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

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

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.

                For the quarterly period ended September 28, 2001

                                       OR

              [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934.

        For the transition period from ______________ to ________________

                        Commission file number 000-30993

                          WESTERN MULTIPLEX CORPORATION

             (Exact name of registrant as specified in its charter)

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

                              1196 Borregas Avenue
                           Sunnyvale, California 94089
                                 (408) 542-5200
          (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, 2001 was 58,018,243. No shares of the
Company's Class B common stock, par value $.01 per share, are outstanding.

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.         FINANCIAL INFORMATION                                                                           Page
                                                                                                                ----
<S>                                                                                                             <C>
Item 1.         Financial Statements

                Condensed Consolidated Balance Sheets at September 28, 2001 (unaudited) and December 31,
                2000                                                                                               1

                Condensed Consolidated Income Statements for the three months and nine months ended
                September 28, 2001 (unaudited) and September 29, 2000 (unaudited)                                  2

                Condensed Consolidated Statements of Cash Flows for the nine months ended September 28,
                2001 (unaudited) and September 29, 2000 (unaudited)                                                3

                Notes to Condensed Consolidated Financial Statements (unaudited)                                   4

Item 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations             10

Item 3.         Quantitative and Qualitative Disclosures About Market Risk                                        16

PART II.        OTHER INFORMATION

                SIGNATURE                                                                                         17
</TABLE>

<PAGE>

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                          WESTERN MULTIPLEX CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                              September 28,                December 31,
                                                                                 2001                         2000
                                                                           ------------------         -------------------
                                                                              (unaudited)
<S>                                                                        <C>                        <C>
                             ASSETS
Current assets:
    Cash and cash equivalents                                              $            9,546         $           31,094
    Short-term investments                                                              9,908                     20,633
    Accounts receivable, net                                                           30,230                     34,292
    Inventory                                                                          21,163                     10,949
    Prepaid expenses and other                                                          2,371                      4,970
    Deferred tax assets                                                                 4,197                      1,573
                                                                           ------------------         ------------------
        Total current assets                                                           77,415                    103,511
Long-term investments and other                                                         3,110                      3,014
Equipment and leasehold improvements, net                                               8,742                      5,381
Deferred tax assets                                                                     3,455                      3,565
Other long-term assets                                                                  2,840                      2,500
Goodwill and other intangible assets, net                                              39,478                     22,906
                                                                           ------------------         ------------------
        Total assets                                                       $          135,040         $          140,877
                                                                           ==================         ==================

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                       $            5,844         $           10,208
    Accrued liabilities                                                                 4,584                      8,582
    Payable to parent company                                                               -                         35
                                                                           ------------------         ------------------
         Total current liabilities                                                     10,428                     18,825
Long-term debt                                                                              -                         28
                                                                           -------------------        ------------------

        Total liabilities                                                              10,428                     18,853
                                                                           -------------------        ------------------

Stockholders' equity:
    Common stock                                                                          988                        975
    Paid-in capital                                                                   154,001                    141,341
    Treasury stock                                                                    (21,000)                   (21,000)
    Deferred stock compensation                                                          (324)                    (4,310)
    Other comprehensive income                                                            128                         12
    Retained earnings (deficit)                                                        (8,263)                     6,068
    Less: Employee stock subscription receivable                                         (918)                    (1,062)
                                                                           -------------------        ------------------
        Total stockholders' equity                                                    124,612                    122,024
                                                                           -------------------        ------------------
        Total liabilities and stockholders' equity                         $          135,040         $          140,877
                                                                           ===================        ==================
</TABLE>

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

                                        1

<PAGE>


                          WESTERN MULTIPLEX CORPORATION

                    CONDENSED CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                            Three Months Ended                Nine Months Ended
                                                                     September 28,    September 29,   September 28,    September 29,
                                                                         2001             2000             2001             2000
                                                                     ------------     -------------   -------------    -------------
<S>                                                                  <C>              <C>             <C>              <C>

Revenue                                                              $     21,675     $     29,909    $     81,555     $     67,873
Cost of revenue                                                            12,829           14,775          43,813           31,840
                                                                     ------------     ------------    ------------     ------------
      Gross profit                                                          8,846           15,134          37,742           36,033
                                                                     ------------     ------------    ------------     ------------
Operating expenses:
      Research and development                                              5,151            3,298          14,282            8,067
      Sales and marketing                                                   7,324            4,767          20,441           10,518
      General and administrative                                            3,103            1,545           9,463            4,097
      Amortization of goodwill                                              1,491              722           3,727            1,660
      Amortization of deferred stock compensation                             303              946           2,559            2,914
      Impairment of goodwill                                                 --               --             4,331             --
      Restructuring charges                                                   396             --             1,816             --
      Merger costs                                                           --               --                30             --
                                                                     ------------     ------------    ------------     ------------
         Total operating expenses                                          17,768           11,278          56,649           27,256
                                                                     ------------     ------------    ------------     ------------
         Income (loss) from operations                                     (8,922)           3,856         (18,907)           8,777
Interest income (expense), net                                                304              258           1,220             (966)
                                                                     ------------     ------------    ------------     ------------
         Income (loss) before taxes                                        (8,618)           4,114         (17,687)           7,811
Income tax provision (benefit)                                             (2,905)           2,030          (3,356)           4,413
                                                                     ------------     ------------    ------------     ------------
         Income (loss) before extraordinary item                           (5,713)           2,084         (14,331)           3,398
Loss on early extinguishment of debt,
      net of income tax benefit                                              --                394            --                394
                                                                     ------------     ------------    ------------     ------------
         Net income (loss)                                           $     (5,713)    $      1,690    $    (14,331)    $      3,004
                                                                     ============     ============    ============     ============
Basic earnings (loss) per share                                      $      (0.10)    $       0.03    $      (0.25)    $       0.07
                                                                     ============     ============    ============     ============
Diluted earnings (loss) per share                                    $      (0.10)    $       0.03    $      (0.25)    $       0.06
                                                                     ============     ============    ============     ============
Shares used to compute basic earnings (loss) per share                 57,747,335       49,707,477      57,084,837       44,225,561
                                                                     ============     ============    ============     ============
Shares used to compute diluted earnings (loss) per share               57,747,335       54,946,756      57,084,837       50,015,671
                                                                     ============     ============    ============     ============
</TABLE>

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


                                        2

<PAGE>

                          WESTERN MULTIPLEX CORPORATION

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

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                 ------------------------------------
                                                                                  September 28,       September 29,
                                                                                      2001                2000
                                                                                 ----------------    ----------------
<S>                                                                              <C>                 <C>
Cash flows from operating activities:
      Net income (loss)                                                              $   (14,331)         $    3,004
      Adjustments to reconcile net income (loss) to net cash used in
      operating activities:
          Depreciation and amortization                                                    8,403               5,390
          Amortization of deferred financing costs                                             -                 748
          Impairment of goodwill                                                           4,331                   -
          Provision for bad debts                                                            821                 149
          Provision for sales returns                                                      2,162                 513
          Assets and liabilities, net of acquisition:
             Accounts receivable                                                           1,079             (17,854)
             Inventory                                                                   (10,214)             (5,952)
             Prepaid expenses and other                                                    2,664              (1,402)
             Deferred tax assets                                                          (2,514)                435
             Other long-term assets                                                         (290)             (2,500)
             Accounts payable and accrued liabilities                                    (10,120)              8,677
             Payable to parent company                                                       (35)             (1,303)
             Other long-term obligations                                                       -                  38
                                                                                 ----------------    ----------------
                  Net cash used in operating activities                                  (18,044)            (10,057)
                                                                                 ----------------    ----------------
Cash flows from investing activities:
      Purchases of equipment and leasehold improvements                                   (4,388)             (2,310)
      Purchases of investment securities                                                 (10,154)                  -
      Proceeds from sale of investment securities                                         20,899                   -
      Cash paid for acquisition of WirelessHome, net of cash acquired                    (10,146)                  -
                                                                                 ----------------    ----------------
                  Net cash used in investing activities                                   (3,789)             (2,310)
                                                                                 ----------------    ----------------
Cash flows from financing activities:
      Net proceeds from issuance of shares                                                   (41)             94,973
      Exercise of stock options                                                              600                   -
      Issuance of employee stock purchase plan shares                                      1,285                   -
      Repayment of long-term debt                                                         (1,703)            (22,000)
      Borrowings on line of credit                                                             -              (2,000)
      Employee stock subscription receivable                                                 144              (1,155)
                                                                                 ----------------    ----------------
                  Net cash provided by financing activities                                  285              69,818
                                                                                 ----------------    ----------------
Net increase (decrease) in cash                                                          (21,548)             57,451
Cash and cash equivalents, beginning of period                                            31,094               1,913
                                                                                 ----------------    ----------------
Cash and cash equivalents, end of period                                             $     9,546          $   59,364
                                                                                 ================    ================

Supplemental Disclosures:
      Cash paid for:
          Interest                                                                   $       138          $    1,514
                                                                                 ================    ================
          Income taxes                                                               $     2,038          $    5,710
                                                                                 ================    ================

Noncash Transactions:
      Issuance of shares and stock options assumed in connection
          with WirelessHome acquisition                                              $    12,061          $        -
                                                                                 ================    ================
      Restructuring charges                                                          $       226          $        -
                                                                                 ================    ================
</TABLE>


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


                                        3

<PAGE>

                          WESTERN MULTIPLEX CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.   Organization and Operations of the Company

     Western Multiplex Corporation (the "Company") was founded in 1979 in
Sunnyvale, California. In 1992, the Company launched the Lynx broadband wireless
access systems, which are primarily used by wireless operators to connect their
base stations to other base stations and to existing wire line networks. In
1999, the Company introduced the Tsunami broadband wireless access systems,
which are primarily used by service providers, businesses and other enterprises
to expand or establish private networks carrying Internet traffic among multiple
facilities.

     The Company was acquired by GTI Acquisition Corporation ("GTI"), a
wholly-owned subsidiary of Glenayre Technologies Inc. ("Glenayre") in 1995.

     Effective November 1, 1999, a recapitalization of the Company was
consummated pursuant to the Amended and Restated Acquisition Agreement by and
among GTI, Glenayre, the Company and WMC Holding Corp. ("Purchaser"), dated
September 30, 1999 (the "Agreement") in accordance with the Agreement:

     .    The Company borrowed $22.0 million under two term loan arrangements
          and drew down $2.0 million on a $10.0 million revolving credit
          facility with Credit Suisse First Boston.

     .    The Company redeemed 42 million shares of Class B common stock of the
          80 million then outstanding from GTI for $21.0 million.

     .    Purchaser acquired approximately 36 million shares of Class B common
          stock from GTI, or approximately 94.6% of the remaining outstanding
          shares of the Company, for approximately $16.5 million.

     .    The Company incurred approximately $0.8 million in financing costs
          that were capitalized and $3.1 million in transaction costs related to
          the equity transactions that were classified as recapitalization costs
          in the income statement for 1999.

     On March 24, 2000, the Company acquired Ubiquity Communication, Inc.
("Ubiquity"), located in Petaluma, California. Ubiquity was a development stage
company, which designed and developed point-to-multipoint broadband wireless
systems. The Company issued 692,772 shares of Class A common stock in the
acquisition and reserved 137,727 shares for issuance upon the exercise of the
Ubiquity options assumed. The acquisition was accounted for as a purchase
transaction. The total purchase price was valued at $6.4 million. Purchased
intangibles and goodwill related to the acquisition totaled approximately $6.8
million and was being amortized on a straight-line basis over the estimated
useful life of three years. The Company subsequently granted to certain Ubiquity
employees an additional 350,000 options at an exercise price of $.50 under the
Western Multiplex Corporation 1999 Stock Incentive Plan. Additionally, certain
Ubiquity employees purchased 300,000 shares of WMC Holding Corp. In March 2001,
Ubiquity operations were closed due to the acquisition of WirelessHome
Corporation.

     On August 4, 2000, the Company completed its initial public offering of
7,500,000 shares of Class A common stock at a public offering price of $12.00
per share. On August 31, 2000, the underwriters exercised their option to
purchase 1,125,000 additional shares of Class A common stock to cover over-
allotments. The initial public offering and subsequent exercise of 1,125,000
shares by the underwriters resulted in net proceeds to the Company of
approximately $91.1 million after payment of the underwriter's commission and
deduction of offering expenses. Simultaneously with the closing of the initial
public offering, all of the Company's then outstanding 38,000,000 shares of
Class B common stock and 42,000,000 shares of Class B treasury stock were
automatically converted into 38,000,000 shares of Class A common stock and
42,000,000 shares of Class A treasury stock, respectively.

     In August 2000, the Company used a portion of the net proceeds from the
initial public offering to repay outstanding indebtedness. The Company made the
mandatory prepayment of its term notes to Credit Suisse First Boston and also
repaid all borrowings outstanding under the revolving credit facility. The total
repayment including accrued interest was $28.9 million. In connection with the
prepayment of its term notes, the Company wrote off deferred financing costs of
$394,000, net of income


                                        4

<PAGE>

taxes, and recorded an extraordinary loss on early extinguishment of debt.

     In November 2000, the Company entered into an Agreement and Plan of Merger
with Adaptive Broadband Corporation ("Adaptive"). This proposed merger was
subject to the approval of both the Company's and Adaptive's stockholders in
special meetings of the stockholders of each company. In January 2001, prior to
the special stockholders' meetings taking place, both companies mutually agreed
to terminate the merger agreement.

     On March 22, 2001, the Company acquired WirelessHome Corporation
("WirelessHome") located in Long Beach, California. WirelessHome is a
development stage company that designs and develops point-to-multipoint systems.
The acquisition was accounted for as a purchase. In a cash and stock
transaction, the Company acquired WirelessHome for consideration of $23 million,
including transaction expenses. The initial purchase price allocation was as
follows: $24.6 million to goodwill, $0.4 million to current assets, $0.9 million
to other assets and assumed current liabilities of $3.2 million. Unaudited
proforma operating results of the Company for the periods indicated assume the
WirelessHome acquisition occurred as of January 1, 2000 (in thousands except per
share amounts).

<TABLE>
<CAPTION>
                                                               Three months ended          Year ended
                                                               ------------------          -----------
                                                                March 30, 2001         December 31, 2000
                                                                --------------         -----------------
<S>                                                            <C>                     <C>
               Revenue                                               $37,585                $105,508
               Net loss from continuing operations                  $(6,994)                $(7,615)
               Diluted loss per share                                $(0.12)                 $(0.16)
</TABLE>

     Goodwill related to the acquisition is being amortized on a straight-line
basis over the estimated useful life of five years. The total purchase price, as
well as the initial purchase price allocation, are subject to adjustments upon
WirelessHome meeting certain development milestones and other considerations.

     WirelessHome replaced Ubiquity in the development of our
point-to-multipoint systems, and as such, the Company closed its Ubiquity
operations in the quarter ended March 30, 2001. Consequently, the Company
recorded restructuring charges of $1.2 million. The charge includes $1.0 million
of cash provisions, which include severance of $0.8 million for 12 employees and
$0.2 million for future lease commitments and exit costs related to the Petaluma
office facility. As of September 28, 2001, approximately $0.8 million of the
$1.0 million of cash provisions were incurred with the remainder expected to be
paid by the end of 2001. 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.

     In addition, the Company recorded $0.6 million associated with
restructuring the operations at the Company's headquarters.

2.   Basis of Presentation

     In the opinion of management, the unaudited interim condensed consolidated
financial statements furnished in this report reflect all adjustments necessary
for a fair presentation of the results of operations for the interim periods
covered and of the Company's financial position as of the interim balance sheet
date. The results of operations for the interim periods are not necessarily
indicative of the results for the entire year. These condensed consolidated
financial statements should be read in conjunction with the Company's audited
financial statements and the accompanying notes for the year ended December 31,
2000 included in the Company's Form 10-K filed with the Securities and Exchange
Commission. The condensed consolidated balance sheet at December 31, 2000 is
derived from the Company's audited consolidated financial statements as of that
date.

3.   Summary of Significant Accounting Policies

   Revenue Recognition

     Revenue from product and part sales is recognized when all of the following
conditions are met: the product has been shipped and title has passed to the
customer, the selling price is fixed and determinable, the collection of the
receivable is probable and there are no post-delivery obligations remaining.
Provisions to revenue and cost of revenue are made at the time revenue is
recognized for estimated return and warranty costs, respectively.

     The Company also provides certain services and rental units to customers.
Revenue from services, such as preinstallation, diagnostic testing and product
repair services is recognized upon completion of the service and acceptance by
the customer. Revenue from product rentals is recognized over the period of the
rental.

     Under certain agreements with distributors, co-op advertising, price
protection or stock rotation rights exist. The Company provides for the
estimated costs of marketing arrangements mentioned above, stock rotation and
warranty costs at the time when revenue is recognized.

   Inventory

     Inventory, net of provisions, is stated at the lower of cost (first-in,
first-out), consisting of materials, labor and overhead or market and consists
of the following (in thousands):


                                        5

<PAGE>

<TABLE>
<CAPTION>
                                                        September 28,      December 31,
                                                            2001               2000
                                                       ----------------   ---------------
<S>                                                    <C>                <C>

           Raw materials........................              $ 10,380           $ 3,628
           Work-in-process......................                   633             1,646
           Finished goods.......................                10,150             5,675
                                                       ----------------   ---------------
                                                              $ 21,163          $ 10,949
                                                       ================   ===============
</TABLE>

     Provisions for excess and obsolete inventory were $2.4 million and $1.4
million as of September 28, 2001 and December 31, 2000, respectively.

   Goodwill and Other Intangible Assets

     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 totaled $22.0 million. This goodwill is being amortized on a
straight-line basis over its estimated useful life of 30 years, or $0.7 million
per year.

     Goodwill and other intangible assets related to the acquisition of Ubiquity
(see Note 1) totaled $6.8 million. In March 2001, the Company recorded an
impairment of the Ubiquity goodwill 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.

     Goodwill related to the acquisition of WirelessHome totaled $24.6 million.
This goodwill is being amortized on a straight-line basis over an estimated
useful life of five years. This goodwill is subject to subsequent adjustments
(See Note 1).

     Subsequent to its acquisitions, the Company assesses long-lived assets
acquired for impairment under Financial Accounting Standards Board's ("FASB")
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"). 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 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.

   Segment Reporting

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information" ("SFAS
131"). SFAS 131 establishes standards for disclosures about operating segments,
products and services, geographic areas and major customers. The Company is
organized and operates as one operating segment: providing wireless access
products. Revenues by geographic area are attributed to the country from which
the sale is made. To date, all of the Company's transactions have originated in
one geographic location, the United States, even though many of the Company's
customers may operate in foreign as well as domestic markets.

   Major Customers

     Two customers accounted for 36.6% and 13.6% of total revenue for the third
quarter of 2001, and two customers accounted for 22.4% and 12.8% of total
revenue, respectively, for the third quarter of 2000. Two customers accounted
for 30.2% and 10.7% of total revenue, respectively, for the nine months ended
September 28, 2001, and one customer accounted for 20.5% of total revenue for
the nine months ended September 29, 2000.

   Earnings Per Share of Common Stock

     Basic and diluted earnings per share are presented in conformity with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). Basic earnings (loss) per share under SFAS 128 were computed using the
weighted average number of shares outstanding of 57,747,335 and 49,707,477 for
the three months ended September 28, 2001 and September 29, 2000, respectively.
Diluted earnings per share are 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.


                                        6

<PAGE>

Diluted earnings (loss) per share were computed using the weighted average
number of shares outstanding of 57,747,335 and 54,946,756 for the three months
ended September 28, 2001 and September 29, 2000, respectively. For the three
months ended September 28, 2001, the incremental shares of approximately 888,000
from the assumed exercise of stock options and warrants were not included in
computing diluted per share amounts as the Company had a net loss for the period
and the effect of such assumed exercise would be antidilutive.

     Basic earnings (loss) per share were computed using the weighted average
number of shares outstanding of 57,084,837 and 44,225,561 for the nine months
ended September 28, 2001 and September 29, 2000, respectively. Diluted earnings
per share were computed using the weighted average number of shares outstanding
of 57,084,837 and 50,015,671 for the nine months ended September 28, 2001 and
September 29, 2000, respectively. For the nine months ended September 28, 2001,
the incremental shares of approximately 1,606,000 from the assumed exercise of
stock options and warrants were not included in computing diluted per share
amounts as the Company had a net loss for the period and the effect of such
assumed exercise would be antidilutive.

   Restructuring

     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.

   Recent Accounting Pronouncements

     In July 2001, the FASB issued SFAS No. 141 ("SFAS 141"). "Business
Combinations," which supersedes Accounting Principles Board ("APB") Opinion No.
16, "Business Combinations." SFAS 141 eliminates the pooling-of-interests method
of accounting for business combinations and modifies the application of the
purchase accounting method. The elimination of the pooling-of-interests method
is effective for transactions initiated after June 30, 2001. The remaining
provisions of SFAS 141 will be effective for transactions accounted for using
the purchase method that are completed after June 30, 2001. The Company believes
that the adoption of this Statement will not have a material impact on the
financial position or the results of operations of the Company.

     In July 2001, the FASB also issued SFAS No. 142 ("SFAS 142"), "Goodwill and
Intangible Assets," which supersedes APB Opinion No. 17, "Intangible Assets".
Under SFAS 142, goodwill and intangible assets with indefinite lives are not
amortized but are tested for impairment annually using the fair value approach,
except in certain circumstances, and whether there is an impairment indicator,
other intangible assets will continue to be valued and amortized over their
estimated lives; in-process research and development will continue to be written
off immediately; all acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting effective January 1, 2002,
and existing goodwill will no longer be subject to amortization. Goodwill
arising between June 30, 2001 and December 31, 2001 will not be subject to
amortization.

     As a result of the Company's adoption of SFAS 142, as of January 1, 2002,
the Company will no longer amortize goodwill, thereby eliminating annual
goodwill amortization of approximately $5.7 million based on anticipated
amortization for 2002. Goodwill amortization for the nine months ended September
29, 2001 pursuant to APB Opinion No. 17 was approximately $3.7 million.

     In August 2001, the FASB issued SFAS No. 143 ("SFAS 143") "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." SFAS 143
addresses financial accounting and reporting for the retirement obligation of an
asset. SFAS 143 states that companies should recognize the asset retirement
cost, at its fair value, as part of the cost of the asset and classify the
accrued amount as a liability in the condensed consolidated balance sheet. The
asset retirement liability is then accreted to the ultimate payout as interest
expense. The initial measurement of the liability would be subsequently updated
for revised estimates of the discounted cash outflows. SFAS 143 will be
effective for fiscal years beginning after June 15, 2002. The Company has not
yet determined the effect SFAS No. 143 will have on its financial position,
results of operations, or cash flows.

     In October 2001, the FASB issued SFAS No. 144 ("SFAS 144") "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes the SFAS
No. 121 by requiring that one accounting model to be used for long-lived assets
to be disposed of by sale, whether previously held and used or newly acquired,
and by broadening the presentation of discontinued operations to include more
disposal transactions. SFAS 144 will be effective for fiscal years beginning
after December 15, 2001. The Company has not yet determined the effect SFAS 144
will have on its financial position, results of operations, or cash flows.

4.   Long-Term Debt

     On November 1, 1999, the Company 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 2002. The
Company may prepay the term notes at any time upon adequate notice to the
lender. The term notes also call for mandatory prepayments in the event of an
initial public offering of the Company. In August 2000, subsequent to the
Company having completed its initial public offering, the Company repaid the
term notes and all borrowings outstanding under the revolving credit facility.
At September 28, 2001, the Company had no borrowings outstanding under the
revolving credit facility.

     Upon acquiring WirelessHome in March 2001, the Company assumed outstanding
debt of $1.7 million of which all has been repaid as of September 28, 2001.

5.   Common Stock

     The Company's 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 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


                                        7

<PAGE>

stockholder or automatically in the event of an initial public offering of the
Company.

     In conjunction with the recapitalization transaction discussed in Note 1,
the Company repurchased 42,000,000 shares of Class B common stock for $21.0
million from Glenayre and held these shares as treasury stock.

     Simultaneously with the closing of the Company's initial public offering as
discussed in Note 1, all of the Company's then outstanding 38,000,000 shares of
Class B common stock and 42,000,000 shares of Class B treasury stock were
automatically converted into 38,000,000 shares of Class A common stock and
42,000,000 shares of Class A treasury stock, respectively.

     As of September 28, 2001, there were 57,879,654 shares of Class A common
stock issued and outstanding and 42,000,000 shares of Class A treasury stock.

   Warrants

     In connection with a new operating lease entered into in September 2000,
the Company issued 25,000 warrants to the lessor in November 2000. Each warrant
is convertible into one share of Class A common stock of the Company at an
exercise price of $14.01 per share. These warrants are exercisable during the
period beginning on January 1, 2001 and ending on December 1, 2005. The Company
has estimated the fair value of the warrants using the Black-Scholes option
valuation model and has determined the expense throughout the life of the lease
to be immaterial.

     In connection with the acquisition of WirelessHome Corporation, the Company
assumed a warrant to purchase 4,162 shares of the Company's Class A common stock
at an exercise price of $9.61 per share. These warrants expire on December 16,
2009.

   Stock Sales

     During the three months ended March 31, 2000, certain Western Multiplex
employees and consultants entered into co-investment agreements with WMC Holding
Corp. Under the co-investment agreements, 3,830,351 shares were purchased of WMC
Holding Corp. at $0.50 per share and WMC Holding Corp. used the proceeds to
purchase 3,830,351 shares of Class A common stock of the Company at $0.50 per
share. In connection with the stock sales, the Company granted stock
subscription loans to a few employees. As of September 28, 2001, the Company had
$918,000 of employee stock subscription receivable outstanding.

   Deferred Stock Compensation

     In connection with the grant of certain stock options and sales of certain
stock to employees and directors during fiscal 2000, the Company recorded
deferred stock compensation within stockholders' equity of $8.5 million,
representing the difference between the estimated fair value of the common stock
for accounting purposes and the option exercise price of these options at the
date of grant or the stock sale price at the date of sale. Such amount is
presented as a reduction of stockholders' equity. The portion of deferred stock
compensation associated with the stock options will be amortized over the
vesting period of the applicable options using an accelerated method of
amortization. Under the accelerated method, each vested tranche of options is
accounted for as a separate option grant awarded for past services. Accordingly,
the compensation expense is recognized over the period during which the services
will be provided; however, the method results in a front-loading of the
compensation expense. For the portion of deferred stock compensation associated
with stock sales, the Company records the expense over the period the shares are
vested under the accelerated method. The Company recorded amortization of
deferred stock compensation of $303,000, net of cancellations, and $946,000 for
the three months ended September 28, 2001 and September 29, 2000, respectively.
For the nine months ended September 28, 2001 and September 29, 2000, the Company
recorded amortization of deferred stock compensation of $2.6 million, net of
cancellations, and $2.9 million, respectively.

     As part of the WirelessHome acquisition, the Company assumed certain
unvested options that when exercised would result in approximately 113,000
shares of common stock outstanding. These options have an exercise price of
approximately $5.00 per share of the Company's common stock. The unvested
options resulted in additional deferred compensation of $0.3 million recorded as
of the date of acquisition.

     During the first quarter of 2001, the Company reversed approximately $1.8
million of deferred stock compensation previously recorded due to cancellations
of unexercised stock options. As of September 28, 2001, the total deferred stock
compensation outstanding was $324,000.


                                        8

<PAGE>

6.         Stock Plans

   Employee Stock Purchase Plan

     In June 2000, the Company adopted the Western Multiplex Corporation
Employee Stock Purchase Plan ("ESPP"), which is intended to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986. The Company has initially reserved for issuance under the plan 1,000,000
shares of its Class A common stock. An annual increase in shares reserved will
occur on the first day of each of the Company's fiscal years beginning in 2001,
2002, 2003, 2004 and 2005 as defined in the plan.

     In August 2000, subsequent to the completion of the initial public
offering, the Company began to administer the plan by enrolling participants in
the plan and processing payroll deductions. The first day of the offering period
was July 31, 2000. On January 31, 2001, the Company issued 123,025 shares at
$10.20 per share to employees participating in the ESPP. On July 31, 2001, the
Company issued 7,241 shares at $4.80 per share to employees participating in the
ESPP.

   1999 Stock Incentive Plan

     In November 1999, the Company adopted the Western Multiplex Corporation
1999 Stock Incentive Plan (the "1999 Plan") for key employees, officers,
directors, and consultants. The Company has reserved for issuance 10,500,000
shares of Class A common stock under the 1999 Plan. The type of awards that may
be made under the 1999 Plan are incentive stock options, non-qualified options,
stock appreciation rights, and other stock-based awards.

     The exercise price for stock options may not be less than 100% of the fair
market value of the Company's Class A common stock on the date of the grant
(110% for any option granted to any stockholder who owns more than 10% of the
total combined voting power of all classes of stock of the Company or its parent
or subsidiary corporation), as determined by the Compensation Committee. An
option may not vest at less than 20% per year over five years, and will vest on
the specific schedule established by the Compensation Committee.

   Ubiquity Communication Plans

     In connection with the acquisition of Ubiquity Communication, Inc. on March
24, 2000, the Company assumed the obligations under Ubiquity Communication's
equity incentive plans ("Ubiquity Plans"). As a result, all options granted
under the Ubiquity Plans became options to purchase shares of the Company's
common stock. As of March 24, 2000, the Company assumed 137,727 options that had
been granted under these plans.

   Platinum IP Stock Incentive Plan

     In connection with the acquisition of WirelessHome on March 22, 2001, the
Company assumed obligations under WirelessHome's Platinum IP Stock Incentive
Plan ("WirelessHome Plan"). As a result, all options granted under the
WirelessHome Plan became options to purchase shares of the Company's common
stock. As of March 22, 2001, the Company assumed certain vested and unvested
options that when converted would result in approximately 14,400 and 113,000
shares of common stock outstanding.

   2000 Stock Option Plan for Non-Employee Directors

     In June 2000, the Company adopted the Western Multiplex Corporation 2000
Stock Option Plan for Non-Employee Directors. The Company has reserved for
issuance a maximum of 1,500,000 shares of common stock pursuant to the grant of
nonqualified stock options to newly elected members of the board of directors
who are not employees of the Company.

     The exercise price of any option granted under this plan is the per share
fair market value of our common stock on the date the option is granted except
with respect to the initial grants made as of June 8, 2000 for which the
exercise price is $8.50. An individual who becomes a director will receive an
initial grant of an option to purchase 100,000 shares of common stock, which
option will be immediately vested upon grant as to one-third of the shares
subject to the option. The option will then become vested as to one-third of the
shares on each of the first and second anniversaries of the date of the initial
grant, so long as the director continues to serve on our board of directors on
each vesting date. In addition, so long as a director continues to serve on our
board of directors, the director will, as of the third anniversary of the date
of the initial grant and triennially thereafter, receive an additional option to
purchase 15,000 shares, the terms of which will be the same as those described
above.

     The following table summarizes stock option activity under the 1999 Plan,
the WirelessHome Plan and the 2000 Plan for the three months ended September 28,
2001:


                                        9

<PAGE>

<TABLE>
<CAPTION>
                                                                             Options Outstanding
                                                                     --------------------------------
                                                                                          Weighted
                                                                                          Average
                                                     Options             Number           Exercise
                                                    Available          of Shares           Price
                                                  ---------------    ---------------    -------------
<S>                                               <C>                <C>                <C>
          Balance at June 29, 2001                     4,685,710          9,720,991           $ 6.12
                Granted                               (1,072,420)         1,072,420             4.56
                Exercised                                      -            (86,670)            0.50
                Cancelled                                433,773           (433,773)            7.70
                                                  ---------------    ---------------    -------------
          Balance at September 28, 2001                4,047,063         10,272,968           $ 5.94
                                                  ===============    ===============    =============
</TABLE>

As of September 28, 2001, 2,596,020 options were exercisable under the 1999
Plan, the WirelessHome Plan and the 2000 Plan previously withheld from the
merger consideration.

7. Subsequent Event

     On October 7, 2001, WirelessHome met certain development milestones. As a
result, the Company will release from escrow $1.3 million in cash and up to
approximately 835,000 shares.

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

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations contain forward-looking statements which reflect our
current views with respect to future events and future financial performance.
These forward-looking statements are subject to certain risks and uncertainties.
Actual results may differ materially from those described in such forward-
looking statements or from historical results. Readers are cautioned not to
place undue reliance on these forward-looking statements. These forward-looking
statements include statements related to the plans and objectives of management
for future operations, and statements as to the Company's future economic
performance, financial conditions or results of operations. The Company's actual
results could differ materially from those projected in these forward-looking
statements as a result of a number of factors, including, but not limited to,
technological innovations in wireless communications markets, the availability
and the price of raw materials and components used in the Company's products,
the demand for our wireless systems and products and acceptance of our new
products.

The following discussion should be read together with our financial statements,
notes to those financial statements included elsewhere in this Form 10-Q, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Form 10-K for the year ended December 31, 2000 filed
with the Securities and Exchange Commission.

Overview

     We were founded in 1979 in Sunnyvale, California as a vendor of radio
components and related services. In 1992, we changed our strategy, became a
designer and manufacturer of broadband wireless systems and launched our
broadband wireless point-to-point systems primarily used by wireless operators
to connect their base stations to other base stations and to existing wire line
networks. In 1999, we introduced our 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 our core technologies and the technology acquired through
our purchase of WirelessHome Corporation in March 2001, we are currently
developing point-to-multipoint systems that will enable service providers,
businesses and other enterprises to connect multiple facilities within a
geographic area to a central hub.

     On August 4, 2000, the Company completed its initial public offering of
7,500,000 shares of Class A common stock at a public offering price of $12.00
per share. On August 31, 2000, the underwriters exercised their option to
purchase 1,125,000 additional shares of Class A common stock to cover over-
allotments. The initial public offering and subsequent exercise of 1,125,000
shares by the underwriters resulted in net proceeds to the Company of
approximately $91.1 million after payment of underwriters' commissions and
deduction of offering expenses. Simultaneously with the closing of the initial
public offering, all of the Company's then outstanding 38,000,000 shares of
Class B common stock and 42,000,000 shares of Class B treasury stock were
automatically converted into 38,000,000 shares of Class A common stock and
42,000,000 shares of Class A treasury stock, respectively.


                                       10

<PAGE>

     In August 2000, the Company used a portion of the net proceeds from the
initial public offering to repay outstanding indebtedness. The Company made the
mandatory prepayment of its term notes to Credit Suisse First Boston and also
repaid all borrowings outstanding under the revolving credit facility. The total
repayment including accrued interest was $28.9 million.

     Revenue. We primarily generate revenue from the sale of point-to-point
broadband wireless systems designed for and used by wireless operators, service
providers, businesses, and other enterprises. Our point-to-multipoint systems
are still under development and we expect to begin offering these systems for
sale in the fourth quarter of 2001. We also generate a small percentage of our
revenue from the sale of services and parts and rentals of our systems. We
recognize revenue from the sale of our systems and parts when all the following
conditions are met: the system or part has been shipped, we have the right to
invoice the customer, the collection of the receivable is probable, and we have
no significant obligations remaining. Revenue from services is recognized over
the period for which the services are performed, which is less than one month.
Revenue from product rentals is recognized over the period of the rental.

     The majority of our direct sales are currently to wireless operators, and
we believe that the majority of the products that we sell through distributors
and value-added resellers are eventually sold to wireless operators.

     We sell our products worldwide to service providers, businesses and other
enterprises directly through our sales force and indirectly through distributors
and value-added resellers. 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, and value-added
resellers not only sell our products, 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. 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 could materially
adversely affect our revenue.

     International sales as a percentage of total sales accounted for
approximately 23% and 35% for the nine months ended September 28, 2001 and
September 29, 2000, respectively. We expect international sales to increase in
the future. Currently, all of our sales are denominated in U.S. dollars.
Accordingly, we are not 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 price 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 sales. This is primarily due to
our 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. As indirect
sales and sales in our international markets increase, we expect that our
average selling prices will further decrease.

     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, 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.

     Gross profit. Our gross profit is affected by both the average selling
prices of our products 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.

     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.

                                       11

<PAGE>

We expect to increase our research and development expenses as we continue to
develop new products and improve our core technologies. In particular, we expect
research and development expenses to increase in connection with our development
of point-to-multipoint broadband wireless access systems.

     Sales and marketing. Sales and marketing expenses consist of salaries,
commissions and related expenses for personnel engaged in sales, product
marketing, sales support functions, advertising, trade show and other
promotional expenses and allocated overhead. We intend to increase our sales and
marketing expenditures as we add sales and marketing personnel, increase the
number of distributors and value-added resellers that sell our products and
increase marketing programs. In particular, we expect sales and marketing
expenses to increase as we substantially expand our sales operations to support
and develop leads for our distributors and value-added resellers.

     General and administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, finance and
administrative personnel, professional fees, other general corporate expenses
and allocated overhead. We expect general and administrative expenses to
increase as we add personnel, increase spending on our information systems and
incur additional costs related to the growth of our business and operation as a
public company.

     Stock option programs. We have implemented stock option programs for
employees and members of our board of directors to attract and retain 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
and directors in all operating expense categories.

Recapitalization

     On November 1, 1999, Ripplewood Partners, L.P. and affiliates acquired
94.6% of our capital stock from Glenayre Technologies, Inc. through a wholly-
owned subsidiary, WMC Holding Corp., in a transaction accounted for as a
recapitalization. Prior to the recapitalization, we were an indirect wholly-
owned subsidiary of Glenayre Technologies, Inc., which had acquired us in 1995.
As part of our acquisition by Glenayre, Glenayre recognized $22.0 million of
goodwill, amortized over a 30-year useful life. This goodwill amount is
reflected on our historical financial statements. As of September 28, 2001 there
was $17.3 million of unamortized goodwill.

     We treated the recapitalization as an asset acquisition for federal income
tax purposes. As a result, we recorded a deferred tax asset in the amount of
$3.9 million which will offset future tax liabilities during the next 15 years,
assuming that we have sufficient income to realize the full benefit of this
deduction.

Acquisition of Ubiquity Communication, Inc.

     On March 24, 2000, we acquired Ubiquity Communication, Inc., located in
Petaluma, California. Through the acquisition, we acquired technology for use in
the development of our point-to-multipoint systems. At the time of the
acquisition, Ubiquity Communication had seven employees, including six
engineers. In connection with the acquisition, we issued 692,772 shares of our
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
Communication options we assumed. The value of the consideration paid for the
acquisition of Ubiquity Communication was $6.4 million. We accounted for the
transaction using the purchase method of accounting. In March 2001, the Ubiquity
operations were closed due to the acquisition of WirelessHome.

Acquisition of WirelessHome Corporation

     On March 22, 2001, we acquired WirelessHome Corporation, a Long Beach,
California-based company for consideration of $23 million. Through this
acquisition, we acquired point-to-multipoint technology in the Beta phase for
use in the development of our point-to-multipoint systems. WirelessHome
technology has replaced Ubiquity in the development of our point-to-multipoint
systems. Accordingly, we closed our Ubiquity operations in the quarter ended
March 30, 2001. Consequently, we recorded restructuring charges of $1.2 million.
The charge includes $1.0 million of cash provisions which include severance of
$0.8 million for 12 employees and $0.2 million of non-cash provisions for future
lease commitments and exit costs related to the Petaluma office facility. As of
September 28, 2001 approximately $0.8 million of the $1.0 million of cash
provisions were incurred with the remainder expected to be paid by the end of
2001.


                                       12

<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
                                                                       Three Months Ended                  Nine Months Ended
                                                              ---------------------------------    --------------------------------
                                                              September 28,       September 29,    September 28,      September 29,
                                                              -------------       -------------    -------------      -------------
                                                                  2001                2000              2001              2000
                                                              -------------       -------------    -------------      -------------
<S>                                                           <C>                 <C>              <C>                <C>
Revenue ...................................................           100.0%              100.0%           100.0%             100.0%
Cost of revenue ...........................................            59.2                49.4             53.7               46.9
                                                              -------------       -------------    -------------      -------------
Gross profit ..............................................            40.8                50.6             46.3               53.1
Operating expenses:
     Research and development .............................            23.8                11.0             17.5               11.9
     Sales and marketing ..................................            33.8                15.9             25.1               15.5
     General and administrative ...........................            14.3                 5.2             11.6                6.0
     Amortization of goodwill .............................             6.9                 2.4              4.6                2.5
     Impairment of goodwill ...............................              --                  --              3.1                4.3
     Amortization of deferred stock compensation ..........             1.4                 3.2              5.3                 --
     Restructuring costs ..................................             1.8                  --              2.2                 --
     Merger costs .........................................              --                  --              0.1                 --
                                                              -------------       -------------    -------------      -------------
        Total operating expenses ..........................            82.0                37.7             69.5               40.2
                                                              -------------       -------------    -------------      -------------
Income (loss) from operations .............................           (41.2)               12.9            (23.2)              12.9
Interest income (expense), net ............................             1.4                 0.9              1.5               (1.4)
                                                              -------------       -------------    -------------      -------------
Income (loss) before taxes ................................           (39.8)               13.8            (21.7)              11.5
Income tax provision ......................................           (13.4)                6.8             (4.1)               6.5
                                                              -------------       -------------    -------------      -------------
Income (loss) before extraordinary item ...................           (26.4)                7.0            (17.6)               5.0
Loss on early extinguishment of debt,
     net of income tax benefit ............................              --                 1.3               --                0.6
                                                              -------------       -------------    -------------      -------------
Net income (loss) .........................................           (26.4)                5.7            (17.6)               4.4
                                                              =============       =============    =============      =============
</TABLE>


Comparison of Three and Nine Months Ended September 28, 2001 and September 29,
2000

Revenue. Revenue decreased 27.5% from $29.9 million in the third quarter of 2000
to $21.7 million in the third quarter of 2001. Revenue decreased due to a 14.6%
decrease in the volume of products shipped in the third quarter of 2001 as
compared to the third quarter of 2000 combined with a decrease of 10.5% in
average selling price of our products in the third quarter of 2001 as compared
to the third quarter of 2000. The decrease in the average selling price is
primarily attributable to product mix. The revenue decrease is also attributable
to a $2.1 million provision for sales returns recorded in the third quarter of
2001 as compared to a provision for sales returns of $513,000 recorded in the
third quarter of 2000. Two customers accounted for 36.6% and 13.6% of total
revenue in the third quarter of 2001, and two customers accounted for 22.4% and
12.8% of total revenue in the third quarter of 2000.

Revenue increased 20.2% from $67.9 million in the nine months ended September
29, 2000 to $81.6 million in the nine months ended September 28, 2001. Revenue
increased due to a 27.3% increase in the volume of products shipped in the nine
months ended September 28, 2001 as compared to the nine months ended September
29, 2000, offset by a decrease of 1.8% in average selling price of our products
in the nine months ended September 28, 2001 as compared to the nine months ended
September 29, 2000. The revenue increase is also offset by a $2.3 million
provision for sales returns recorded in the nine months ended September 28, 2001
as compared to a provision for sales returns of $513,000 recorded in the nine
months ended September 29, 2000. Two customers accounted for 30.2% and 10.7% of
total revenue during the nine months ended September 28, 2001, and one customer
accounted for 20.5% of total revenue during the nine months ended September 29,
2000.

Cost of revenue. Cost of revenue decreased 13.2% from $14.8 million in the third
quarter of 2000 to $12.8 million in the third quarter of 2001. As a percentage
of revenue, cost of revenue increased from 49.4% in the third quarter of 2000 to
59.2% in the third quarter of 2001. Cost of revenue increased 37.6% from $31.8
million in the nine months ended September 29, 2000 to $43.8 million in the nine
months ended September 28, 2001. As a percentage of revenue, cost of revenue
increased from 46.9% in the nine months ended September 29, 2000 to 53.7% in the
nine months ended September 28, 2001. The increase in cost of revenue as a
percentage of sales for both comparable periods was primarily attributable to
lower than expected increase in revenue and production volume.

Research and development. Research and development expenses increased 56.2% from
$3.3 million in the third quarter of 2000 to $5.2 million in the third quarter
of 2001. Research and development expenses increased 77.0% from $8.1 million in
the nine months ended September 29, 2000 to $14.3 million in the nine months
ended September 28, 2001. The increase in research and development expenses for
both comparable periods was primarily attributable to the cost of increased
personnel and prototype spending for the development of new products and
enhancements to existing products. As a percentage of revenue, research and
development expenses increased from 11.0% in the third quarter of 2000 to 23.8%
in the third quarter of 2001. As a percentage of revenue, research and
development expenses increased from 11.9% in the nine months ended September 29,
2000 to 17.5% in the nine months ended September 28, 2001. As a percentage of
revenue, research and development

                                       13

<PAGE>

expenses for both comparable periods increased primarily due to lower than
expected revenue for such periods.

Sales and marketing. Sales and marketing expenses increased 53.6% from $4.8
million in the third quarter of 2000 to $7.3 million in the third quarter of
2001. Sales and marketing expenses increased 94.3% from $10.5 million in the
nine months ended September 29, 2000 to $20.4 million in the nine months ended
September 28, 2001. The increase in sales and marketing expenses for both
comparable periods is primarily attributable to increases in sales and marketing
personnel expenses, advertising, tradeshow, and public relations expenses. As a
percentage of revenue, sales and marketing expenses increased from 15.9% in the
third quarter of 2000 to 33.8% in the third quarter of 2001. As a percentage of
revenue, sales and marketing expenses increased from 15.5% in the nine months
ended September 29, 2000 to 25.1% in the nine months ended September 28, 2001.
As a percentage of revenue, sales and marketing expenses for both comparable
periods increased primarily due to lower than expected revenue during such
periods.

General and administrative. General and administrative expenses increased 100.8%
from $1.5 million in the third quarter of 2000 to $3.1 million in the third
quarter of 2001. General and administrative expenses increased 131.0% from $4.1
million in the nine months ended September 29, 2000 to $9.5 million in the nine
months ended September 28, 2001. The increase in general and administrative
expenses for both comparable periods is primarily due to increased personnel
expenses, consulting costs and provision for bad debts. As a percentage of
revenue, general and administrative expenses increased from 5.2% in the first
quarter of 2000 to 14.3% in the first quarter of 2001. As a percentage of
revenue, the increase in general and administrative expenses for both comparable
periods is attributable to increased personnel expenses, consulting costs,
allowance of bad debts in addition to a lower than expected revenue during such
periods.

Amortization of goodwill. Amortization of goodwill increased from $722,000 in
the third quarter of 2000 to $1.5 million in the third quarter of 2001.
Amortization of goodwill increased from $1.7 million in the nine months ended
September 29, 2000 to $3.7 million in the nine months ended September 28, 2001.
The increase in amortization of goodwill from the third quarter of 2000 to the
third quarter of 2001 is attributable to goodwill related to the WirelessHome
acquisition in March 2001. Amortization of goodwill increased from the nine
months ended September 29, 2000 to the nine months ended September 28, 2001 due
to goodwill and other intangible assets related to the WirelessHome acquisition
in March 2001.

Impairment of goodwill. 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 equals the unamortized amount of the goodwill as of the
date of the closure of the Ubiquity facilities as no future benefit is
anticipated since WirelessHome has replaced Ubiquity as the developer of our
point-to-multipoint systems.

Restructuring charges. We recorded $1.2 million of restructuring charges related
to the closure of our former Ubiquity operations during the first quarter and
second quarter of 2001. The charges include $1.0 million of cash provisions,
which include severance of $0.8 million for 12 employees and $0.2 million for
future lease commitments and exit costs related to the Petaluma office facility.
As of September 28, 2001, approximately $0.8 million of the $1.0 million of cash
provisions were incurred with the remainder expected to be paid by the end of
2001. 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.

In addition, the Company recorded $0.6 million associated with restructuring the
operations at the Company's headquarters.

Amortization of deferred stock compensation. Amortization of deferred stock
compensation was $946,000 in the third quarter of 2000 and $303,000 in the third
quarter of 2001. 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. Consequently, the amortization of
deferred stock compensation in the third quarter of 2001 is lower than in the
third quarter of 2000.

Interest income (expense), net. Interest income (expense), net increased from
$258,000 in the third quarter of 2000 to $304,000 in the third quarter of 2001.
Interest income (expense), net increased from $(966,000) in the nine months
ended September 29, 2000 to $1.2 million in the nine months ended September 28,
2001. The increase in interest income (expense) for both comparable periods was
attributable to interest income earned on our investment securities and
significantly reduced interest expense due to the repayment of our debt.

Income tax provision (benefit). The income tax provision (benefit) decreased
from a $2.0 million provision in the third quarter of 2000 to a $(2.9) million
benefit in the third quarter of 2001. The income tax provision (benefit)
decreased from a $4.4 million provision in the nine months ended September 29,
2000 to a $(3.4) million benefit in the nine months ended September 28, 2001.
The Company reported a net loss of $(5.7) million and $(14.3) million in the
third quarter of 2001 and in the nine months ended September 28, 2001,
respectively, resulting in a tax benefit for both respective periods. Our
effective tax rate was a 33.7% and 19.0% benefit for the third quarter of 2001

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and the nine months ended September 28, 2001, respectively. The primary
difference between the Company's effective tax rate and the statutory rate after
the impact of non-deductible expenses for the third quarter of 2001 include the
amortization of deferred stock compensation and the amortization of WirelessHome
goodwill. For the nine months ended September 28, 2001, non-deductible expenses
include the impairment of goodwill, the amortization of deferred stock
compensation and the amortization of WirelessHome goodwill.

Liquidity and Capital Resources

     As discussed in the Overview above, the Company had net proceeds of
approximately $91.1 million from the initial public offering and in August 2000
used approximately $29 million of the net proceeds to repay outstanding
indebtedness under its term notes along with the outstanding borrowings under
its revolving credit facility. Of the net proceeds, the Company also used
approximately $3 million to pay a security deposit in connection with a new
noncancellable operating lease, approximately $10 million in connection with the
acquisition of WirelessHome, approximately $33 million to invest in short-term
and long-term interest-bearing, investment-grade securities, approximately $8
million in purchases of equipment and leasehold improvements, and approximately
$8 million to finance its operations and working capital requirements.

     Prior to our initial public offering, we had financed our operations and
working capital requirements primarily through cash generated by our business
and bank financing.

     Cash and cash equivalents decreased by $21.5 million from $31.1 million at
December 31, 2000 to $9.5 million at September 28, 2001. Cash and cash
equivalents increased by $57.5 million from $1.9 million at December 31, 1999 to
$59.4 million at September 29, 2000.

     Net cash used in operating activities for the nine months ended September
28, 2001 was $18.0 million primarily due to a net loss of $14.3 million,
increased changes in inventory of $10.2 million, deferred taxes of $2.5 million,
and accounts payable and accrued liabilities of $10.1 million offset by
depreciation and amortization of $8.4 million, impairment of goodwill of $4.3
million, a provision for bad debts of $821,000, a provision for sales returns of
$2.2 million, and increased changes in accounts receivable of $1.1 million and
prepaid expenses and other of $2.7 million. Net cash used in operating
activities for the nine months ended September 29, 2000 was $10.1 million
primarily due to increased changes in accounts receivable of $17.9 million,
inventory of $6.0 million, deferred taxes of $1.4 million, other long-term
assets of $2.5 million, and payable to parent company of $1.3 million, offset by
net income of $3.0 million, depreciation and amortization of $5.4 million,
amortization of deferred financing costs of $748,000, a provision for sales
returns of $513,000, increased changes in deferred taxes of $435,000 and
accounts payable and accrued liabilities of $8.7 million.

     Net cash used in investing activities for the nine months ended September
28, 2001 was $3.8 million primarily due to purchases of equipment and leasehold
improvements of $4.4 million, purchases of investment securities of $10.2
million, cash paid for acquisition of WirelessHome, net of cash acquired, of
$10.1 million, offset by proceeds from sale of investment securities of $20.9
million. Net cash used in investing activities for the nine months ended
September 29, 2000 was $2.3 million due to purchase of equipment and leasehold
improvements.

     Net cash provided by financing activities was $285,000 in the nine months
ended September 28, 2001 resulting from employee stock purchase plan shares of
$1.3 million and exercise of stock options of $600,000, offset by repayment of
long-term debt of $1.7 million. Net cash provided by financing activities in the
nine months ended September 29, 2000 was $69.8 million representing net proceeds
from the issuance of shares of $95.0 million, offset by repayments of $24
million of long-term debt and line of credit, net of borrowings, and issuances
of stockholders' notes to employees of $1.2 million.

     We believe that our current available cash and investments combined with
our available borrowings on our unused $10 million revolving credit facility,
which matures in November 2002, 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.

Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141 ("SFAS 141"). "Business

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Combinations," which supersedes Accounting Principles Board ("APB") Opinion No.
16. "Business Combinations". SFAS 141 eliminates the pooling-of-interests method
of accounting for business combinations and modifies the application of the
purchase accounting method. The elimination of the pooling-of-interests method
is effective for transactions initiated after June 30, 2001. The remaining
provisions of SFAS 141 will be effective for transactions accounted for using
the purchase method that are completed after June 30, 2001. The Company believes
that the adoption of this Statement will not have a material impact on the
financial position or the results of operations of the Company.

In July 2001, the FASB also issued SFAS No. 142. ("SFAS 142"), "Goodwill and
Other Intangible Assets," which supersedes APB Opinion No. 17, "Intangible
Assets". Under SFAS 142, goodwill and intangible assets with indefinite lives
are not amortized but are tested for impairment annually using the fair value
approach, except in certain circumstances, and whether there is an impairment
indicator, other intangible assets will continue to be valued and amortized over
their estimated lives; in-process research and development will continue to be
written off immediately; all acquired goodwill must be assigned to reporting
units for purposes of impairment testing and segment reporting effective January
1, 2002, and existing goodwill will no longer be subject to amortization.
Goodwill arising between June 30, 2001 and December 31, 2001 will not be subject
to amortization.

Under adoption of SFAS 142, on January 1, 2002, the Company will no longer
amortize goodwill, thereby eliminating annual goodwill amortization of
approximately $5.6 million based on anticipated amortization for 2002. Goodwill
amortization for the nine months ended September 29, 2001 under APB Opinion
No. 17 was $3.7 million.

In August 2001, the FASB issued SFAS No. 143 ("SFAS 143") "Accounting for
Obligations Associated with the Retirement of Long-Lived Assets." SFAS 143
addresses financial accounting and reporting for the retirement obligation of an
asset. SFAS 143 states that companies should recognize the asset retirement
cost, at its fair value, as part of the cost of the asset and classify the
accrued amount as a liability in the condensed consolidated balance sheet. The
asset retirement liability is then accreted to the ultimate payout as interest
expense. The initial measurement of the liability would be subsequently updated
for revised estimates of the discounted cash outflows. SFAS 143 will be
effective for fiscal years beginning after June 15, 2002. The Company has not
yet determined the effect SFAS No. 143 will have on its financial position,
results of operations, or cash flows.

In October 2001, the FASB issued SFAS No. 144 ("SFAS 144") "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes SFAS No. 121
by requiring that one accounting model to be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired, and by
broadening the presentation of discontinued operations to include more disposal
transactions. SFAS 144 will be effective for fiscal years beginning after
December 15, 2001. The Company has not yet determined the effect SFAS 144 will
have on its financial position, results of operations, or cash flows.

Seasonality

     Historically, our revenues have been stronger in the last two quarters of
the fiscal year. This shift may primarily be attributed to the budgetary
constraints of the customers in our industry and weather conditions, which make
an outdoor installation more difficult during the winter. However, going
forward, we believe the impact of seasonal fluctuations on our business will
decrease because our expansion into international markets may minimize the
impact that weather conditions may have on our overall sales.

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.

PART II. OTHER INFORMATION

         No applicable items


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                                    SIGNATURE

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 13, 2001     Western Multiplex Corporation

                                    By:           /s/ NANCY HUBER
                                       -----------------------------------------
                                                      Nancy Huber
                                       Chief Financial Officer, Executive Vice
                                              President, and Secretary
                                       (Principal Financial and Accounting
                                                   Officer)

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