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UNITED STATESSECURITIES 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 September 27, 2002

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                  | 52-2198231          
|------------------------- | --------------------
|(State of
 Incorporation) | (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 [  ]

The number of shares outstanding of the
 Companys Class A common stock, par value $.01 per share, as of November 8,
 2002, was 119,688,165. 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                           
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                 
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|                              | ITEM 2. MANAGEMENTS DISCUSSION 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q                                                    
|SIGNATURES                   
|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 September 27, 2002 and December 31, 2001                                                     | 3   
|        |  | Condensed Consolidated Statements of Operations for
 the three months and nine months ended September 27, 2002 and September 28, 2001 | 4   
|        |  | Condensed Consolidated Statements of Cash Flows for
 the nine months ended September 27, 2002 and September 28, 2001                  | 5   
|        |  | Notes to Condensed Consolidated Financial Statements                                                                                  | 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                                                                            | 47  
|Item 4  |  | Controls and Procedures                                                                                                               | 47  
|PART II |  | OTHER INFORMATION                                                                                                                     |     
|Item 1  |  | Legal Proceedings                                                                                                                     | 47  
|Item 2  |  | Changes in Securities and Use of Proceeds                                                                                             | 48  
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                                      | 49  
|        |  | Signature                                                                                                                             | 50  

2



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PROXIM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)



|                                                                                                                                                                                           | September 27,
2002 |          |   | December 31,
2001
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------ | -------- | - | -----------------
|                                                                                                                                                                                           |                    |          |   |                  
|ASSETS                                                                                                                                                                                    
|Current assets:                                                                                                                                                                           
|Cash and cash equivalents                                                                                                                                                                  | $                  | 28,253   |   |                  
|Short-term investments                                                                                                                                                                     |                    | 1,042    |   |                  
|Accounts receivable, net                                                                                                                                                                   |                    | 28,520   |   |                  
|Inventory, net                                                                                                                                                                             |                    | 51,301   |   |                  
|Other current assets                                                                                                                                                                       |                    | 5,468    |   |                  
|Deferred tax assets                                                                                                                                                                        |                    |         |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total current assets                                                                                                                                                                       |                    | 114,584  |   |                  
|Property and equipment, net                                                                                                                                                                |                    | 10,726   |   |                  
|Goodwill and other intangible assets, net                                                                                                                                                  |                    | 206,268  |   |                  
|Deferred tax assets, long-term portion                                                                                                                                                     |                    |         |   |                  
|Restricted cash and long-term investments                                                                                                                                                  |                    | 1,599    |   |                  
|Other long-term assets                                                                                                                                                                     |                    | 4,599    |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total assets                                                                                                                                                                               | $                  | 337,776  |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|LIABILITIES, MANDATORILY REDEEMABLE
 CONVERTIBLE PREFERRED STOCKAND STOCKHOLDERS EQUITY                                                                                                  
|Current liabilities:                                                                                                                                                                       |                    |          |   |                  
|Accounts payable                                                                                                                                                                           | $                  | 26,687   |   |                  
|Accrued liabilities                                                                                                                                                                        |                    | 26,442   |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total current liabilities                                                                                                                                                                  |                    | 53,129   |   |                  
|Long-term debt                                                                                                                                                                             |                    | 101      |   |                  
|Convertible promissory note                                                                                                                                                                |                    | 34,000   |   |                  
|Restructuring accruals, long-term portion                                                                                                                                                  |                    | 27,288   |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total liabilities                                                                                                                                                                          |                    | 114,518  |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Commitments and contingencies (notes 10 and 11)                                                                                                                                            |                    |          |   |                  
|Mandatorily redeemable convertible preferred stock:
 Series A, no par value; authorized 5,000,000 shares: 1,640,000 shares issued and outstanding
 at September 27, 2002                   |                    | 29,489   |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Stockholders equity:                                                                                                                                                                      |                    |          |   |                  
|Common stock, Class A, par
 value $.01; authorized 200,000,000 shares: 59,218,105 and 119,688,165 shares issued and
 outstanding at December 31, 2001 and September 27, 2002, respectively |                    | 1,619    |   |                  
|Common stock, Class
 B, par value $.01; authorized 100,000,000 shares: no shares issued and outstanding at
 December 31, 2001 and September 27, 2002, respectively                         |                    |         |   |                  
|Additional paid-in capital                                                                                                                                                                 |                    | 334,790  |   |                  
|Notes receivable from employees                                                                                                                                                            |                    | (898     | ) |                  
|Treasury stock                                                                                                                                                                             |                    | (21,585  | ) |                  
|Deferred stock compensation                                                                                                                                                                |                    | (114     | ) |                  
|Unrealized gain (loss) on investments                                                                                                                                                      |                    | (154     | ) |                  
|Accumulated deficit                                                                                                                                                                        |                    | (119,889 | ) |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total stockholders equity                                                                                                                                                                 |                    | 193,769  |   |                  
|                                                                                                                                                                                           |                    |          |   |                  
|Total liabilities, mandatorily redeemable
 convertible preferred stock and stockholders equity                                                                                            | $                  | 337,776  |   |                  
|                                                                                                                                                                                           |                    |          |   |                  

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 amounts)
(Unaudited)



|                                                                            |  | Three Months Ended |             | Nine Months Ended 
|--------------------------------------------------------------------------- |  | ------------------ | ----------- | ------------------
|                                                                            |  |                    |             |                   
|                                                                            |  | September 27,
2002 |             | September 28,
2001
|                                                                            |  |                    |             |                   
|Revenue                                                                     |  | $                  | 24,118      |                   
|Cost of revenue                                                             |  |                    | 14,091      |                   
|                                                                            |  |                    |             |                   
|Gross profit                                                                |  |                    | 10,027      |                   
|                                                                            |  |                    |             |                   
|Operating expenses:                                                         |  |                    |             |                   
|Research and development                                                    |  |                    | 8,699       |                   
|Selling, general and administrative                                         |  |                    | 15,220      |                   
|Amortization of goodwill and intangible assets                              |  |                    | 4,606       |                   
|Amortization of deferred stock compensation                                 |  |                    | 316         |                   
|Impairment of goodwill and intangible assets                                |  |                    |            |                   
|Restructuring charges                                                       |  |                    | 2,335       |                   
|In-process research and development                                         |  |                    | 10,364      |                   
|Merger costs                                                                |  |                    |            |                   
|                                                                            |  |                    |             |                   
|Total operating expenses                                                    |  |                    | 41,540      |                   
|                                                                            |  |                    |             |                   
|Loss from operations                                                        |  |                    | (31,513     | )                 
|Interest income (expense), net                                              |  |                    | (355        | )                 
|                                                                            |  |                    |             |                   
|Loss before income taxes                                                    |  |                    | (31,868     | )                 
|Income tax provision (benefit)                                              |  |                    |            |                   
|                                                                            |  |                    |             |                   
|Net loss                                                                    |  |                    | (31,868     | )                 
|Deemed preferred stock dividend                                             |  |                    | (2,740      | )                 
|Accretion of Series A preferred stock                                       |  |                    | (476        | )                 
|                                                                            |  |                    |             |                   
|Net loss attributable to common stockholders                                |  | $                  | (35,084     | )                 
|                                                                            |  |                    |             |                   
|Net loss per share attributable to common
 stockholders  basic and diluted |  | $                  | (0.29       | )                 
|                                                                            |  |                    |             |                   
|Shares used to compute net loss per
 share  basic and diluted              |  |                    | 119,556,721 |                   
|                                                                            |  |                    |             |                   

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)



|                                                                                   |  | Nine Months Ended 
|---------------------------------------------------------------------------------- |  | ------------------
|                                                                                   |  |                   
|                                                                                   |  | September 27,
2002
|                                                                                   |  |                   
|Cash flows from operating activities:                                              |  |                   
|Net loss                                                                           |  | $                 
|Adjustments to reconcile net loss to net cash used
 in operating activities:       |  |                   
|Deferred tax assets                                                                |  |                   
|Depreciation and amortization                                                      |  |                   
|Impairment of goodwill and other intangible assets                                 |  |                   
|In-process research and development                                                |  |                   
|Provision for bad debts, sales returns and price protection                        |  |                   
|Provision for restructuring charges                                                |  |                   
|Changes in assets and liabilities, net of effect
 of business combinations:        |  |                   
|Accounts receivable, net                                                           |  |                   
|Inventory, net                                                                     |  |                   
|Other assets                                                                       |  |                   
|Accounts payable and accrued liabilities                                           |  |                   
|Payable to parent company                                                          |  |                   
|                                                                                   |  |                   
|Net cash used in operating activities                                              |  |                   
|                                                                                   |  |                   
|Cash flows from investing activities:                                              |  |                   
|Purchase of property and equipment                                                 |  |                   
|Purchase of investment securities                                                  |  |                   
|Sale of short-term investments                                                     |  |                   
|Net cash used in acquisitions                                                      |  |                   
|                                                                                   |  |                   
|Net cash used in investing activities                                              |  |                   
|                                                                                   |  |                   
|Cash flows from financing activities:                                              |  |                   
|Repayment of long-term debt                                                        |  |                   
|Proceeds from repayments of notes receivable from employees                        |  |                   
|Proceeds from issuance of Series A preferred stock                                 |  |                   
|Proceeds from issuance of convertible promissory notes                             |  |                   
|Issuance of common stock, net                                                      |  |                   
|Purchase of treasury stock                                                         |  |                   
|                                                                                   |  |                   
|Net cash provided by financing activities                                          |  |                   
|                                                                                   |  |                   
|Net increase (decrease) in cash and cash equivalents                               |  |                   
|Cash and cash equivalents at beginning of period                                   |  |                   
|                                                                                   |  |                   
|Cash and cash equivalents at end of period                                         |  | $                 
|                                                                                   |  |                   
|Supplemental disclosures:                                                          |  |                   
|Cash paid (received) during the period for:                                        |  |                   
|Income taxes                                                                       |  | $                 
|                                                                                   |  |                   
|Non-cash transactions:                                                             |  |                   
|Issuance of common stock and stock options assumed in connection with acquisitions |  | $                 
|                                                                                   |  |                   
|Restructuring charges                                                              |  | $                 
|                                                                                   |  |                   
|Accretion of series A preferred stock                                              |  | $                 
|                                                                                   |  |                   
|Warrants issued in connection with Series A preferred stock                        |  | $                 
|                                                                                   |  |                   
|Deemed preferred stock dividend                                                    |  | $                 
|                                                                                   |  |                   

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

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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. The results for the nine
 months ended September 27, 2002 include the financial results of the former Western Multiplex for
 the period from January 1, 2002 to September 27, 2002 and the results of the former Proxim, Inc. for
 the period from March 27, 2002 to September 27, 2002, in accordance with accounting principles
 generally accepted in the United States of America. 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-topoint
 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. In March 2002, Western Multiplex merged with Proxim, Inc. located in Sunnyvale,
 California which designs, manufactures and markets high performance wireless local area networking,
 or LAN, and building-tobuilding 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 wireless LAN systems business of Agere Systems, Inc., or Agere, including its ORiNOCO
 product line.


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 September 27, 2002, the condensed consolidated statements of operations for the
 three and nine months ended September 27, 2002 and September 28, 2001, and the condensed
 consolidated statements of cash flows for the nine months ended September 27, 2002 and September
 28, 2001 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.




The
 balance sheet at December 31, 2001 has been derived from Western Multiplexs audited 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 financial
 statements and notes thereto included in the Companys Annual Report on Form 10-K for the year
 ended December 31, 2001.


Principles of Consolidation



The
 consolidated financial statements include the accounts of Proxim Corporation and all of its
 subsidiaries. The financial condition and results of operations for the three and nine months ended
 September 27, 2002 and September 28, 2001 include the results of acquired subsidiaries from their
 effective dates. All significant intercompany transactions and balances are eliminated in
 consolidation.


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Note 2  Summary of Significant Accounting Policies



The
 preparation of financial statements requires the Company to make estimates and judgments that
 affect the reported amounts of assets, liabilities, stockholders equity, revenues, cost of
 revenue and expenses, charges and related disclosure of contingent assets and liabilities. On an
 on-going basis, the Company evaluates its estimates, including those related to customer programs
 and incentives, product returns, bad debts, inventories, investments, intangible assets, income
 taxes, financing operations, warranty obligations, excess component order cancellation costs,
 restructuring, long-term service contracts and contingencies and litigation. The Company bases its
 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 may not be readily apparent from other sources.
 Actual results may differ from these estimates under different assumptions or
 conditions.




Effective
 June 29, 2002, the Company began to recognize sales of its wide area
network, or WAN, products to distributors with rights of return on a sell-through basis. As such, the Company now
 recognizes sales to distributors with rights of return upon shipment to the end customer. Formerly,
 the Company recognized revenue for sales of all WAN 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 ORiNOCO business and the
 adoption of one uniform method is consistent with the Companys plans to sell bundled and
 integrated LAN and WAN products. The impact of this change resulted
in an increase in the net loss and
 loss per share of $9.2 million and $0.08, respectively. Deferred gross profit on these distributor
 sales at September 27, 2002 was $15.0 million. In addition to the deferral of certain WAN product
 revenue identified above, the Company reported accounts receivable net of deferred revenue, and
 carried the value of the related products as consigned inventory. As of September 27, 2002,
 accounts receivable was reduced by $36.1 million to $28.5 million and the Company recorded
 consigned inventory of $21.1 million which increased total inventory to $51.3 million. This change
 in accounting methodology is treated as a change in estimate, and made on a prospective
 basis.




The
 Company maintains allowances for doubtful accounts for estimated losses resulting from the
 inability of its customers to make required payments. If the financial condition of the
 Companys customers were to deteriorate, resulting in an impairment of their ability to make
 payments, additional allowances may be required.




The
 Company provides for the estimated cost of product warranties at the time revenue is recognized.
 While the Company engages in extensive product quality programs and processes, including actively
 monitoring and evaluating the quality of its component suppliers, the Companys 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 the Companys estimates, revisions to the estimated
 warranty liability would be required.




The
 Company writes down its inventory for estimated obsolescence 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 may be required.




The
 Company holds minority interest investments in companies having operations or technology in areas
 within its strategic focus, one of which is publicly traded and has highly volatile share prices.
 The Company records an investment impairment charge when it believes an investment has experienced
 a decline in value that is other than temporary. Future adverse changes in market conditions or
 poor operating results of an investee 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.




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


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Note 3  Business Combinations

Acquisition of the 802.11
wireless LAN systems business of Agere Systems, Inc.



On August
 5, 2002, the Company completed its acquisition of the 802.11 wireless LAN systems business of
 Agere, 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 million in the Company. These investors received 1,640,000 shares
 of redeemable convertible Series A preferred stock (Preferred Stock) in the amount of
 approximately $41 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. A deemed preferred stock dividend representing the beneficial
 conversion feature of the Preferred Stock of $2.7 million was also recorded to increase the loss
 attributable to common stockholders. The remaining $34 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 the Company granted to the investors additional warrants to purchase
 approximately 5.6 million shares of common stock valued at
$1.6 million, which will be recorded as a reduction of the
Preferred Stock carrying value and recorded as additional paid-in
capital in the quarter ending 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 Preferred Stock
 and warrants issued to the investors represent approximately 28% 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 has entered into a patent cross-license agreement and settled all
 outstanding patent-related litigation with Agere, and has entered into a three-year strategic
 supply agreement, pursuant to which Agere will provide 802.11 chips, modules and cards to Proxim at
 specified prices. Total consideration of $70.0 million for the acquisition
 comprised:




       $65.0
 million in cash; and




       transaction
 expenses of approximately $5.0 million.




The
 purpose of the acquisition is to expand the Companys customer base, technological capability and
 geographical coverage.




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 consist 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.


8



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##### Table of Contents





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 had no alternative future use as of the date of acquisition.
 As of the valuation date, the 802.11 wireless LAN 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

Acquisition of nBand Communications,
 Inc.



On April 18, 2002, the Company acquired
 nBand Communication, Inc. (nBand), a California corporation. nBand is
 a startup developer of advanced application specific integrated circuits (ASICs)
 designs that the Company intends to use in the development of next generation ASICs.
 The purchase price was $1.2 million and comprised of $550,000 in cash, 180,144 shares
 of Class A common stock valued at approximately $450,000 and transaction expenses
 of approximately $200,000. In the second quarter of 2002, the Company assigned the
 entire purchase price of $1.2 million to purchased in-process research and development
 as the acquired technology had not reached technological feasibility.


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 wireless LAN 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 and was adjusted to $175.3
 million in the third quarter of 2002 and comprised of:




| | 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
 expenses originally estimated at $14.0 million 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.


9



---



##### Table of Contents





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 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 in-process research and development
 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 wireless LAN 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

Acquisition of WirelessHome



On March 22, 2001, the Company acquired
 WirelessHome located in Long Beach, California in a cash and stock transaction.
 WirelessHome is a development stage company that designs and develops point-to-multipoint
 systems. The acquisition was accounted for as a purchase. The Company acquired WirelessHome
 for a total consideration of $28.2 million comprised of:




| | 1,649,324
 shares of Class A common stock valued at $12.1 million;
|- | ------------------------------------------------------------------
|  |                                                                   
| | $10.5 million
 in cash;                                           

10



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##### Table of Contents





| | options
 and warrants having an assumed value of $0.7 million;                
|- | ------------------------------------------------------------------------------
|  |                                                                               
| | a stock
 price protection contingent consideration valued at $2.5 million; and
|  |                                                                               
| | transaction
 expenses of $2.4 million.                                        



As part of the transaction the Company assumed
 $2.0 million of net liabilities, which consisted of $0.4 million of current assets,
 $0.9 million of other assets and $3.3 million of current liabilities. In March 2001,
 the Company issued an initial consideration of $23.0 million. As a result, the Company
 recorded the initial purchase price allocation as follows: $24.7 million to goodwill
 and $0.3 million to deferred compensation.




The initial purchase price, as well as the
 initial allocation, were subject to adjustments upon WirelessHome meeting certain
 development milestones and other considerations as defined in the agreement to acquire
 WirelessHome.




On October 7, 2001, WirelessHome met the
 development milestones in accordance with the acquisition agreement. This resulted
 in additional purchase consideration of $5.2 million. We then evaluated and recorded
 the final purchase price and stock compensation expense arising from the achievement
 of those milestones. The total purchase price allocation, which consisted of $28.2
 million of purchase price and $2.0 million of net liabilities assumed, was as follows:
 $1.0 million to assembled workforce, $6.4 million to in-process research and development,
 $22.5 million to goodwill, and $0.3 million to deferred compensation. In addition,
 we recorded $2.2 million of stock compensation expense as a result of releasing
 and issuing 558,950 shares, which were previously held in escrow, to individuals
 who were directly involved in the completion of the development milestones.




The purchase price allocation and intangible
 assets valuation were based on managements estimates of the after-tax net
 cash flows and gave consideration to the following: (i) the employment of a fair
 market value premise excluding any consideration specific to the Company which could
 result in estimates of investment value for the subject assets; (ii) comprehensive
 due diligence concerning all potential intangible assets including trademarks, tradename,
 patents, copyrights, non-compete agreements, assembled work force, customer relationships
 and sales channel; and (iii) the value of existing technology was specifically addressed,
 with a view toward ensuring that the relative allocations to existing technology
 and in-process research and development were consistent with the relative contributions
 of each final product.




In making its purchase price allocation,
 management considered present value calculations of income, an analysis of project
 accomplishments and remaining outstanding items and an assessment of overall contributions,
 as well as project risks. The value assigned to purchased in-process technology
 was determined by estimating the costs to develop the acquired technology into commercially
 viable products, estimating the resulting net cash flows from the projects, and
 discounting the net cash flows to their present value. The revenue projection used
 to value the in-process research and development was based on estimates of relevant
 market sizes and growth factors, expected trends in technology, and the nature and
 expected timing of new product introductions by the Company and its competitors.
 The resulting net cash flows from such projects are based on managements estimates
 of cost of revenue, operating expenses, and income taxes from such projects.


Acquisition of Ubiquity Communication,
 Inc.



On March 24, 2000, the Company acquired
 Ubiquity Communication, Inc. (Ubiquity), located in Petaluma, California.
 Through the acquisition, the Company acquired technology for use in its development
 of point-to-multipoint systems. At the time of the acquisition, Ubiquity had seven
 employees, including six engineers. In connection with the acquisition, the Company
 issued 692,772 shares of Class A common stock to its former owners and reserved
 137,727 shares of our Class A common stock for issuance upon the exercise of the
 Ubiquity options we assumed. The value of the consideration paid for the acquisition
 of Ubiquity was $6.4 million. The transaction was accounted for using the purchase
 method of accounting. In March 2001, the Ubiquity operations were closed due to
 the acquisition of WirelessHome.




Goodwill and other intangible assets related
 to the acquisition of Ubiquity totaled $6.8 million. In March 2001, the Company
 recorded an impairment of the Ubiquity goodwill and other intangible assets of $4.3
 million as a result of closing the Ubiquity operations. The amount of the charge
 equals the unamortized amount of these intangible assets as of the date of closure
 of the Ubiquity operations as no future benefit is anticipated, since Ubiquity was
 replaced by WirelessHome as the developer of point-to-multipoint systems. The Ubiquity
 intangible asset of $229,000 is being amortized on a straight-line basis over its
 estimated useful life of three years, or $76,000, per year.


11



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##### Table of Contents



Pro Forma Financial Information



The following table represents unaudited
 pro forma financial information for the nine months ended September 27, 2002 and
 September 28, 2001 had Proxim Corporation (formerly Western Multiplex Corporation),
 Proxim, Inc., WirelessHome, nBand and the 802.11 wireless LAN systems business of
 Agere been combined as of January 1, 2001. 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., WirelessHome,
 nBand and the 802.11 wireless LAN systems business of Agere been a combined company
 during the specified periods. The pro forma results include the effects of the amortization
 of identifiable intangible assets and goodwill and adjustments to the income tax
 provision or benefits. The pro forma combined results exclude the $4.5 million,
 $6.4 million, $1.2 million and $10.4 million charges for acquired in-process technology
 from Proxim, Inc., WirelessHome, nBand and the 802.11 wireless LAN systems business
 of Agere acquisitions, respectively (in thousands except per share amounts):




|                                                                         |  | Nine Months Ended 
|------------------------------------------------------------------------ |  | ------------------
|                                                                         |  |                   
|                                                                         |  | September 27, 2002
|                                                                         |  |                   
|Revenue                                                                  |  | $                 
|Net loss attributable to common stockholders                             |  | $                 
|Basic and diluted net loss per
share attributable to common stockholders |  | $                 
|                                                                         |  |                   

Goodwill and Other Intangible Assets



Goodwill and other intangible assets, net,
 consist of the following (in thousands):




|                                     |  | September 27,2002 |         | December 31,2001
|------------------------------------ |  | ----------------- | ------- | ----------------
|                                     |  |                   |         |                 
|Goodwill:                            |  |                   |         |                 
|GTI                                  |  | $                 | 17,126  |                 
|WirelessHome                         |  |                   | 18,775  |                 
|Proxim, Inc.                         |  |                   | 79,847  |                 
|802.11 wireless LAN systems business |  |                   | 23,086  |                 
|                                     |  |                   |         |                 
|                                     |  | $                 | 138,834 |                 
|                                     |  |                   |         |                 
|Acquired intangible assets:          |  |                   |         |                 
|WirelessHome and other               |  | $                 | 280     |                 
|Proxim, Inc.                         |  |                   | 29,133  |                 
|802.11 wireless LAN systems business |  |                   | 38,021  |                 
|                                     |  |                   |         |                 
|                                     |  | $                 | 67,434  |                 
|                                     |  |                   |         |                 



In July 2001, the Financial Accounting Standards
 Board, or FASB, issued, Statement of Financial Accounting Standards, or SFAS, No.s
 141 and 142, Business Combinations and Goodwill and Other
 Intangibles, respectively. SFAS No. 141 requires all business combinations
 initiated after June 30, 2001 to be accounted for using the purchase method. Under
 SFAS No. 142, effective January 1, 2002, goodwill is no longer subject to amortization
 over its estimated useful life. Rather, goodwill is subject to at least an annual
 assessment for impairment, applying a fair-value based test. Additionally, an acquired
 intangible asset should be separately recognized if the benefit of the intangible
 asset is obtained through contractual or other legal rights, or if the intangible
 asset can be sold, transferred, licensed, rented, or exchanged, regardless of the
 acquirers intent to do so. The Company adopted these new statements to account
 for the merger with Proxim, Inc., the acquisition of nBand and the acquisition of
 the 802.11 wireless LAN systems business of Agere.




Goodwill represents the excess of cost over
 the fair market value of net assets acquired. Goodwill pushed down from the 1995
 acquisition of the Company by GTI totals $22.0 million. Prior to January 1, 2002
 this goodwill was amortized on a straight-line basis over its estimated useful life
 of 30 years, or $0.7 million per year. As a result of the Companys adoption
 of SFAS No. 142, as of January 1, 2002, the Company no longer amortizes goodwill.




Goodwill related to the acquisition of WirelessHome
 totaled $24.7 million. Prior to December 31, 2001 this goodwill was amortized on
 a straight-line basis over its estimated useful life of 5 years. As a result of
 the Companys adoption of SFAS No. 142, as of January 1, 2002, the Company
 no longer amortizes goodwill. This goodwill was subject to subsequent adjustments
 upon WirelessHome meeting certain development milestones and other considerations.
 After WirelessHome met those development milestones, the goodwill was adjusted to
 $22.5 million in the fourth quarter of 2001.


12



---



##### Table of Contents





Goodwill related to the merger with Proxim,
 Inc. totaled $77.2 million and was adjusted to $79.9 million in the third quarter
 of 2002 as a result of additional unanticipated transaction expenses.




Goodwill related to the 802.11 wireless
 LAN systems business of Agere totaled $23.1 million.




Assembled workforce related to the acquisition
 of WirelessHome totaled $1.0 million were reclassified as Goodwill
on January 1, 2002. Patents related to the acquisition of Ubiquity
 totaled $229,000, and are being amortized on a straight-line basis over an
 estimated useful life of 3 years.




Core technology, developed technology and
 patents related to the merger with Proxim, Inc. totaled $18.0 million, $12.0 million
 and $3.2 million respectively, and are being amortized on a straight-line basis
 over an estimated useful life of 5 years, 3 years and 5 years, respectively.




Core technology, developed
technology and customer
 relationships related to the acquisition of the 802.11 wireless LAN
 systems business of Agere totaled $8.5 million, $17.0 million and $9.0 million respectively, and are being amortized on a straight-line basis over an estimated
 useful life of 5 years, 2 years and 3 years, respectively. The fair
value assigned to the trade name totaled $5.9 million and
because the Company will continue to use the ORiNOCO tradename the
intangible asset will not be amortized.




The Company assesses long-lived assets for
 impairment under SFAS No. 121, Accounting for the Impairment of Long-Lived
 Assets and for Long-Lived Assets to be Disposed of. Under those rules, the
 Company reviews long-lived assets and certain identifiable intangibles to be held
 and used for impairment whenever events or changes in circumstances indicate that
 the carrying amount of an asset may not be recoverable. The Company evaluates any
 possible impairment of long-lived assets using estimates of undiscounted future
 cash flows. If an impairment loss is to be recognized, it is measured as the amount
 by which the carrying amount of the asset exceeds the estimated fair value of the
 asset. Management evaluates the fair value of its long-lived assets and intangibles
 using primarily the estimated discounted future cash flows method. Management uses
 other alternative valuation techniques whenever the estimated discounted future
 cash flows method is not applicable.




In August 2001, the FASB issued SFAS No.
 144, Accounting for the Impairment or Disposal of Long-Lived Asset.
 SFAS No. 144 clarifies and further defines the provisions of SFAS No. 121, Accounting
 for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
 Of. SFAS No. 144 does not apply to goodwill and other intangible assets that
 are not amortized. SFAS No. 144 is effective for fiscal years beginning after December
 15, 2001. The Company adopted SFAS No. 144 in the year ending December 31, 2002.
 The effect of adopting this statement did not have a material effect on the Companys
 condensed consolidated financial statements.


Purchased In-Process Research and Development



Purchased in-process research and development
 consist 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 wireless
 LAN 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 the nine months ended September
 27, 2002 and September 28, 2001 (in thousands):




|                                      |  | Year |      | Estimated Cost tocomplete
 Technology atTime of Acquisition |  | Risk-Adjusted DiscountRate
 for In-ProcessResearch andDevelopment
|------------------------------------- |  | ---- | ---- | ----------------------------------------------------------- |  | -----------------------------------------------------------------
|                                      |  |      |      |                                                             |  |                                                                  
|802.11 wireless
 LAN systems business |  |      | 2002 |                                                             |  | $                                                                
|Proxim, Inc                           |  |      | 2002 |                                                             |  | $                                                                
|WirelessHome                          |  |      | 2001 |                                                             |  | $                                                                



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


13



---



##### Table of Contents





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 between six to nine months after integration. 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, 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



|                                                             |  | September 27,2002 |         | December 31,2001
|------------------------------------------------------------ |  | ----------------- | ------- | ----------------
|                                                             |  |                   |         |                 
|                                                             |  | (in thousands)   
|Marketable securities:                                       |  |                   |         |                 
|Corporate bonds and time deposits                            |  | $                 | 2,590   |                 
|Auction rate securities                                      |  |                   |        |                 
|Equity investment in a wireless company listed in Canada     |  |                   | 51      |                 
|                                                             |  |                   |         |                 
|                                                             |  |                   | 2,641   |                 
|Less: long-term portion                                      |  |                   | (1,599  | )               
|                                                             |  |                   |         |                 
|Current portion                                              |  | $                 | 1,042   |                 
|                                                             |  |                   |         |                 
|Accounts receivable, net:                                    |  |                   |         |                 
|Gross accounts receivable                                    |  | $                 | 70,565  |                 
|Less: deferred revenue                                       |  |                   | (36,076 | )               
|allowances for bad debts, sales returns and price protection |  |                   | (5,969  | )               
|                                                             |  |                   |         |                 
|                                                             |  | $                 | 28,520  |                 
|                                                             |  |                   |         |                 
|Inventory, net:                                              |  |                   |         |                 
|Raw materials                                                |  | $                 | 44,249  |                 
|Work-in-process                                              |  |                   | 7,980   |                 
|Finished goods                                               |  |                   | 21,358  |                 
|Consignment inventories                                      |  |                   | 21,126  |                 
|                                                             |  |                   |         |                 
|                                                             |  |                   | 94,713  |                 
|Less: reserve for excess and obsolete inventory              |  |                   | (43,412 | )               
|                                                             |  |                   |         |                 
|                                                             |  | $                 | 51,301  |                 
|                                                             |  |                   |         |                 
|Property and equipment, net:                                 |  |                   |         |                 
|Computer and test equipment                                  |  | $                 | 17,663  |                 
|Furniture and fixtures                                       |  |                   | 914     |                 
|Leasehold improvements                                       |  |                   | 222     |                 
|                                                             |  |                   |         |                 
|                                                             |  |                   | 18,799  |                 
|Less: accumulated depreciation                               |  |                   | (8,073  | )               
|                                                             |  |                   |         |                 
|                                                             |  | $                 | 10,726  |                 
|                                                             |  |                   |         |                 
|Goodwill and other intangible assets, net:                   |  |                   |         |                 
|Goodwill                                                     |  | $                 | 148,433 |                 
|Core technology                                              |  |                   | 26,531  |                 
|Developed technology                                         |  |                   | 29,036  |                 
|Acquired workforce                                           |  |                   |        |                 
|Customer relationships                                       |  |                   | 8,995   |                 
|Tradename                                                    |  |                   | 5,909   |                 
|Patents                                                      |  |                   | 3,439   |                 
|                                                             |  |                   |         |                 
|                                                             |  |                   | 222,343 |                 
|Less: Accumulated amortization                               |  |                   | (16,075 | )               
|                                                             |  |                   |         |                 
|                                                             |  | $                 | 206,268 |                 
|                                                             |  |                   |         |                 

14



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##### Table of Contents





|                                        |  | September 27,2002 |        | December 31,2001
|--------------------------------------- |  | ----------------- | ------ | ----------------
|                                        |  |                   |        |                 
|                                        |  | (in thousands)   
|Other current liabilities:              |  |                   |        |                 
|Restructuring accruals, current portion |  | $                 | 6,226  |                 
|Accrued merger costs                    |  |                   | 877    |                 
|Accrued compensation                    |  |                   | 5,036  |                 
|Accrued warranty costs                  |  |                   | 2,216  |                 
|Other accrued liabilities               |  |                   | 12,087 |                 
|                                        |  |                   |        |                 
|                                        |  | $                 | 26,442 |                 
|                                        |  |                   |        |                 

Note 5  Revenue Information and
 Concentration of Credit Risks:



The Companys products are grouped
 into two product lines: Wide Area Network, or WAN, product line, and; Local Area
 Network, or LAN, product line. The WAN product line includes point-to-point Lynx,
 Tsunami, Stratum and ORiNOCO products and point-to-multipoint Tsunami and Stratum
 products. The LAN product line includes 900 MHz, RangeLAN, Harmony, 802.11b, 802.11a,
 Skyline and ORiNOCO products for the Enterprise/Commercial markets; and Symphony
 HomeRF and HomeRF 2.0 products and Netline products for the Home/SOHO markets. Prior
 to the March 26, 2002 merger with Proxim, Inc., the Company did not have a LAN product
 line. Historical LAN 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. Revenue information by product line is as follows (in
 thousands):




|              |  | Three Months Ended |        | Nine Months Ended
|------------- |  | ------------------ | ------ | -----------------
|              |  |                    |        |                  
|Product Line  |  | September 27,2002  |        | September 28,2001
|              |  |                    |        |                  
|WAN           |  | $                  | 4,193  |                  
|LAN           |  |                    | 19,925 |                  
|              |  |                    |        |                  
|Total revenue |  | $                  | 24,118 |                  
|              |  |                    |        |                  



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 United States 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 |        | Nine Months Ended
|----------------- |  | ------------------ | ------ | -----------------
|                  |  |                    |        |                  
|Geographic Region |  | September 27,2002  |        | September 28,2001
|                  |  |                    |        |                  
|North America     |  | $                  | 16,744 |                  
|International     |  |                    | 7,374  |                  
|                  |  |                    |        |                  
|Total revenue     |  | $                  | 24,118 |                  
|                  |  |                    |        |                  



One customer accounted for 21.2% of total
 revenue for the nine months ended September 27, 2002, and two customers accounted
 for 30.2% and 10.7% of total revenue in the nine months ended September 28, 2001.


Note 6  Restructuring Charges



The Company accounts 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 2001, the Company recorded $1.8 million
 of restructuring charges related to the closure of its former Ubiquity operations
 and employee severance. The charges include $1.6 million of cash provisions, which
 include severance of $1.4 million for 26 employees and $0.2 million for future lease
 commitments and exit costs related to the Petaluma office facility. The charge also
 includes $0.2 million of non-cash provisions primarily related to fixed assets and
 other assets that will no longer be used at the facility.




As a result of the acquisition of the 802.11
 wireless LAN systems business of Agere during the three months ended September 27,
 2002, the Company recorded $2.3 million of restructuring charges related to severance
 pay for 61 employees.


15



---



##### Table of Contents



For the nine
 months ended September 27, 2002, the Company recorded $53.9 million
 of restructuring
 charges, including a $48.0 million, $3.6 million and $2.3 million in the first,
 second and third quarter of 2002, respectively, related to closure of certain facilities,
 discontinued product lines and severance pay. The charges included $43.8 million
 of cash provisions, which included severance of $6.0 million for 122 employees,
 $32.7 million for future lease commitments and exit costs related to the closure
 of four facilities, $5.0 million related to purchase order commitments and $0.1
 related to consulting fees. The charges also included $10.1 million of non-cash
 provisions of which $7.7 million related to additional reserves for excess and obsolete
 inventory on hand and $2.4 million related to fixed assets that will no longer be
 used at the facilities.

Included in
 the restructuring charge during the nine months ended September 27, 2002 was an
 increase in the reserve for excess and obsolete inventory of $7.7 million and purchase
 commitments of $5.0 million. Inventory purchases and commitments are based upon
 future sales forecasts. To mitigate the component supply constraints that have existed
 in the past, the Company 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 the nine month
 period ended September 27, 2002:



|Balance as of December 31, 2001                      | $ | 3,021   |  
|---------------------------------------------------- | - | ------- | -
|Additional reserve for excess and obsolete inventory |   | 7,686   |  
|Balance acquired with Proxim, Inc.                   |   | 45,114  |  
|Inventory scrapped                                   |   | (12,409 | )
|                                                     |   |         |  
|Balance as of September 27, 2002                     | $ | 43,412  |  
|                                                     |   |         |  

The following
 table summarizes the restructuring activity in 2001 and the nine
months period ended September 27, 2002 (in thousands):



|                                   | Severances |        | Facilities |  | Inventory |        | Other |  | Total
|---------------------------------- | ---------- | ------ | ---------- |  | --------- | ------ | ----- |  | -----
|                                   |            |        |            |  |           |        |       |  |      
|Balance as
 of December 31, 2000   | $          |       |            |  | $         |       |       |  | $    
|Provision charged to operations    |            | 1,382  |            |  |           | 388    |       |  |      
|Charges utilized                   |            | (1,184 | )          |  |           | (156   | )     |  |      
|                                   |            |        |            |  |           |        |       |  |      
|Balance as of December 31, 2001    |            | 198    |            |  |           | 232    |       |  |      
|Balance acquired with Proxim, Inc. |            |       |            |  |           | 1,066  |       |  |      
|Provision charged to operations    |            | 6,046  |            |  |           | 32,699 |       |  |      
|Charges utilized                   |            | (5,658 | )          |  |           | (2,609 | )     |  |      
|                                   |            |        |            |  |           |        |       |  |      
|Balance as of September 27, 2002   | $          | 586    |            |  | $         | 31,388 |       |  | $    
|                                   |            |        |            |  |           |        |       |  |      

In June 2002,
 the Financial Accounting Standards Board (FASB) issued Statements of Financial
 Accounting Standard (SFAS) No. 146, Accounting for Costs Associated with Exit
 or Disposal Activities. SFAS No. 146 addresses significant issues relating to the
 recognition, measurement and reporting of costs associated with exit and disposal
 activities, and nullifies the guidance in Emerging Issues Task Force (EITF)
 Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits
 and Other Costs to Exit an Activity. SFAS No. 146:



| | requires that
 the initial liability of costs associated with exit and disposal activities be measured
 at fair value.
|- | ----------------------------------------------------------------------------------------------------------------------

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| | prohibits
 the recognition of a liability based on an entitys commitment to a plan.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 the liability for costs associated with exit or disposal activities be evaluated
 each reporting period and subsequent changes in the fair value of the liability
 be measured using an interest allocation approach.                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | provides a
 definition of a one-time benefit arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | provides a
 model for the accounting for one-time termination benefits that is based on whether
 the benefit arrangement requires employees to render future service beyond a minimum
 retention period.                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 a liability for costs to terminate an operating lease or other contract that represent
 (1) costs to terminate a contract before the end of its term be recognized and measured
 at fair value when the entity terminates the contract in accordance with the contract
 terms and (2) costs that will continue to be incurred under the contract for its
 remaining term without economic benefit to be recognized and measured at fair value
 when the entity ceases using the rights conveyed by the contract.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | nullifies
 EITF Issue No. 88-10, Costs Associated with Lease Modification or
 Termination, by requiring that the fair value of the liability
 for costs associated with an operating
 lease that is not terminated be measured at the cease-use date based on the remaining
 lease rentals reduced by estimated sublease rentals that could be reasonably obtained
 for the property.                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 all costs associated with an exit or disposal activity be expensed as incurred,
 even those costs are incremental to other operating costs and will be incurred as
 a direct result of the plan.                                                                                                                                                                                                                                                                                                                

The provisions of SFAS No. 146 are effective
 for exit or disposal activities initiated after December 31, 2002. SFAS No. 146
 is applied prospectively upon adoption and, as a result, would not have a material
 impact on the Companys consolidated financial statements.

Note 7  Income Taxes

The income
 tax provision for the nine months ended September 27, 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, which
 was recorded in other current assets in the first quarter of 2002. 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 8  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 128 were computed using the weighted average number of shares outstanding
 of 119,556,721 and 57,747,335 for the three months ended September 27, 2002 and
 September 28, 2001, respectively, and the weighted average number of shares outstanding
 of 100,005,804 and 57,084,837 for the nine months ended September 27, 2002 and September
 28, 2001, 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
 and nine months ended September 27, 2002 and September 28, 2001, 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 9  Mandatorily Redeemable
Convertible Preferred Stock and Stockholders Equity

Mandatorily Redeemable
Convertible Preferred Stock

Mandatorily
redeemable convertible Preferred Stock or Preferred Stock, holders of
the Preferred Stock are entitled to receive certain benefits not
available to holders of the 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;


Common Stock

The Companys
 authorized common stock consists of Class A and Class B common stock. Holders
 of Class A common stock are entitled to one vote per share. Holders of Class B common

17



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stock are entitled to ten votes per share.
 Each share of Class B common stock is convertible into one share of Class A common
 stock at the election of the stockholder or, prior to the Companys initial
 public offering, upon such event.

As of September
 27, 2002, there were 119,688,165 shares of Class A common stock issued and outstanding
 and 42,185,534 shares of Class A treasury stock.

Stock Plans

As part of
 the merger with Proxim, Inc., the Company assumed certain vested and unvested options
 that when converted would result in approximately 8.7 million and 7.3 million shares
 of common stock outstanding. These options have a weighted average exercise price
 of $5.75 per share. Additionally, approximately 10.8 million shares were available
 under Proxim, Inc. plans.

Note 10  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 September 27, 2002 were as follows (in thousands):



|Three months ending December 31, 2002 | $ | 2,357 
|------------------------------------- | - | ------
|Year ending December 31:              |   |       
|2003                                  |   | 9,927 
|2004                                  |   | 10,595
|2005                                  |   | 10,476
|2006                                  |   | 9,009 
|Thereafter                            |   | 27,801
|                                      |   |       
|Total minimum lease payments          | $ | 70,165
|                                      |   |       

During the
 nine months ended September 27, 2002 the Company recorded a restructuring charge
 relating to the committed future lease payment for closed facilities, net of estimated
 future sublease receipts, of $32.7 million, which are included in the above disclosures.

Note 11  Legal Proceedings

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.

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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 wireless LAN 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, 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 wireless
 LAN 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.

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 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
Company is 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 that the Company implemented during
2001 and 2002. The Company has insurance intended to cover claims of
this nature and 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, we could be required to pay damages
 and other expenses. In the case of disputes 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 can not make any assurance that these matters will not materially and adversely
 affect our business, financial condition or operating results.

Note 12  Supplemental Cash Flow
 Data

The Company
 paid cash of $50,577,000 and $10,146,000, respectively in connection with its merger
 with Proxim, Inc. and the acquisition of nBand, WirelessHome and the 802.11 wireless
 LAN systems business of Agere in the nine months ended September 27, 2002 and September
 28, 2001, respectively, described below (in thousands):



|                              | Nine months ended
|----------------------------- | -----------------
|                              |                  
|                              | September 27,2002
|                              |                  
|Purchase price                |                  
|Common stock issued           |                  
|Accrued transactions costs    |                  
|                              |                  
|Cash paid                     |                  
|Less: cash acquired           |                  
|                              |                  
|Net cash used in acquisitions |                  
|                              |                  

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Note 13  Subsequent Event

The Company
 had guaranteed up to $5 million of obligations of Mr. David King, President and
 Chief Operating Officer, with respect to a margin loan with an investment bank that
 he established prior to 2001. This guarantee was established in March 2001. Mr.
 Kings margin account obligations were secured by, among other assets, shares
 of the Companys common stock owned by Mr. King. Following the recent decline
 in the share price of the Companys common stock, the investment bank demanded
 that Mr. King deposit sufficient funds into his account to discharge his indebtedness.
 After making certain payments to the investment bank, Mr. King indicated that he
 was unable to promptly pay the remaining $5 million of debt in his margin account.
 On October 15, 2002, the investment bank called the Companys guarantee of
 $5 million. Pursuant to a Reimbursement and Security Agreement entered into on March
 15, 2001, Mr. King agreed to reimburse the Company for any payment that the Company
 may make to the investment bank under the guarantee. The Company will not forgive
 Mr. Kings indebtedness and will seek repayment from Mr. King under the Reimbursement
 and Security Agreement.

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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, or Western Multiplex. The results for the nine months ended
 September 27, 2002 include the financial results of the former Western Multiplex
 for the period from January 1, 2002 to September 27, 2002, the results of the
 former Proxim, Inc. for the period from March 27, 2002 to September 27, 2002, and
 the results of the 802.11 wireless LAN systems business of Agere for the period
 from August 6, 2002 to September 27, 2002, in accordance with generally accepted
 accounting principles for accounting for business combinations. 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 wireless LAN 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 startup developer of ASIC
 technology.

On August
 5, 2002, we completed our acquisition of the 802.11 wireless LAN systems business
 of Agere, 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 million in the Company.
 These investors received 1,640,000 shares of redeemable convertible Series A preferred
 stock (Preferred Stock) in the amount of approximately $41 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. A deemed preferred stock dividend
 representing the beneficial conversion feature of the Preferred Stock of $2.7 million
 was also recorded to increase the loss attributable to common stockholders. The
 remaining $34 million was in the form 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 we granted to the investors additional warrants to purchase approximately 5.6
 million shares of common stock valued at $1.6 million, which
will be recorded as a reduction of the Preferred Stock carrying
value and recorded as additional paid-in capital in the quarter
ending 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
 Preferred Stock and warrants issued to the investors represent approximately 28%
 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 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.

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Revenue. We generate revenue primarily from the sale of our Lynx and Tsunami systems
 for our WAN product line, and 802.11a and HomeRF 2.0 standards based products, acquired
 in the Proxim, Inc. acquisition, and ORiNOCO products acquired from Agere, for our
 LAN 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 the last month of 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.

Effective
 June 29, 2002 we began to recognize sales of our WAN products to distributors with
 rights of return on a sell-through basis. As such, we now recognize all sales to
 distributors with rights of return upon shipment to the end customer. Formerly,
 we recognized revenue for sales of WAN 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 ORiNOCO business and the adoption of one uniform method is consistent with
 our plans to sell bundled and integrated LAN and WAN products. This change in accounting
 methodology is treated as a change in estimate, and made on a prospective basis.
 Revenue from services, such as preinstallation 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 over
 the period of the rental.

Revenue consists
 of product revenues reduced by estimated sales returns and allowances. 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 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 also 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 or value-added
 resellers or OEM customers, could materially adversely affect our revenue.

During the
 nine months ended September 27, 2002, we sold our products to approximately 170
 customers in 45 countries. In the nine months ended September 27, 2002, international
 sales accounted for approximately 40% of our total revenue. 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 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, 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 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.

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. 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

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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 is included as a reduction of stockholders equity and
 is being amortized by charges to operations over the vesting period. The amortization
 expense relates to options awarded to employees in all operating expense categories.

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.

Effective
 June 29, 2002, we began to recognize sales of our WAN products to distributors with
 rights of return on a sell-through basis. As such, we now recognize all sales to
 distributors with rights of return upon shipment to the end customer. Formerly,
 we recognized revenue for sales of WAN products to distributors with rights 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 acquisition
 of the ORiNOCO business and the adoption of one uniform method is consistent with
 our plans to sell bundled and integrated LAN and WAN products. This change in accounting
 methodology is treated as a change in estimate, and made on a prospective basis.
 The impact of this change resulted in an increase in the net loss and earnings per
 share of $9.2 million and $0.08, respectively. Deferred gross profit on these distributors
 sales at September 27, 2002 was $15.0 million. In addition to the deferral of certain
 WAN product revenue identified above, we reported accounts receivable net of deferred
 revenue and carried the value of the related products as consigned inventory. As
 of September 27, 2002, accounts receivable was reduced by $36.1 million to $28.5
 million and we recorded consigned inventory of $21.1 million which increased total
 inventory to $51.3 million.

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We record
 estimated reductions to revenue for 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.

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.

We write down
 our inventory for estimated obsolescence 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
 may be required.

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.

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.

Results of Operations

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



|                                                     | Three Months Ended |        | Nine Months Ended
|---------------------------------------------------- | ------------------ | ------ | -----------------
|                                                     |                    |        |                  
|                                                     | September 27,2002  |        | September 28,2001
|                                                     |                    |        |                  
|Revenue                                              |                    | 100.0  | %                
|Cost of revenue                                      |                    | 58.4   |                  
|                                                     |                    |        |                  
|Gross profit                                         |                    | 41.6   |                  
|                                                     |                    |        |                  
|Operating expenses:                                  |                    |        |                  
|Research and development                             |                    | 36.1   |                  
|Selling, general and administrative                  |                    | 63.1   |                  
|Amortization of goodwill and other intangible assets |                    | 19.1   |                  
|Amortization of deferred stock compensation          |                    | 1.3    |                  
|Impairment of goodwill and other intangible assets   |                    |       |                  
|Restructuring charges                                |                    | 9.7    |                  
|In-process research and development                  |                    | 43.0   |                  
|Merger costs                                         |                    |       |                  
|                                                     |                    |        |                  
|Total operating expenses                             |                    | 172.3  |                  
|                                                     |                    |        |                  
|Loss from operations                                 |                    | (130.7 | )                
|Interest income (expense), net                       |                    | (1.4   | )                
|                                                     |                    |        |                  
|Loss before taxes                                    |                    | (132.1 | )                
|Income tax provision (benefit)                       |                    |       |                  
|                                                     |                    |        |                  
|Net loss                                             |                    | (132.1 | )                
|Deemed preferred stock dividend                      |                    | (11.4  | )                
|Accretion of Series A preferred stock                |                    | (2.0   | )                
|                                                     |                    |        |                  
|Net loss attributable to common stockholders         |                    | (145.5 | )%               
|                                                     |                    |        |                  

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Comparison of Three and Nine Months Ended
 September 27, 2002 and September 28, 2001

Revenue

We classify
 our products into two product lines: the Wide Area Network, or WAN, product line,
 and; the Local Area Network, or LAN, product line. The WAN product line includes
 point-to-point Lynx, Tsunami, Stratum and ORiNOCO products and point-to-multipoint
 Tsunami and Stratum products. The LAN product line includes 900 MHz, RangeLAN, Harmony,
 802.11b, 802.11a , Skyline and ORiNOCO products for the Enterprise/Commercial markets;
 and Symphony HomeRF and HomeRF 2.0 products and Netline products for the Home/SOHO
 markets. Prior to the merger we did not have a LAN product line. Historical LAN
 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. Revenue information by product line is as follows (in thousands):



|              | Three Months Ended |   | Nine Months Ended
|------------- | ------------------ | - | -----------------
|              |                    |   |                  
|Product Line  | September 27,2002  |   | September 28,2001
|              |                    |   |                  
|WAN           |                    | $ | 4,193            
|LAN           |                    |   | 19,925           
|              |                    |   |                  
|Total revenue |                    | $ | 24,118           
|              |                    |   |                  

Revenue increased
 11.3% from $21.7 million in the third quarter of 2001 to $24.1 million in the third
 quarter of 2002. Revenue increased primarily due to the contribution of sales of
 LAN products totaling $19.9 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. This was offset by a decrease in WAN product sales due to the adoption
 of a uniform sell-through revenue recognition methodology for products that are
 sold through distribution channels with rights of return. This accounting methodology
 change was implemented on a prospective basis effective June 29, 2002, and resulted
 in the deferral of $22.2 million of revenue from WAN products shipped to distributors
 during the third quarter that were not sold through to end customers.

Revenue increased
 16.1% from $81.6 million in the nine months ended September 28, 2001 to $94.7 million
 in the nine months ended September 27, 2002. Revenue increased primarily due to
 the contribution of sales of LAN products, and was partially offset by a decrease
 in WAN revenue in the third quarter due to the accounting methodology change that
 resulted in the deferral of $22.2 million of revenue.

Cost of revenue

Cost of revenue
 increased 10.2% from $12.8 million in the third quarter of 2001 to $14.1 million
 in the third quarter of 2002. As a percentage of revenue, cost of revenue decreased
 from 59.2% in the third quarter of 2001 to 58.4% in the third quarter of 2002. Cost
 of revenue increased 24.9% from $43.8 million in the nine months ended September
 28, 2001 to $54.7 million in the nine months ended September 27, 2002. As a percentage
 of revenue, cost of revenue increased from 53.7% in the nine months ended September
 28, 2001 to 57.8% in the nine months ended September 27, 2002. The increases in
 cost of revenue for both comparable periods were primarily attributable to increased
 revenue. The decrease in cost of revenue as a percentage of revenue for the third
 quarter of 2002 compared to the third quarter of 2001 was primarily attributable
 to a $2.0 million stock rotation reserve established in the third quarter of 2001
 to reserve for future product returns based on historical experience. The increase
 in cost of revenue as a percentage of revenue for nine months ended September 27,
 2002 compared to the nine months ended September 28, 2001 was primarily attributable
 to manufacturing inefficiencies related to point-to-multipoint Tsunami products
 and a higher contribution of lower gross margin LAN products acquired in both the
 merger with Proxim, Inc and the acquisition of the 802.11 wireless LAN system business
 from Agere.

Research and development

Research and
 development expenses increased 67.3% from $5.2 million in the third quarter of 2001
 to $8.7 million in the third quarter of 2002. Research and development expenses
 increased 43.4% from $14.3 million in the nine months ended September 28, 2001 to
 $20.5 million in the nine months ended September 27, 2002. The increases in research
 and development expenses for both periods were 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 wireless LAN 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 expenses increased
 from 23.8% in the third quarter of 2001 to 36.1% in the third quarter of 2002. As
 a percentage of revenue, research and development expenses increased from 17.5%
 in the nine months ended September 28, 2001 to 21.7% in the nine months ended September
 27, 2002.

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The percentage increase for each comparable
 period was primarily due to lower revenue as a result of the accounting methodology
 change partially offset by increased personnel expenses.

Selling, general and administrative

Selling, general
 and administrative expenses increased 46.2% from $10.4 million in the third quarter
 of 2001 to $15.2 million in the third quarter of 2002. Selling, general and administrative
 expenses increased 19.1% from $29.9 million in the nine months ended September 28,
 2001 to $35.6 million in the nine months ended September 27, 2002. The increase
 in selling, general and administrative expenses for both comparable periods 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 wireless LAN systems business of Agere, advertising, tradeshow, and
 public relations expenses. As a percentage of revenue, selling, general and administrative
 expenses increased from 48.1% in the third quarter of 2001 to 63.1% in the third
 quarter of 2002 and from 25.1% in the nine months ended September 28, 2001 to 37.6%
 in the nine months ended September 27, 2002. The percentage increases for both comparable
 periods were primarily due to lower revenue due to the accounting methodology change
 offset by increased personnel and program expenses.

Amortization of goodwill and other intangible
 assets

Amortization
 of goodwill and other intangible assets increased from $1.5 million in the third
 quarter of 2001 to $4.6 million in the third quarter of 2002. Amortization of goodwill
 increased from $3.7 million in the nine months ended September 28, 2001 to $7.0
 million in the nine months ended September 27, 2002. Amortization of goodwill and
 other intangible assets for both comparable periods increased primarily due to the
 increased intangible assets from both the merger with Proxim, Inc. on March 26,
 2002 and the acquisition of the 802.11 wireless LAN systems business of Agere offset
 by the cessation of amortization of goodwill subsequent to the adoption of SFAS
 No. 142 beginning in January 1, 2002.

Amortization of deferred stock compensation

Amortization
 of deferred stock compensation was $303,000 in the third quarter of 2001 and $316,000
 in the third quarter of 2002. Amortization of deferred stock compensation was $2.6
 million in the nine months ended September 28, 2001 and $741,000 in the nine months
 ended September 27, 2002. As a result of closing the Ubiquity operations in March
 2001, we reversed in the first quarter of 2001 both a portion of the deferred stock
 compensation associated with the Ubiquity employees expensed in previous quarters
 and the remaining unamortized portion of the deferred stock compensation associated
 with those employees. Amortization of deferred stock compensation for both comparable
 periods decreased primarily due to the closing of the Ubiquity
operations in 2001.

Impairment of goodwill and other intangible
 assets

We recorded
 $4.3 million of impairment for goodwill related to our former Ubiquity operations
 during the first quarter of 2001. The amount of the charge equaled the unamortized
 amount of the goodwill as of the date of the closure of the Ubiquity facilities
 as no future benefit is anticipated since Ubiquity has been replaced by WirelessHome
 as the developer of our point-to-multipoint systems.

Due to the
decline in the market price of our common stock in the fourth quarter
of 2002, we are currently assessing the appropriateness of an
impairment charge related to our long-lived assets.

Restructuring charges

During 2001,
 we recorded $1.8 million of restructuring charges related to the closure of our
 former Ubiquity operations and employee severance. The charges included $1.6 million
 of cash provisions, which included severance of $1.4 million for 26 employees and
 $0.2 million for future lease commitments and exit costs related to the Petaluma
 office facility. The charge also included $0.2 million of non-cash provisions primarily
 related to fixed assets and other assets that will no longer be used at the facility.

As a result
 of the acquisition of the 802.11 wireless LAN systems business of Agere during the
 three months ended September 27, 2002, we recorded $2.3 million of restructuring
 charges related to severance pay for 61 employees.

For the nine
 months ended September 27, 2002, we recorded $53.9 million of restructuring charges,
 including $48.0 million, $3.6 million and $2.3 million in the first, second and
 third quarters of 2002, respectively, related to closure of certain facilities,
 discontinued product lines and severance pay. The charges include $43.8 million
 of cash provisions, which include severance of $6.0 million for 122 employees, $32.7
 million for future lease commitments and exit costs related to the closure of four
 facilities, $5.0 million related to purchase order commitments and $0.1 related
 to consulting fees. The charge also includes $10.1 million of non-cash

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provisions of which $7.7 million relates
 to an additional reserve for excess and obsolete inventory on hand and $2.4 million
 relates to fixed assets that will no longer be used at the facilities.

In-process research and development

Purchased
 in-process research and development consist primarily of acquired technology that
 has not reached technological feasibility and had no alternative future use as of
 the date of acquisition.

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 wireless LAN 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 related to the Proxim,
 Inc. merger.

Interest income (expense), net

Interest income
 (expense), net decreased from income of $304,000 in the third quarter of 2001 to
 expense of $355,000 in the third quarter of 2002. The increase in interest expense
 is mainly attributable to interest on the convertible promissory notes issued in
 August 2002. Interest income decreased from $1.2 million in the nine months ended
 September 28, 2001 to $16,000 in the nine months ended September 27, 2002 due to
 the lower applicable return rates.

Income tax provision

The income
 tax provision for the nine months ended September 27, 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. We will carry back losses
 to prior years and claim income tax refunds totaling $10.4 million, which was recorded
 in other current assets in the first quarter of 2002. Accordingly, we believe 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.

Liquidity and Capital Resources

Cash and cash
 equivalents increased by $11.7 million from $16.6 million at December 31, 2001 to
 $28.3 million at September 27, 2002. Cash and cash equivalents decreased by $21.6
 million from $31.1 million at December 31, 2000 to $9.5 million at September 28,
 2001.

Net cash used
 in operating activities was $16.8 million in the nine months ended September 27,
 2002 primarily due to the net loss after the effect of non cash charges, an increase
 in inventory and other current assets, partially offset by a decrease in accounts
 receivable and an increase in accounts payable and accrued liabilities. Net cash
 used in operating activities was $18.0 million in the nine months ended September
 28, 2001 primarily due to the net loss after the effect of non cash charges, an
 increase in inventory and a decrease in account payable and accrued liabilities,
 partially offset by a decrease in accounts receivable and other assets.

Net cash used
 in investing activities was $46.8 million in the nine months ended September 27,
 2002 due to $50.6 million in cash used in the merger with Proxim, Inc., the acquisition
 of the 802.11 wireless LAN systems business of Agere and the nBand acquisition and
 by $3.1 million in capital spending, partially offset by $6.9 million in net proceeds
 from the sale of investment securities. Net cash used in investing activities was
 $3.8 million in the nine months ended September 28, 2001 due to capital spending
 of $4.4 million and $10.1 million of spending associated with the acquisition of
 WirelessHome, partially offset by the net proceeds from the sale of investment securities
 of $10.7 million.

Net cash provided
 by financing activities was $75.3 million in the nine months ended September 27,
 2002 due to proceeds from the issuance of Series A preferred stock, convertible
 promissory notes and the issuance of common stock as a result of the exercise of
 employee stock options and employee stock purchase plan purchases partially offset
 by purchases of treasury stock related to employee stock forward sale agreements.
 Net cash provided by financing activities was $285,000 in the nine months ended
 September 28, 2001 due to issuance of common stock as a result of the exercise of
 employee stock options and the employee stock purchase plan purchases offset by
 repayment of long-term debt.

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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 minimum lease payments under non-cancelable operating
 leases at September 27, 2002 were as follows (in thousands):



|Three months ending December 31, 2002 | $ | 2,357 
|------------------------------------- | - | ------
|Year ending December 31:              |   |       
|2003                                  |   | 9,927 
|2004                                  |   | 10,595
|2005                                  |   | 10,476
|2006                                  |   | 9,009 
|Thereafter                            |   | 27,801
|                                      |   |       
|Total minimum lease payments          | $ | 70,165
|                                      |   |       

As of September
 27, 2002 we had unconditional purchase order commitments of $1.5 million for excess
 and obsolete inventory, which were accrued for as restructuring charges.

We had guaranteed
 up to $5 million of obligations of Mr. David King, President and Chief Operating
 Officer, with respect to a margin loan with an investment bank that he established
 prior to 2001. This guarantee was established in March 2001. Mr. Kings margin
 account obligations were secured by, among other assets, shares of our common stock
 owned by Mr. King. Following the recent decline in the share price of our common
 stock, the investment bank demanded that Mr. King deposit sufficient funds into
 his account to discharge his indebtedness. After making certain payments to the
 investment bank, Mr. King indicated that he was unable to promptly pay the remaining
 $5 million of debt in his margin account. On October 15, 2002, the investment bank
 called our guarantee of $5 million. Pursuant to a Reimbursement and Security Agreement
 entered into on March 15, 2001, Mr. King agreed to reimburse us for any payment
 that we may make to the investment bank under the guarantee. We will not forgive
 Mr. Kings indebtedness and will seek repayment from Mr. King under the Reimbursement
 and Security Agreement.

On November
 1, 1999, we entered into a credit agreement with Credit Suisse First Boston, as
 agent. The credit agreement included two term notes and a $10 million revolving
 credit facility maturing in November 2000. We had the option to prepay the term
 notes at any time upon adequate notice to the lender. In August 2000, subsequent
 to the completion of our initial public offering, we repaid the term notes and all
 borrowings outstanding under the revolving credit facility. As of September 27,
 2002, we had no borrowings outstanding under the revolving credit facility.

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.
These steps were taken in October 2002, and we expect to record
approximately $2.0 million of restructuring charges related
primarily to severance payments in the fourth quarter of 2002. We
also intend to reduce the amount of consignment inventories held by
distributors by reducing manufacturing volumes in the fourth quarter
of 2002 and the first quarter of 2003 below the expected sell through
of products during those periods. While we expect our cash balances
to decline during the fourth quarter of 2002, we are taking measures to reduce our
operating expenses and reduce the amount of cash utilized for
consignment inventories.

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 as well as increased market uncertainty following the terrorist
 attacks of September 11, 2001, the ongoing U.S. war on terrorism and the potential
 war with Iraq. There can be no assurance that any financing will be available on
 terms acceptable to us, 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 August
 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial
 Accounting Standards, or SFAS, No. 144, Accounting for the Impairment or Disposal
 of Long-Lived Asset. SFAS No. 144 clarifies and further defines the provisions
 of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
 Long-Lived Assets to be Disposed Of. SFAS No. 144 does not apply to goodwill
 and other intangible assets that are not amortized. SFAS No. 144 is effective for
 fiscal years

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beginning after December 15, 2001. We adopted
 SFAS No. 144 in the year ending December 31, 2002. The effect of adopting this statement
 did not have a material effect on our financial statements.

In June 2002,
 the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
 Activities. SFAS No. 146 addresses significant issues relating to the recognition,
 measurement and reporting of costs associated with exit and disposal activities,
 and nullifies the guidance in Emerging Issues Task Force (EITF) Issue
 No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
 Costs to Exit an Activity. SFAS No. 146:



| | requires that
 the initial liability of costs associated with exit and disposal activities be measured
 at fair value.                                                                                                                                                                                                                                                                                                                                                                                                         
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | prohibits
 the recognition of a liability based on an entitys commitment to a plan.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 the liability for costs associated with exit or disposal activities be evaluated
 each reporting period and subsequent changes in the fair value of the liability
 be measured using an interest allocation approach.                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | provides a
 definition of a one-time benefit arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | provides a
 model for the accounting for one-time termination benefits that is based on whether
 the benefit arrangement requires employees to render future service beyond a minimum
 retention period.                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 a liability for costs to terminate an operating lease or other contract that represent
 (1) costs to terminate a contract before the end of its term be recognized and measured
 at fair value when the entity terminates the contract in accordance with the contract
 terms and (2) costs that will continue to be incurred under the contract for its
 remaining term without economic benefit to be recognized and measured at fair value
 when the entity ceases using the rights conveyed by the contract.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | nullifies
 EITF Issue No. 88-10, Costs Associated with Lease Modification or Termination,
 by requiring that the fair value of the liability for costs associated with an operating
 lease that is not terminated be measured at the cease-use date based on the remaining
 lease rentals reduced by estimated sublease rentals that could be reasonably obtained
 for the property.                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | requires that
 all costs associated with an exit or disposal activity be expensed as incurred,
 even those costs are incremental to other operating costs and will be incurred as
 a direct result of the plan.                                                                                                                                                                                                                                                                                                                

The provisions of SFAS No. 146 are effective
 for exit or disposal activities initiated after December 31, 2002.
SFAS No. 146 applied prospectively upon adoption and, as a
result, would not have a material impact on the Company's
consolidated financial statements.

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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 wireless LAN 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 overcome significant challenges in order to realize any benefits or synergies
 from our merger with Proxim, Inc. and our acquisition of the 802.11 wireless LAN
 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;                                       
|-------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 |                                                                                                                                          
|                                                                                                                                | 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 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 wireless LAN systems business.

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 wireless LAN systems business.

The market price of our common stock
 may decline as a result of our merger with Proxim, Inc. or our acquisition of Ageres
 802.11 wireless LAN systems business.

The market
 price of our common stock may decline as a result of these transactions for a number
 of reasons, including if:



| | the integration
 of the these businesses is not completed in a timely and efficient manner;
|- | -------------------------------------------------------------------------------------------

30



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| | 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.                             

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

We have incurred
 transaction costs of approximately $16.7 million in connection with our merger with
 Proxim, Inc. We expect to incur transaction costs of 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, our financial results,
 including earnings per share, could be materially harmed.

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

The combined
 company is not profitable on a pro forma basis and may not be profitable in the
 future.

For the nine
 months ended September 27, 2002 we had a $100.4 million net loss
attributable to common stockholders. 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 Agere 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 as we implement
 our product and distribution strategies would harm our business, operating results
 and financial condition.

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 and HomeRF 2.0 products for a limited amount of time and Western
 Multiplex had just began production of its Tsunami point-to-multipoint product prior
 to the merger. Agere also had a limited operating history with its 802.11 wireless
 LAN 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.                    

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.

31



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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;                                                                                 
|  |                                                                                                                                                                          
| | our ability
 to successfully manage the integration of operations;                                                                                                       
|  |                                                                                                                                                                          
| | the sell-through
 rate of our ORiNOCO products (acquired in the our acquisition of Ageres 802.11
 wireless LAN systems business) through consumer retail channels;      
|  |                                                                                                                                                                          
| | market adoption
 of radio frequency, or RF, standards-based products (such as those compliant with
 the HomeRF, IEEE 802.11b, IEEE 802.11a, or Bluetooth specifications);
|  |                                                                                                                                                                          
| | the sell-through
 rate of our LAN and WAN products through commercial distribution channels;                                                                             
|  |                                                                                                                                                                          
| | market demand
 for our point-to-point Lynx and Tsunami systems;                                                                                                          
|  |                                                                                                                                                                          
| | market demand
 for our point-to-multipoint systems;                                                                                                                      
|  |                                                                                                                                                                          
| | technical
 difficulties, system downtime or other similar failures;                                                                                                      
|  |                                                                                                                                                                          
| | 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. and Western Multiplex did not operate with a significant order backlog
 and a substantial portion of their revenues in any quarter were 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.

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
 local area networking (LAN) products, and a sell-in method for wide area networking
 (WAN) products. We have adopted the sell-through method on a uniform basis because,
 following the acquisition of Ageres 802.11 wireless LAN systems business,
 which also uses the sell-through method, the LAN 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 LAN and WAN products.
 The adoption of the sell-through method of revenue recognition for WAN products
 could result in greater variability in our revenue recognition, and therefore

32



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increased
 fluctuations in our operating results, because sell-through shipments to customers
 may not be as predictable as sell-in shipments to distributors.

Our future operating results could 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 have accounted for our merger
 with Proxim, Inc. 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 merger, the fair value of the options to purchase Proxim, Inc. 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. 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 will
 be required to be amortized prospectively over their estimated useful lives. The
 purchase price will also be allocated to deferred compensation, based on the portion
 of the intrinsic value of the unvested Proxim, Inc. options we have assumed to the
 extent that service is required after completion of the merger in order to vest.
 Any excess of the purchase price over those fair market values will be accounted
 for as goodwill. We are not required to amortize goodwill against income but goodwill
 will be subject to periodic reviews for impairment. If we are required to recognize
 an impairment charge, 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 wireless LAN systems business, we entered into a securities
 purchase agreement with Warburg Pincus Private Equity VIII, L.P., Broadview Capital
 Partners L.P. and affiliated entities, who agreed to collectively invest $75 million
 in the Company. These investors received 1,640,000 shares of redeemable convertible
 Series A preferred stock (the Preferred Stock) in the amount of approximately
 $41 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 $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. A deemed preferred
 stock dividend representing the beneficial conversion feature of the Preferred Stock
 of $2.7 million was also recorded to increase the loss attributable to common stockholders.
 The remaining $34 million of the investment 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 Preferred Stock and we granted to these investors additional warrants to purchase
 approximately 5.6 million shares of our common stock. In total, the investors were
 granted warrants to acquire 12,271,345 shares of common stock for approximately
 $3.06 per share. The Preferred Stock and warrants issued to the investors represent
 approximately 28% of our outstanding common stock on an as-converted and as-exercised
 basis including dividends. We have agreed to file a registration
 statement with the Securities and Exchange Commission to register the Proxim capital
 stock held by these investors. Upon the effectiveness of the registration statement,
 the investors will have the right to resell their equity holdings.

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 Chief Executive Officer, 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 provides 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 have agreed to release 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.

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In addition
 to outstanding shares eligible for sale, as of September 27, 2002, options and warrants
 to acquire 46.5 million shares of our common stock were outstanding. Also, as of
 September 27, 2002, approximately an additional 19.4 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 to competitors, particularly Alcatel, Business Networks AB, Cisco
 Systems, D-Link, Intel Corporation and Linksys, 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. 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 wireless LAN and building-to-building
 markets, obtain more rapid market 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 the 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 wireless
 LAN 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. There
 can be no assurance that the 802.11b products will be competitive in the market.
 In addition, we have developed higher-speed frequency hopping technology based on
 the FCC Part 15 rule change adopted in August 2000, that allows for wider band hopping
 channels and increases the data rate from 1.6 Mbps to up to 10 Mbps. There can be
 no assurance that any such new products will compete effectively with IEEE 802.11b
 standard compliant products.

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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 it does develop or acquire
 such technology, that such products will be competitive in the market.

In 2000, the
 IEEE approved a new 5 GHz wireless LAN 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 wireless LAN standard designated
 as HiperLAN2, also based on OFDM technology. We are currently shipping commercial
 units of 802.11a products, and certain competitors have announced their intention
 to ship 802.11a products during the first quarter of 2002. In August 2002, we completed
 the acquisition of Ageres 802.11 wireless LAN systems business, including
 its ORiNOCO product line.

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 by early 2003. 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 addition,
 we are a core member of the HomeRF Working Group, an industry consortium that is
 establishing an open industry standard, called the HomeRF specification, for wireless
 digital communications between PCs and consumer electronic devices, including a
 common interface specification that supports wireless data and voice services in
 and around the home. There can be no assurance that our HomeRF specification, or
 the Symphony HomeRF products developed to comply with the specification, will have
 a meaningful commercial impact. Further, given the emerging nature of the wireless
 LAN market, 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 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 our operations. Failure to effectively manage growth could result in an inability
 to support and maintain our operations.

We anticipate
 that we will need to expand our operations in order to address new market opportunities
 for our products. This expansion 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.

In addition,
 we could experience lower earnings as a result of expenses associated with growing
 our operations, whether through internal development or through acquisitions.

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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
 nine months ending September 27, 2002, international sales accounted for approximately
 40% 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%, 33% and 23% of total revenue during the calendar years 2001, 2000 and 1999,
 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%, 18% and 21% of total revenue during the calendar years 2001, 2000 and 1999,
 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                                     
|  |                                                                                                               
| | 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.

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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 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
 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 operation 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.

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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 pro forma
 revenue. Sales to one Proxim, Inc. customer in calendar years 2000 and 1999 represented
 approximately 12% and 30% of total revenue, respectively. 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 substantial 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.

Western Multiplex derived 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.

Western Multiplex
 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 Western Multiplex distributor accounted for
 approximately 21.2% of our total revenue in the nine months ended September 27,
 2002. For the year ended December 31, 2001, approximately 52% of Western Multiplexs
 revenue was derived from three distributors, and approximately 30% of its
 revenue was derived from one of the three distributors. Western Multiplex did not
 have long-term contracts with any of these distributors. While we will have a more
 diversified and expansive 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.

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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 wireless LAN 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 charges 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.

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 expect
 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.

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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 use 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 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 and Proxim, Inc. 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 systems that can be sold
 at higher average selling prices.

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, increases costs and decreased customer

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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 our 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 wireless LAN 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 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. Jonathan N. Zakin, Chairman
 and Chief Executive Officer, Mr. David C. King our President and Chief Operating
 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

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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:



| | 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 Private Equity VIII, L.P., and Broadview Capital Partners L.P.
 and affiliated entities, and given approval of our stockholders at a special meeting
 held on October 8, 2002 relating to the issuances of additional shares of Series
 A preferred stock and warrants to purchase common stock, and conversion and exercise
 of these securities, these investors collectively represent approximately 28% of
 our outstanding common stock. Affiliates of Ripplewood
 Investments L.L.C. control approximately 26.9% 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.

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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 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 then in effect. In addition, in the event of a change of control that
 occurs prior to August 2005, the liquidation preference will increase to include
 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 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, 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.


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

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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.

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 wireless LAN 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, 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.

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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 wireless
 LAN 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.

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, 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.

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 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;

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| | 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.

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 Proxim, Inc. common stock and Western Multiplex common stock having been
 subject to wide fluctuations, 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;
|  |                                                                                        
| | 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.

46



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##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE
 DISCLOSURES ABOUT MARKET RISK

Our exposure
 to market risk for changes in interest rates relates primarily to the Companys
 investment portfolio. We place our investments with high credit quality issuers
 and, by policy, limit the amount of the credit exposure to any one issuer. Our general
 policy is to limit the risk of principal loss and ensure the safety of invested
 funds by limiting market and credit risk.

Currently,
 all sales to international customers are denominated in U.S. dollars and, accordingly,
 we are not currently exposed to foreign currency exchange rate risks other than
 the risk that conversion to U.S. dollars at a high cost may cause some customers
 to search for a lower priced competitive product.




ITEM 4. CONTROLS AND PROCEDURES

During the
 90 day period prior to the filing of this quarterly report, an evaluation was performed
 under the supervision and with the participation of our management, including our
 Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
 design and operation of our disclosure controls and procedures (as defined in Rules
 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended).
 Our Chief Executive Officer and Chief Financial Officer believe based on the evaluation
 that the design and operation of our disclosure controls and procedures are effective
 to ensure that material information relating to Proxim is made known to them by
 others within the Company during the period in which this Report on Form 10-Q was
 being prepared. There have been no significant changes in our internal controls
 or, to our knowledge, in other factors that could significantly affect internal
 controls subsequent to that evaluation.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

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 wireless LAN patents. Symbol is seeking unspecified damages and a permanent
 injunction against Proxim, Inc. related to these infringement claims.

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##### Table of Contents



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, 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 wireless
 LAN 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.

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
Company is 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 that the Company implemented during
2001 and 2002. The Company has insurance intended to cover claims of
this nature and 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, we could be required to pay damages
and other expenses. In the case of disputes 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 can make any assurance that these matters will not materially and adversely affect
 our business, financial condition or operating results.




ITEM 2. CHANGES IN SECURITIES AND
 USE OF PROCEEDS

Recent Sales of Unregistered Securities

From June
 29, 2002 through September 27, 2002, the Company issued and sold the following unregistered
 securities:

On August
 5, 2002, the Company issued and sold to certain institutional investors 1,640,000
 shares of Series A preferred stock, par value $.01 per share, and warrants to acquire
 6,708,335 shares of our Class A common stock with an exercise price of $3.0559 per
 share for an aggregate amount of $41 million. In addition, the Company issued to
 the investors $34 million of convertible notes (the Notes) bearing interest
 at 10% per year in exchange for a loan of equal principal amount. Upon receipt
 of approval of our stockholders at a special meeting held on October 8, 2002, the
 Notes were converted into 1,360,000 shares of Series A preferred stock and the Company
 issued to the investors additional warrants to acquire 5,563,010 shares of our common
 stock with an exercise price of $3.0559 per share.

On August
 5, 2002, proceeds of $75 million from the financing were used to acquire assets
 primarily relating to the 802.11 wireless LAN systems business of Agere, including
 its ORiNOCO product line, for $65 million in cash, to pay expenses related to the
 acquisition of approximately $5.0 million and to pay restructuring charges totaling
 $4.6 million.

There were
 no underwriters employed in connection with the issuances set forth above. The
 issuances were made pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Rights of Securityholders

Holders of
 our Series A preferred stock are entitled to receive certain benefits not available
 to holders of our common stock, including preferential dividends, liquidation preferences,
 redemption rights, preemptive rights that apply to certain future issuances of

48



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##### Table of Contents



our
 capital stock, change of control conversion rights, conversion price adjustments,
 certain protective provisions relating to future corporate actions, and rights to
 board representation.




ITEM 6. EXHIBITS AND REPORTS ON FORM
 10-Q

A. Exhibits:



|10.49 (1)                                                                                                   |  | Intellectual
 Property Agreement, dated as of August 5, 2002, by and between Agere
Systems, Inc.
 and Proxim Corporation.                           
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                            |  |                                                                                                                                                     
|10.50 (1)                                                                                                   |  | Patent License
 Agreement, dated as of August 5, 2002, by and among Agere Systems Guardian Corporation,
 Agere Systems, Inc. and Proxim Corporation.
|                                                                                                            |  |                                                                                                                                                     
|10.51 (1)                                                                                                   |  | Supply Agreement,
 dated as of August 5, 2002, by and between Agere Systems, Inc. and Proxim Corporation.                                           
|                                                                                                            |  |                                                                                                                                                     
|99.1                                                                                                        |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002.
|                                                                                                            |  |                                                                                                                                                     
|99.2                                                                                                        |  | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002.
|                                                                                                            |  |                                                                                                                                                     
|                                                                                                           
|(1)  Incorporated by reference
 from Proxim Corporations Current Report on Form 8-K filed August 19, 2002.

B. Reports on Form 8-K:



|Date             |  | Item
 Reported On                                                                                                                                                                                                                                                                                                                                                                       
|---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                         
|August 19,
 2002 |  | On August
 5, 2002, Proxim Corporation completed its acquisition of assets primarily relating
 to the 802.11 wireless local area network (LAN) equipment business of Agere Systems
 Inc., including its ORiNOCO product line, for $65 million in cash, pursuant to the
 terms of the previously reported Asset Purchase Agreement, dated as of June 14,
 2002, between Proxim and Agere.

49



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##### Table of Contents






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:  November 12,
 2002 | Proxim Corporation          
|------------------------- | ----------------------------
|                          |                             
|                          | By:  /s/     Keith E. Glover
|                          |                             
|                          |                             
|                          |                             
|                          |                             
|                          |                             

50



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##### Table of Contents



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

I, Jonathan N. Zakin, Chairman and Chief Executive
 Officer 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)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | c)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| | 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)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| | 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:  November 12,
 2002 | By: | /s/ Jonathan N. Zakin               
|                          |     |                                     
|                          |     | Jonathan N. Zakin                   
|                          |     | Chairman and Chief Executive Officer

51



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##### Table of Contents



Proxim CorporationCertification
 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)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | c)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| | 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)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                              
| | 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:  November 12,
 2002 | By: | /s/ Keith E. Glover                  
|                          |     |                                      
|                          |     | Keith E. Glover                      
|                          |     | Executive Vice President,            
|                          |     | Chief Financial Officer and Secretary

52



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EXHIBIT INDEX



|ExhibitNumber                                                                                               |  | Description                                                                                                                                         
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                            |  |                                                                                                                                                     
|                                                                                                            |  |                                                                                                                                                     
|10.49(1)                                                                                                    |  | Intellectual Property
 Agreement, dated as of August 5, 2002, by and between Agere Systems, Inc. and Proxim
 Corporation.                           
|                                                                                                            |  |                                                                                                                                                     
|10.50(1)                                                                                                    |  | Patent License Agreement,
 dated as of August 5, 2002, by and among Agere Systems Guardian
Corporation, Agere Systems,
 Inc. and Proxim Corporation.
|                                                                                                            |  |                                                                                                                                                     
|10.51(1)                                                                                                    |  | Supply Agreement, dated
 as of August 5, 2002, by and between Agere Systems, Inc. and Proxim Corporation.                                           
|                                                                                                            |  |                                                                                                                                                     
|99.1                                                                                                        |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
 to Section 906 of the Sarbanes-Oxley Act of 2002.
|                                                                                                            |  |                                                                                                                                                     
|99.2                                                                                                        |  | Certification of Chief
 Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
 of the Sarbanes-Oxley Act of 2002.
|                                                                                                            |  |                                                                                                                                                     
|                                                                                                           
|                                                                                                            |  |                                                                                                                                                     
|(1)  Incorporated by reference from Proxim
 Corporations Current Report on Form 8-K filed August 19, 2002.

53