand for our products increases or
decreases. Some contract manufacturers have decreased their operations in
response to an overall contraction in demand for wireless networking products.
There can be no assurance that we will effectively manage our contract
manufacturers or that these manufacturers will meet our future requirements for
timely delivery of products of sufficient quality and quantity. The inability
of our contract manufacturers to provide us with adequate supplies or the loss
of a contract manufacturer would result in costs to acquire additional
manufacturing capacity and delays in shipments of our products, materially
adversely affecting our business and operating results. In addition,
cancellations in orders as a result of decreases in demand for products may
subject us to claims for damages. In this regard, we are party to disputes,
including legal actions, with a number of suppliers and vendors. These disputes
relate primarily to excess materials and order cancellation claims that
resulted from declines in demand for our products during 2001 and 2002 and the
commensurate reductions in manufacturing volumes.

We may need additional capital in the future and may not be able to secure
adequate funds on terms acceptable to us.

Our cash and investment balance declined by $11.3 million in the fourth
quarter of 2002 and further declined by $0.6 million during the quarter ended
March 28, 2003. We currently believe that our existing liquidity sources,
including our bank line of credit, will satisfy our capital requirements for at
least the next twelve months. In December 2002 we finalized a new credit
facility with Silicon Valley Bank. The facility provides for borrowing of up to
$20 million; however the facility also requires us to maintain at least the
outstanding principal plus $7.5 million on deposit with Silicon Valley Bank.
Our ability to borrow under the credit facility is subject to a number of
restrictions, as described in Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity herein. We cannot
assure you that we will have access to the credit facility. We are seeking to
renegotiate the terms of a material lease, as described in Managements
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity. If the building owner were to terminate the lease and sue us for
breach, we would be in breach of the covenants in the credit facility, and our
borrowing rights could be limited or terminated. We may need to raise
additional funds if our estimates change or prove inaccurate or in order for us
to take advantage of unanticipated opportunities or to strengthen our financial
position. Because our stock is currently trading near historically low levels,
any financing at these levels could be significantly dilutive to existing
stockholders.

Our ability to raise funds may be adversely affected by a number of
factors relating to us, as well as factors beyond our control, including
increased market uncertainty following the events of September 11, 2001, the
ongoing U.S. war on terrorism, and the international epidemics of SARS, as well
as conditions in capital markets. There can be no assurance that such financing
will be available on terms acceptable to us if at all.

We may be unable to achieve the manufacturing cost reductions and improvements
required in order to achieve or maintain profitability.

The average selling prices of the products of Western Multiplex, Proxim,
Inc. and Ageres WLAN systems business declined in recent years. If we do not
reduce production costs and other expenses, we may not be able to offset this
continuing decline and achieve or maintain profitability. We must also develop
and introduce on a timely basis new products that can be sold at higher average
selling prices or produced at lower costs.

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Failure to decrease the cost of our products or to effectively develop new
systems would cause our revenue to decline or to increase more slowly.

We expect that average selling prices of our products will continue to
decrease because one of our strategies is to increase the percentage of
domestic and international sales being made through distributors and
value-added resellers, and to OEM customers, which involve lower prices than
our direct sales. This risk from declining average selling prices may also
intensify because we expect that market conditions, particularly falling prices
for competing broadband solutions, will force us to reduce prices over time.
Under some circumstances, we may be forced to reduce prices even if it causes
us to decrease gross profit or to take a loss on our products. We may also be
unable to reduce sufficiently the cost of our products to enable us to compete
with other broadband access technologies with lower product costs. In order to
remain competitive, we will need to design our products so that they can be
manufactured with low-cost, automated manufacturing, assembly and testing
techniques. We cannot assure you that we will be successful in designing our
products to allow contract manufacturers to use lower-cost, automated
techniques. In addition, any redesign may fail to result in sufficient cost
reductions to allow us to significantly reduce the price of our products or
prevent our gross profit from declining as prices decline.

Because many of our current and planned products are or will be highly complex,
they may contain defects or errors that are detectable only after deployment in
complex networks and which, if detected, could harm our reputation, result in
costs to us in excess of our estimates, adversely affect our operating results,
result in a decrease in revenue or result in difficulty collecting accounts
receivable.

Many of our complex products can only be fully tested when deployed in
commercial networks. As a result, end users may discover defects or errors or
experience breakdowns in their networks after the products have been deployed.
The occurrence of any defects or errors in these products, including defects or
errors in components supplied by our contract manufacturers, could result in:



| |  |  | failure to achieve market acceptance and loss of market share;             
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | cancellation of orders;                                                    
|
| |  |  | difficulty in collecting accounts receivable;                              
|
| |  |  | increased service and warranty costs;                                      
|
| |  |  | diversion of resources, legal actions by customers and end users; and      
|
| |  |  | increased insurance costs and other losses to our business or to end users.

If we experience warranty failure that indicate either manufacturing or
design deficiencies, we may be required to recall units in the field and or
stop producing and shipping such products until the deficiency is identified
and corrected. In the event of such warranty failures, our business could be
adversely affected resulting in reduced revenue, increased costs and decreased
customer satisfaction. Because customers often delay deployment of a full
system until the products have been tested by them and any defects have been
corrected, we expect these revisions to cause delays in orders by our customers
for our systems. Because our strategy is to introduce more complex products in
the future, this risk will intensify over time. End users have discovered
errors in our products in the past and may discover errors in our products in
the future. Recently, we have identified performance issues related to a power
supply component provided by one of our contract manufacturers. If the costs of
remediating problems experienced by our customers exceeds our warranty
reserves, these costs may adversely affect our operating results.

To compete effectively, we will need to establish and expand new distribution
channels for our point-to-point and point-to-multipoint products and 802.11
WLAN products.

Western Multiplex sold its point-to-point and point-to-multipoint products
and Agere sold its ORiNOCO products through domestic and international
distributors. We intend to add new distributors and value-added resellers for
the Tsunami point-to-multipoint products. In general, distributors, value-added
resellers and retailers offer products of several different companies,
including products that may compete with our products. Accordingly, they may
give higher priority to products of other suppliers, thus reducing our efforts
to sell our products. In addition they often focus on specific markets and we
will need to add new distributors and value-added resellers as we expand our
sales to new markets. Agreements with distributors and retailers are generally
terminable at their option. Any reduction in sales efforts or termination of a
relationship may materially and adversely affect our business and

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operating results. Use of distributors and retailers also entails the risk
that they will build up inventories in anticipation of substantial growth in
sales. If such growth does not occur as anticipated, they may substantially
decrease the amount of products ordered in subsequent quarters. Such
fluctuations could contribute to significant variations in our future operating
results.

Broadband wireless access solutions have some disadvantages and limitations as
compared to other alternative broadband access solutions that may prevent
widespread adoption, which could hurt our prospects.

Broadband wireless access solutions, including point-to-point and
point-to-multipoint systems, compete with other high-speed access solutions
such as digital subscriber lines, cable modem technology, fiber optic cable and
other high-speed wire line and satellite technologies. If the market for our
point-to-point and point-to-multipoint solutions fails to develop or develops
more slowly than we expect due to this competition, our sales opportunities
will be harmed. Many of these alternative technologies can take advantage of
existing installed infrastructure and are generally perceived to be reliable
and secure. As a result, they have already achieved significantly greater
market acceptance and penetration than point-to-point and point-to-multipoint
broadband wireless access technologies. Moreover, current point-to-point and
point-to-multipoint broadband wireless access technologies have inherent
technical limitations that may inhibit their widespread adoption in many areas,
including the need for line-of-sight installation and, in the case of operating
frequencies above 11 GHz, reduced communication distance in bad weather.

We expect point-to-point and point-to-multipoint broadband wireless access
technologies to face increasing competitive pressures from both current and
future alternative technologies. In light of these factors, many service
providers may be reluctant to invest heavily in broadband wireless access
solutions.

Broadband wireless access products require a direct line-of-sight, which may
limit the ability of service providers to deploy them in a cost-effective
manner and could harm our sales.

Because of line-of-sight limitations, service providers often install
broadband wireless access equipment on the rooftops of buildings and on other
tall structures. Before undertaking these installations, service providers must
generally secure roof rights from the owners of each building or other
structure on which the equipment is to be installed. The inability to easily
and cost-effectively obtain roof rights may deter customers from choosing to
install broadband wireless access equipment, which could have an adverse effect
on our sales.

Inability to attract and retain key personnel could hinder our ability to
operate.

Our success depends to a large extent on the continued services of Mr.
Frank Plastina, our new President and Chief Executive Officer, Mr. Keith E.
Glover, our Executive Vice President, Chief Financial Officer and Secretary,
and other members of our senior management team. The loss of the services of
any of these management members could harm our business because of the crucial
role each of them is expected to play in our operations and strategic
development. In order to be successful, we must also retain and motivate key
employees, including those in managerial, technical, marketing and sales
positions. In particular, our product generation efforts depend on hiring and
retaining qualified engineers. Experienced management and technical, sales,
marketing and support personnel in the wireless networking industry are in high
demand and competition for their talents is intense. This is particularly the
case in Silicon Valley, where our headquarters are located. In addition, our
employees may experience uncertainty about their participation in the future of
the combined company due to the following issues relating to recent business
combination transactions: changing employee roles with respect to Proxims
announced operations strategies, the management of an increasing number of
geographically dispersed operations and the related challenges of integrating a
growing number of diverse local regulations, customs and practices. These
conditions may adversely affect our ability to attract and retain key
management, technical, sales and marketing personnel. We must also continue to
motivate employees and keep them focused on the strategies and goals of the
combined company, which may be particularly difficult due to the potential
distractions of the merger and morale challenges posed by any workforce
reduction that may be implemented.

We may have difficulties with our acquisitions and investments, which could
adversely affect our growth and financial condition.

From time to time, we may consider new business opportunities and
ventures, including acquisitions, in a broad range of areas. Any decision to
pursue a significant business expansion or new business opportunity would be
accompanied by risks, including, among others:
44Table of Contents



| |  |  | requiring to invest a substantial amount of capital, which could
materially harm our financial condition and ability to implement our
existing business strategy;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | requiring to issue additional equity interests, which would be dilutive to our stockholders;                                                                     
|
| |  |  | placing additional and substantial burdens on our management personnel and financial and operational systems;                                                    
|
| |  |  | the difficulty of assimilating the operations, technology and personnel of the acquired companies;                                                               
|
| |  |  | the potential disruption of our ongoing business;                                                                                                                
|
| |  |  | the possible inability to retain key technical and managerial personnel;                                                                                         
|
| |  |  | potential additional expenses associated with amortization of purchased intangible assets or the impairment of goodwill;                                         
|
| |  |  | additional expenses associated with the activities and expansion of the acquired businesses; and                                                                 
|
| |  |  | the possible impairment of relationships with existing employees, customers, suppliers and investors.                                                            

In addition, we cannot assure you that we will be successful in overcoming
these risks or any other problems encountered in connection with any
acquisitions or other investments that we may make in the future.

Several of our stockholders beneficially own a significant percentage of our
Common Stock, which will allow them to significantly influence matters
requiring shareholder approval and could discourage potential acquisitions of
our company.

Following the issuances of Series A Preferred Stock and warrants to
purchase Common Stock to Warburg Pincus and Broadview Capital, assuming
conversion and exercise of these securities, these investors collectively
represent approximately 25% of our outstanding Common Stock as of December 31,
2002. Affiliates of Ripplewood Investments L.L.C. control approximately 27% of
our outstanding Common Stock on an as-converted and as-exercised basis
including dividends. These stockholders will be able to exert significant
influence over actions requiring the approval of our stockholders, including
many types of change of control transactions and any amendments to our
certificate of incorporation. The interests of these stockholders may be
different than those of other stockholders of our company. In addition, the
significant ownership percentage of these stockholders could have the effect of
delaying or preventing a change of control of our company or otherwise
discouraging a potential acquiror from obtaining control of our company.

Holders of our Series A Preferred Stock have rights that are senior to those of
our Common Stock.

Holders of our Series A Preferred Stock are entitled to receive certain
benefits not available to holders of our common stock. In particular:



| |  |  | from August 2005 through August 2007, shares of Series A Preferred
Stock will be entitled to dividends equal to 8% of their liquidation
preference per year, payable, at our election, in cash or shares of our
Common Stock valued at the then-market price;                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | each share of Series A Preferred Stock will have an initial
liquidation preference of $25.00 and the liquidation preference will
bear interest at 8%, compounded semi-annually, for three years. The
liquidation preference is subject to adjustments in the event we
undertake a business combination or other extraordinary transaction, or
we are liquidated or dissolved;                                                                                                                                                                                                                                                                     
|
| |  |  | in August 2007, we will be required to redeem all outstanding shares
of Series A Preferred Stock, if any, for cash equal to their liquidation
preference plus accrued and unpaid dividends;                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | in the event of a change of control of our company, we will have the
right to convert the Series A Preferred Stock into Common Stock if upon
such conversion the holders of Series A Preferred Stock would receive
liquid securities or cash with a fair market value equal to or greater
than 110% of the liquidation preference then in effect. If the
consideration is less than 110% of the liquidation preference, we may
either modify the conversion price so that the consideration will equal
110% of the liquidation preference then in effect or repurchase the
Series A Preferred Stock for cash at 101% of the liquidation preference

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| |   |  | then in effect. In addition, in the event of a change of control that
occurs prior to August 2005, the liquidation preference will increase as
necessary to provide for three years of accretion;                                                                                                                                                                                                                                                                                                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | holders of Series A Preferred Stock have rights to acquire additional
shares of our capital stock or rights to purchase property in the event
of certain grants, issuance or sales;                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | the conversion price of the Series A Preferred Stock, which initially
shall be approximately $3.06 per share, will be subject to customary
weighted average anti-dilution adjustments and other customary
adjustments;                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | the approval of holders of a majority of the Series A Preferred Stock
is separately required to approve changes to our certificate of
incorporation or bylaws that adversely affect these holders rights, any
offer, sale or issuance of our equity or equity-linked securities
ranking senior to or equally with the Series A Preferred Stock, and any
repurchase or redemption of our equity securities (other than from an
employee, director or consultant following termination), or the
declaration or payment of any dividend on our common stock; and
|
| |  |  | for so long as Warburg Pincus owns at least 25% of its shares of
Series A Preferred Stock or the Common Stock issuable on conversion of
its Series A Preferred Stock and exercise of its warrants, Warburg
Pincus will have the right to nominate for election one member of our
board of directors, who will sit on all major board committees for so
long as such committee membership does not conflict with any applicable
law or regulation or any listing requirements of the Nasdaq National
Market.                                                   

We are obligated to register the Series A Preferred Stock on a resale
registration statement with the Securities and Exchange Commission. We do not
intend to register the Series A Preferred Stock until after our annual meeting
of stockholders, at which time we will seek stockholder approval for an
amendment to our certificate of incorporation to increase the number of shares
of common stock authorized for issuance thereunder. To the extent we are not
able to register or maintain the effectiveness of the resale registration
statement for the Series A Preferred Stock, we could incur substantial
financial penalties.

If we fail to protect our intellectual property rights or if such rights are
not adequately protected under current law, competitors may be able to use our
technology or trademarks and this could weaken our competitive position, reduce
our revenue and increase costs.

We rely on intellectual property laws to protect our products,
developments and licenses. We also rely on confidentiality agreements with some
of our licensees and other third parties and confidentiality agreements and
policies covering our employees.

We cannot assure you that such laws and measures will provide sufficient
protection, that other companies will not develop technologies that are similar
or superior or that third parties will not copy or otherwise obtain and use our
technologies without authorization.

Possible third-party claims of infringement of proprietary rights against us
could have a material adverse effect on our business, results of operation and
financial condition.

The communications industry is characterized by a relatively high level of
litigation based on allegations of infringement of proprietary rights. There
can be no assurance that third parties will not assert infringement claims
against us, that any such assertion of infringement will not result in
litigation or that we would prevail in such litigation. Furthermore, any such
claims, with or without merit, could result in substantial cost to our business
and diversion of our personnel, require us to develop new technology or enter
into royalty or licensing arrangements. Such royalty or licensing agreements,
if required, may not be available on terms acceptable to us, or at all. In the
event of a successful claim of infringement or misappropriation against us, and
our failure or inability to develop non-infringing technology or to license the
infringed, misappropriated or similar technology at a reasonable cost, our
business, results of operations and financial condition would be materially
adversely affected. In addition, we may be obligated to indemnify our customers
against claimed infringement of patents, trademarks, copyrights and other
proprietary rights of third parties. Any requirement to indemnify our customers
could have a material adverse effect on our business, results of operations and
financial condition.

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Prior to the completion of our merger with Proxim, Inc., Proxim, Inc. commenced
United States patent infringement and International Trade Commission legal
actions against a number of its competitors, and legally remains the subject of
counter suits and patent infringement counterclaims. Should the outcome of this
patent, trade commission or any related litigation be unfavorable, we may be
required to pay damages and other expenses, or we could be enjoined from
selling certain products, which could materially and adversely affect our
business, financial condition and operating results.

Proxim, Inc.s involvement in patent and International Trade Commission
litigation with respect to alleged infringement of certain of its United States
patent rights related to direct sequence wireless local area networking
technology has resulted in, and could in the future continue to result in,
substantial costs and diversion of management resources of the combined
company. In addition, this litigation, if determined adversely to us, could
result in the payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could materially and
adversely affect our business, financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9, 2001,
Proxim, Inc. filed to remove Compex from the ITC complaint as Compex entered
into an agreement with Proxim, Inc. to license these patents. Intersil and
Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc. sought
declaratory judgment for non-infringement, invalidity and unenforceability of
certain Agere patents, as well as damages for violation of the antitrust laws
of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a permanent injunction against Proxim, Inc. based on
alleged patent infringement counterclaims. On December 18, 2001, Proxim, Inc.
filed an answer and counterclaims seeking declaratory judgments for
non-infringement, invalidity and unenforceability of the four asserted Symbol
patents, injunctive and monetary relief for Symbols infringement of a Proxim,
Inc. patent, monetary relief for Symbols false patent marking, and injunctive
and monetary relief for Symbols unfair competition under the Lanham Act,
common law unfair competition and tortious interference.

On August 5, 2002, in connection with our acquisition of the 802.11 WLAN
systems business from Agere, we announced that we had entered into a
cross-license agreement with Agere whereby, in part, Agere agreed to settle the
pending patent-related litigation between the two companies.

47



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On March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.
As part of the confidential settlement agreement, the two companies have
entered into a patent cross license agreement for their respective patent
portfolios and Intersil agreed to make a one-time payment of $6.0 million to
the Company.

We are a party to disputes, including legal actions, with a number of
suppliers and vendors. These disputes relate primarily to excess materials and
order cancellation claims that resulted from the declines in demand for our
products during 2001 and 2002 and the commensurate reductions in manufacturing
volumes. We have recorded reserves related to these disputes to the extent that
management believes that the Company is liable. We intend to vigorously defend
ourself in these matters.

The results of any litigation matters are inherently uncertain. In the
event of any adverse decision in the described legal actions or disputes, or
any other related litigation with third parties that could arise in the future
with respect to patents or other intellectual property rights relevant to our
products, we could be required to pay damages and other expenses, to cease the
manufacture, use and sale of infringing products, to expend significant
resources to develop non-infringing technology, or to obtain licenses to the
infringing technology. These matters are in the early stages of litigation and,
accordingly, we cannot make any assurance that these matters will not
materially and adversely affect our business, financial condition or operating
results.

Compliance with governmental regulations in multiple jurisdictions where we
sell our products is difficult and costly.

In the United States, we are subject to various Federal Communications
Commission, or FCC, rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio spectrum.
Our spread spectrum wireless products are certified for unlicensed operation in
the 902  928 MHz, 2.4  2.4835 GHz, 5.15  5.35 GHz and 5.725  5.825 GHz
frequency bands. Operation in these frequency bands is governed by rules set
forth in Part 15 of the FCC regulations. The Part 15 rules are designed to
minimize the probability of interference to other users of the spectrum and,
thus, accord Part 15 systems secondary status in the frequency. In the event
that there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of our products experience excessive
interference from primary users, market acceptance of our products could be
adversely affected, which could materially and adversely affect our business
and operating results. The FCC, however, has established certain standards that
create an irrefutable presumption of noninterference for Part 15 users and we
believe that our products comply with such requirements. There can be no
assurance that the occurrence of regulatory changes, including changes in the
allocation of available frequency spectrum, changes in the use of allocated
frequency spectrum, or modification to the standards establishing an
irrefutable presumption for unlicensed Part 15 users, would not significantly
affect our operations by rendering current products obsolete, restricting the
applications and markets served by our products or increasing the opportunity
for additional competition.

The FCC is coordinating discussions between the United States military and
the commercial wireless industry regarding the operation and potential
interference from unlicensed 5 GHz systems. These discussions are intended to
resolve the potential interference issues without a rule change to the
operation of unlicensed 5 GHz systems. If a solution cannot be agreed upon by
the parties, the FCC could change the regulations related to the operation of
unlicensed 5 GHz products. Such a change could have a material adverse affect
upon the sale of our unlicensed 5 GHz products.

Our products are also subject to regulatory requirements in international
markets and, therefore, we must monitor the development of spread spectrum and
other radio frequency regulations in certain countries that represent potential
markets for our products. While there can be no assurance that we will be able
to comply with regulations in any particular country, we will design our
products to minimize the design modifications required to meet various 2.4 GHz
and 5 GHz international spread spectrum regulations. In addition, we will seek
to obtain international certifications for our product line in countries where
there are substantial markets for wireless networking systems. Changes in, or
the failure by us to comply with, applicable domestic and international
regulations could materially adversely affect our business and operating
results. In addition, with respect to those countries that do not follow FCC
regulations, we may need to modify our products to meet local rules and
regulations.

Regulatory changes by the FCC or by regulatory agencies outside the United
States, including changes in the allocation of available frequency spectrum,
could significantly affect our operations by restricting our development
efforts, rendering current products obsolete or increasing the opportunity for
additional competition. Several changes by the FCC were approved within the
last eight years including changes in the allocation and use of available
frequency spectrum, as well as the granting of an interim waiver. These
approved changes could create opportunities for other wireless networking
products and services. There can be no assurance that new regulations will not
be promulgated, that could materially and adversely affect our business and
operating results. It is

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possible that the United States and other jurisdictions will adopt new
laws and regulations affecting the pricing, characteristics and quality of
broadband wireless systems and products. Increased government regulations
could:



| |  |  | decrease the growth of the broadband wireless industry;
| | - |  | -------------------------------------------------------
|
| |  |  | hinder our ability to conduct business internationally;
|
| |  |  | reduce our revenues;                                   
|
| |  |  | increase the costs and pricing of our products;        
|
| |  |  | increase our operating expenses; and                   
|
| |  |  | expose us to significant liabilities.                  

Any of these events or circumstances could seriously harm our business and
results of operations.

If the trading price of our common stock does not increase, we may not be able
to meet the continued listing criteria for the Nasdaq National Market, which
would adversely affect the ability of investors to trade our common stock and
could adversely affect our business and financial condition.

On March 25, 2003, we received a letter from The Nasdaq Stock Market, Inc.
notifying us that for the prior 30 consecutive trading days, the bid price of
our common stock had closed below the $1.00 per share minimum required for
continued inclusion on Nasdaq pursuant to Nasdaqs Marketplace Rules. In
accordance with the Marketplace Rules, the Company will be provided 180
calendar days, or until September 22, 2003, to regain compliance with this
requirement. Compliance will be achieved if the bid price per share of our
common stock closes at $1.00 per share or greater for a minimum of ten (10)
consecutive trading days prior to September 22, 2003. If compliance with the
Marketplace Rules as currently in effect is not achieved by September 22, 2003,
Nasdaq will notify us that our stock will be delisted from the Nasdaq National
Market. In the event of such notification, we would have an opportunity to
appeal Nasdaqs determination or to apply to transfer our common stock to The
Nasdaq SmallCap Market.

We cannot assure you that we will be able to maintain the listing of our
common stock on the Nasdaq National Market, or that we will be able to meet the
listing criteria for the Nasdaq SmallCap Market. If as a result of the
application of these listing requirements, our common stock is delisted from
The Nasdaq National Market, our common stock would become more difficult to buy
and sell. In addition, our common stock could be subject to certain rules
placing additional requirements on brokers-dealers who sell or make a market in
our securities. Consequently, if we were removed from the Nasdaq National
Market, the ability or willingness of broker-dealers to sell or make a market
in our common stock might decline, which would adversely affect the ability of
investors to resell our common stock. In addition, our ability to secure
additional capital in financing transactions with investors might be impacted,
which would adversely affect our business and financial condition.

The price of our Common Stock may be subject to wide fluctuation, and you may
lose all or part of your investment in our Common Stock.

The trading prices of our common stock has been subject to wide
fluctuations, and such trend is likely to continue with respect to the trading
price of our common stock. The trading price of our Common Stock may fluctuate
in response to a number of events and factors, including:



| |  |  | quarterly variations in revenues and operating results;                               
| | - |  | --------------------------------------------------------------------------------------
|
| |  |  | announcements of innovations and new products;                                        
|
| |  |  | strategic developments or business combinations by us or our competitors;             
|
| |  |  | changes in our expected operating expense levels;                                     
|
| |  |  | changes in financial estimates and recommendations of financial and industry analysts;

49



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| |  |  | the operating and securities price performance of comparable companies; and
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | news reports relating to trends in the wireless communications industry.   

In addition, the stock market in general, and the market prices for
wireless-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of these companies.
These broad market and industry fluctuations may influence the trading price of
our common stock. These trading price fluctuations may make it more difficult
to use our Common Stock as currency to make acquisitions that might otherwise
be advantageous, or to use stock options as a means to attract and retain
employees. In addition, you may lose all or part of your investment in our
common stock.

Provisions of our certificate of incorporation, bylaws and Delaware law could
deter takeover attempts.

Some provisions in our certificate of incorporation and bylaws could
delay, prevent or make more difficult a merger, tender offer, proxy contest or
change of control of our company despite the possibility that such transactions
may be viewed to be in the best interest of our stockholders since such
transactions could result in a higher stock price than the then-market price of
our common stock. Among other things, our certificate of incorporation and
bylaws:



| |  |  | authorize our board of directors to issue preferred stock with the
terms of each series to be fixed by the board of directors;              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | divide our board of directors into three classes so that only
approximately one-third of the total number of directors is elected each
year;
|
| |  |  | permit directors to be removed only for cause; and                                                                                          
|
| |  |  | specify advance notice requirements for stockholder proposals and director nominations.                                                     

In addition, with some exceptions, the Delaware General Corporation Law
will restrict or delay mergers and other business combinations between the
Company and any stockholder that acquires 15% or more of our voting stock.

50



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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements.

Interest Rate Sensitivity

We maintain a short-term investment portfolio consisting mainly of
corporate bonds purchased with an average maturity of less than one year. These
available-for-sale securities are subject to interest rate risk and will
decline in value if market interest rates increase. If market interest rates
were to increase immediately and uniformly by 10 percent from levels at March
28, 2003, the fair value of the portfolio would decline by an immaterial
amount. We generally have the ability to hold our fixed income investments
until maturity and therefore do not expect our operating results or cash flows
to be affected to any significant degree by the effect of a sudden change in
market interest rates on our securities portfolio.

Exchange Rate Risk

We currently have operations in the United States and several countries in
South America, Europe and Asia. The functional currency of all our operations
is the U.S. dollar. Though some expenses are incurred in local currencies by
our overseas operations, substantially all of our transactions are made in U.S.
dollars, hence, we have minimal exposure to foreign currency rate fluctuations
relating to our transactions.

While we expect our international revenues to continue to be denominated
predominately in U.S. dollars, an increasing portion of our international
revenues may be denominated in foreign currencies in the future. As a result,
our operating results may become subject to significant fluctuations based upon
changes in exchange rates of certain currencies in relation to the U.S. dollar.
We will analyze our exposure to currency fluctuations and may engage in
financial hedging techniques in the future to attempt to minimize the effect of
these potential fluctuations; however, exchange rate fluctuations may adversely
affect our financial results in the future.

Investment Risk

We are exposed to market risk as it relates to changes in the fair value
of our investments. We invest in equity investments in a public company for
business and strategic purposes and we have classified these securities as
available-for-sale. We also invest in equity instruments in a private company.
These equity investments, primarily in technology companies, are subject to
significant fluctuations in fair value due to the volatility of the stock
market and the industries in which these companies participate. As of March 28,
2003, we had unrealized gain of $795,000 which was recorded as a separate
component of stockholders equity. Our objective in managing our exposure to
stock market fluctuations is to minimize the impact of stock market declines to
our earnings and cash flows. There are, however, a number of factors beyond our
control.

Continued market volatility, as well as mergers and acquisitions, have the
potential to have a material impact on our results of operations in future
periods.




ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to filing this report, we carried out an evaluation,
under the supervision and with the participation of our principal executive
officer and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic filings with the
Securities and Exchange Commission. It should be noted that the design of any
system of controls is based in part upon certain assumptions, and there can be
no assurance that any design will succeed in achieving its stated goals.

In addition, we reviewed our internal controls and there have been no
significant changes in our internal controls or in other factors that could
significantly affect our disclosure controls and procedures, nor were there any
significant deficiencies or material weaknesses in our internal controls,
subsequent to the date of their evaluation. As a result, no corrective actions
were required or undertaken.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Companys involvement in patent and International Trade Commission
litigation with respect to alleged infringement of certain of its United States
patent rights related to direct sequence wireless local area networking
technology has resulted in, and could in the future continue to result in,
substantial costs and diversion of management resources of the combined
company. In addition, this litigation, if determined adversely to us, could
result in the payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could materially and
adversely affect our business, financial condition and operating results.

On March 8, 2001, Proxim, Inc. filed two lawsuits for infringement of
three United States Patents for wireless networking technology: one suit in the
U.S. District Court for the District of Massachusetts against Cisco Systems,
Incorporated and Intersil Corporation; and one suit in the U.S. District Court
for the District of Delaware against 3Com Corporation, SMC, Symbol Technologies
and Wayport. These suits sought an injunction against continued infringement,
damages resulting from the infringement and the defendants conduct, interest
on the damages, attorneys fees and costs, and such further relief as the
respective courts deem just and appropriate.

On March 9, 2001, Proxim, Inc. filed suit with the International Trade
Commission (ITC) in Washington, D.C. asking the ITC to stop the importation of
products that infringe its patented wireless networking technology. Eight
companies are identified in this action; Acer, Addtron, Ambicom, Compex,
D-Link, Enterasys, Linksys and Melco. Proxim, Inc. notified these and other
companies that it believed to have been infringing its patents. On May 9, 2001,
Proxim, Inc. filed to remove Compex from the ITC complaint as Compex entered
into an agreement with Proxim, Inc. to license these patents. Intersil and
Agere have filed motions to intervene in the proceedings before the ITC and
these motions have been approved by the ITC.

On or about April 24, 2001, Intersil Corporation and Cisco Systems,
Incorporated filed suit in the U.S. District Court for the District of Delaware
seeking that Proxim, Inc.s patents be found invalid, unenforceable and not
infringed. Intersil and Cisco sought damages and attorneys fees from Proxim,
Inc. based upon alleged breach of contract and unfair competition.

On or about May 1, 2001, Symbol Technologies filed patent infringement
counterclaims in the U.S. District Court for the District of Delaware alleging
that Proxim, Inc. infringed four Symbol WLAN patents. Symbol is seeking
unspecified damages and a permanent injunction against Proxim, Inc. related to
these infringement claims.

On or about May 31, 2001, Agere filed suit in the U.S. District Court for
the District of Delaware alleging that Proxim, Inc. infringed three Agere
patents. Agere sought unspecified damages and a permanent injunction against
Proxim, Inc. related to its infringement claims. On July 9, 2001, Proxim, Inc.
filed an amended answer and counterclaim to the Agere suit. Proxim, Inc. sought
declaratory judgment for non-infringement, invalidity and unenforceability of
certain Agere patents, as well as damages for violation of the antitrust laws
of the United States.

On August 8, 2001, Proxim, Inc. filed an amended answer and counterclaim,
and further sought damages for violation of the antitrust laws of the United
States. On December 13, 2001, Proxim, Inc. filed a second amended answer and
counterclaim, and sought to add Ageres parent, Agere Guardian Systems Inc., as
a party.

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages and a permanent injunction against Proxim, Inc. based on
alleged patent infringement counterclaims. On December 18, 2001, Proxim, Inc.
filed an answer and counterclaims seeking declaratory judgments for
non-infringement, invalidity and unenforceability of the four asserted Symbol
patents, injunctive and monetary relief for Symbols infringement of a Proxim,
Inc. patent, monetary relief for Symbols false patent marking, and injunctive
and monetary relief for Symbols unfair competition under the Lanham Act,
common law unfair competition and tortious interference.

On August 5, 2002, in connection with the Companys acquisition of the
802.11 WLAN systems business from Agere, the Company announced that we had
entered into a cross-license agreement with Agere whereby, in part, the Company
and Agere agreed to settle the pending patent-related litigation between the
two companies.

52



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On March 17, 2003, the Company announced a settlement with Intersil
Corporation to resolve all pending patent-related litigation between the two
companies. Under the terms of the agreement, the Company and Intersil have
agreed to dismiss all claims against each other, including lawsuits before the
International Trade Commission and Delaware and Massachusetts Federal Courts.
As part of the confidential settlement agreement, the two companies have
entered into a patent cross license agreement for their respective patent
portfolios and Intersil agreed to make a one-time payment of $6.0 million to
the Company.

The Company is party to disputes, including legal actions, with a number
of suppliers and vendors. These disputes relate primarily to excess materials
and order cancellation claims that resulted from the declines in demand for our
products during 2001 and 2002 and the commensurate reductions in manufacturing
volumes. The Company has recorded reserves related to these disputes to the
extent that management believes that the Company is liable. The Company intends
to vigorously defend itself in these matters.

The results of any litigation matters are inherently uncertain. In the
event of any adverse decision in the described legal actions or disputes, or
any other related litigation with third parties that could arise in the future
with respect to patents or other intellectual property rights relevant to our
products, the Company could be required to pay damages and other expenses, to
cease the manufacture, use and sale of infringing products, to expend
significant resources to develop non-infringing technology, or to obtain
licenses to the infringing technology. These matters are in the early stages of
litigation and, accordingly, the Company cannot make any assurance that these
matters will not materially and adversely affect the Companys business,
financial condition, operating results, or cash flows.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|A.   |  | Exhibits                                                                                                               
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|    
|99.1 |  | Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|    
|99.2 |  | Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|    
|B.   |  | Reports on Form 8-K                                                                                                    

|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date             |  | Item Reported                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|January 30, 2003 |  | On January 28, 2003, Proxim Corporation issued a press
release announcing its fourth quarter and year end
results, which included the following financial
statements: (i) the Registrants unaudited consolidated
balance sheets at December 31, 2002 and December 31,
2001, (ii) the Registrants unaudited consolidated
statement of operations for the three months and years
ended December 31, 2002 and December 31, 2001 and (iii)
the Registrants unaudited quarterly statements of
operations for each of the eight quarters in the period
ended December 31, 2002.
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|March 27, 2003   |  | On March 25, 2003, Proxim Corporation received a letter
from The Nasdaq Stock Market Inc. notifying the
Registrant that for the prior 30 consecutive trading
days, the bid price of the Registrants common stock had
closed below the $1.00 per share minimum required for
continued inclusion on Nasdaq pursuant to Nasdaqs
Marketplace Rules and informing the Registrant that it
will have 180 calendar days to regain compliance with
this requirement.                                                                                                               

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SIGNATURES

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

|                    |  |                    |  |                                                                                                                                                 
|------------------- |  | ------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Date:  May 12, 2003 |  | Proxim Corporation
|                    |  |                    |  |                                                                                                                                                 
|                    |  | By:                |  | /s/ Keith E. Glover
Keith E. Glover
Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)

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Proxim Corporation
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jonathan N. Zakin, Chairman of Proxim Corporation,
President and Chief Executive Officer of Proxim Corporation prior to
May 2, 2003, and currently performing the function of principal executive officer (within the meaning of
Exchange Act Rules 13a-14 and 15d-14) of Proxim
Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Proxim Corporation;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |     |  |                                                 
|------------------- |  | --- |  | ------------------------------------------------
|Date:  May 12, 2003 |  | By: |  | /s/ Jonathan N. Zakin
Jonathan N. Zakin
Chairman

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Proxim Corporation
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Keith E. Glover, Executive Vice President, Chief Financial Officer and
Secretary of Proxim Corporation, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Proxim Corporation;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |     |  |                                                                                                    
|------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------
|Date:  May 12, 2003 |  | By: |  | /s/ Keith E. Glover
Keith E. Glover
Executive Vice President,
Chief Financial Officer and Secretary

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EXHIBIT INDEX

|        |  |                                                                                                                         |  |  |  | 
|------- |  | ----------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |  |                                                                                                                         |  |  |  | 
|Number  |  | Description                                                                                                             |  |  |  | 
|        |  |                                                                                                                         |  |  |  | 
|99.1    |  | Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|       
|99.2    |  | Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.