<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 June 29, 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 August 7, 2001 was 57,846,911. 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>                                                                                                           <C>
Item 1.     Financial Statements

            Condensed Consolidated Balance Sheets at June 29, 2001 (unaudited) and December 31, 2000                        1

            Condensed Consolidated Income Statements for the three months and six months ended June 29,                     2
            2001 (unaudited) and June 30, 2000 (unaudited)

            Condensed Consolidated Statements of Cash Flows for the six months ended June 29, 2001 (unaudited)              3
            and June 30, 2000 (unaudited)

            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

Item 1.     Legal Proceedings                                                                                              16

Item 2.     Changes in Securities and Use of Proceeds                                                                      16

Item 6.     Exhibits and Reports on Form 8-K                                                                               16

            Signature                                                                                                      17
</TABLE>
<PAGE>

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                         WESTERN MULTIPLEX CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                   June 29,                 December 31,
                                                                                     2001                       2000
                                                                              ---------------             --------------
                                                                                 (unaudited)
<S>                                                                           <C>                         <C>
                                    ASSETS
Current assets:
     Cash and cash equivalents                                                $        11,901             $       31,094
     Short-term investments                                                            15,312                     20,633
     Accounts receivable, net                                                          32,593                     34,292
     Inventory                                                                         23,846                     10,949
     Prepaid expenses and other                                                         2,032                      4,970
     Deferred tax assets                                                                3,182                      1,573
                                                                              ---------------             --------------
         Total current assets                                                          88,866                    103,511

Long-term investments and other                                                         5,128                      3,014
Equipment and leasehold improvements, net                                               8,528                      5,381
Deferred tax assets                                                                     3,455                      3,565
Other long-term assets                                                                  2,575                      2,500
Goodwill and other intangible assets, net                                              40,968                     22,906
                                                                              ---------------             --------------
         Total assets                                                         $       149,520             $      140,877
                                                                              ===============             ==============

                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                         $        12,103             $       10,208
     Accrued liabilities                                                                7,435                      8,582
     Payable to parent company                                                             35                         35
                                                                              ---------------             --------------
         Total current liabilities                                                     19,573                     18,825
Long-term debt                                                                              -                         28
                                                                              ---------------             --------------
         Total liabilities                                                             19,573                     18,853
                                                                              ---------------             --------------

Stockholders' equity:
     Common stock                                                                         986                        975
     Paid-in capital                                                                  153,925                    141,341
     Treasury stock                                                                   (21,000)                   (21,000)
     Deferred stock compensation                                                         (627)                    (4,310)
     Other comprehensive income                                                           142                         12
     Retained earnings (deficit)                                                       (2,547)                     6,068
     Less:   Employee stock subscription receivable                                      (932)                    (1,062)
                                                                              ---------------             --------------
         Total stockholders' equity                                                   129,947                    122,024
                                                                              ---------------             --------------
         Total liabilities and stockholders' equity                           $       149,520             $      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                     Six Months Ended
                                                                June 29,         June 30,             June 29,         June 30,
                                                                  2001             2000                 2001             2000
                                                              -----------      -----------          -----------     ------------
<S>                                                           <C>              <C>                  <C>             <C>
Revenue                                                       $    22,295      $    20,944          $    59,880     $     37,964
Cost of revenue                                                    12,085            9,340               30,984           17,065
                                                              -----------      -----------          -----------     ------------

      Gross profit                                                 10,210           11,604               28,896           20,899
                                                              -----------      -----------          -----------     ------------

Operating expenses:
      Research and development                                      5,054            2,828                9,131            4,769
      Sales and marketing                                           6,038            3,202               13,117            5,751
      General and administrative                                    3,450            1,463                6,360            2,552
      Amortization of goodwill                                      1,414              751                2,236              938
      Amortization of deferred stock compensation                     315            1,082                2,256            1,968
      Impairment of goodwill                                            -                -                4,331                -
      Restructuring charges                                           312                -                1,420                -
      Merger costs                                                      -                -                   30                -
                                                              -----------      -----------          -----------     ------------
         Total operating expenses                                  16,583            9,326               38,881           15,978
                                                              -----------      -----------          -----------     ------------
         Income (loss) from operations                             (6,373)           2,278               (9,985)           4,921
Interest income (expense), net                                        444             (627)                 916           (1,224)
                                                              -----------      -----------          -----------     ------------
         Income (loss) before taxes                                (5,929)           1,651               (9,069)           3,697
Income tax provision (benefit)                                     (1,797)           1,100                 (451)           2,383
                                                              -----------      -----------          -----------     ------------
         Net income (loss)                                    $    (4,132)     $       551          $    (8,618)    $      1,314
                                                              ===========      ===========          ===========     ============
Basic and diluted earnings (loss) per share                   $     (0.07)     $      0.01          $     (0.15)    $       0.03
                                                              ===========      ===========          ===========     ============
Shares used to compute basic earnings (loss) per share         57,509,224       42,709,145           56,791,902       41,454,483
                                                              ===========      ===========          ===========     ============
Shares used to compute diluted earnings (loss) per share       57,509,224       50,797,779           56,791,902       48,858,593
                                                              ===========      ===========          ===========     ============
</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>
                                                                                          Six Months Ended
                                                                                  ----------------------------------
                                                                                      June 29,          June 30,
                                                                                        2001              2000
                                                                                  ----------------  -----------------
<S>                                                                              <C>                <C>
Cash flows from operating activities:
      Net income (loss)                                                           $       (8,618)    $        1,314
      Adjustments to reconcile net income (loss) to net cash used in
      operating activities:
          Depreciation and amortization                                                    5,859              3,340
          Amortization of deferred financing costs                                             -                 96
          Impairment of goodwill                                                           4,331                  -
          Provision for bad debt                                                             767                149
          Assets and liabilities:
             Accounts receivable                                                             932             (5,032)
             Inventory                                                                   (12,897)            (6,610)
             Prepaid expenses and other                                                    3,003               (917)
             Deferred tax assets                                                          (1,499)               242
             Other long-term assets                                                          (25)                 -
             Accounts payable and accrued liabilities                                       (558)             3,955
             Payable to parent company                                                         -               (719)
             Other long-term obligations                                                       -                 47
                                                                                  ----------------  -----------------
                  Net cash used in operating activities                                   (8,705)            (4,135)
                                                                                  ----------------  -----------------
Cash flows from investing activities:
      Purchases of equipment and leasehold improvements                                   (3,875)            (1,291)
      Purchases of investment securities                                                 (10,154)                 -
      Proceeds from sale of investment securities                                         13,491                  -
      Cash paid for acquisition of WirelessHome, net of cash acquired                    (10,146)                 -
                                                                                  ----------------  -----------------
                  Net cash used in investing activities                                  (10,684)            (1,291)
                                                                                  ----------------  -----------------
Cash flows from financing activities:
      Net proceeds from issuance of shares                                                   (41)             2,385
      Exercise of stock options                                                              556                  -
      Issuance of employee stock purchase plan shares                                      1,254                  -
      Repayment of long-term debt                                                         (1,703)              (909)
      Borrowings on line of credit                                                             -              3,500
      Employee stock subscription receivable                                                 130             (1,179)
                                                                                  ----------------  -----------------
                  Net cash provided by financing activities                                  196              3,797
                                                                                  ----------------  -----------------
Net decrease in cash                                                                     (19,193)            (1,629)
Cash and cash equivalents, beginning of period                                            31,094              1,913
                                                                                  ----------------  -----------------
Cash and cash equivalents, end of period                                          $       11,901    $           284
                                                                                  ================  =================

Supplemental Disclosures:
      Cash paid for:
          Interest                                                                $          113    $         1,219
                                                                                  ================  =================
          Income taxes                                                            $          506    $         3,975
                                                                                  ================  =================
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") in 1995, a
wholly-owned subsidiary of Glenayre Technologies Inc. ("Glenayre").

     Effective November 1, 1999, a recapitalization of the Company was
consummated that included the following transactions each, in accordance with
the terms of the Amended and Restated Acquisition Agreement by and among GTI
Acquisition Corp., Glenayre, the Company and WMC Holding Corp., dated September
30, 1999 (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.

     .   WMC Holding Corp. ("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.

     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).


                                    Three months ended         Year ended
                                    ------------------         ----------
                                      March 30, 2001        December 31, 2000
                                      --------------        -----------------

        Revenue                          $ 37,585              $ 105,508
        Net loss from continuing
         operations                      $ (6,994)             $  (7,615)
        Diluted loss per share           $  (0.12)             $   (0.16)

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 allocation, are subject to adjustments upon WirelessHome meeting
certain development milestones and other considerations. WirelessHome has
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 June 29, 2001
approximately $0.8 million of these costs 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 (See Note 3). In addition, the Company
recorded $0.2 million associated with restructuring the Sunnyvale operations.

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 audited financial statements as of that date.


3.   Summary of Significant Accounting Policies


   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>
                                                                                    June 29,         December 31,
                                                                                      2001               2000
                                                                                ----------------   ---------------
                     <S>                                                       <C>                <C>
                     Raw materials............................................. $          8,450   $         3,628
                     Work-in-process...........................................            3,226             1,646
                     Finished goods............................................           12,170             5,675
                                                                                ----------------   ---------------
                                                                                $         23,846   $        10,949
                                                                                ================   ===============
</TABLE>

   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 totals $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 has been 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 ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
Under those rules, the Company reviews long-lived assets and certain
identifiable intangibles to be held and used for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company evaluates any possible impairment of long-lived
assets using estimates of undiscounted future cash flows. If an impairment loss
is to be recognized, it is measured as the amount by which the carrying amount
of the asset exceeds the 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 No.
131"). SFAS No. 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 40.7% and 11.7% of total revenue for the second
quarter of 2001, and two customers accounted for 20.5% and 18.0% of total
revenue for the second quarter of 2000. Three customers accounted for 27.9%,
12.7% and 10.2% of total revenue for the first half of 2001, and two customers
accounted for 18.9% and 13.1% of total revenue for the first half of 2000.


   Earnings Per Share of Common Stock

     Basic and diluted net income per share are presented in conformity with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
No. 128"). Basic earnings per share under SFAS 128 were computed using the
weighted average number of shares outstanding of 57,509,224 and 42,709,145 for
the three months ended June 29, 2001 and June 30, 2000, respectively. Diluted
earnings per share is determined in the same manner as basic earnings per share
except that the number of shares is increased assuming dilutive stock options
and warrants using the treasury stock method. Diluted earnings per share were
computed using the weighted average number of shares outstanding of 57,509,224
and 50,797,779 for the three months ended June 29, 2001 and June 30, 2000,
respectively. For the three months ended June 29, 2001, the incremental shares
from the assumed exercise of stock options were not included in computing
diluted per share amounts as there was a net loss for the period

                                       6
<PAGE>

and the effect of such assumed conversion would be antidilutive.

     Basic earnings per share were computed using the weighted average number of
shares outstanding of 56,791,902 and 41,454,483 for the six months ended June
29, 2001 and June 30, 2000, respectively. Diluted earnings per share were
computed using the weighted average number of shares outstanding of 56,791,902
and 48,858,593 for the six months ended June 29, 2001 and June 30, 2000,
respectively. For the six months ended June 29, 2001, the incremental shares
from the assumed exercise of stock options were not included in computing
diluted per share amounts as there was a net loss for the period and the effect
of such assumed conversion 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, 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 this statement 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 29, 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 six months ended June 30, 2001 was approximately $2.2
million.


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 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 June 29, 2001,
there were no borrowings were 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 June 29, 2001.


5.     Common Stock

   Common Stock

     The Company's common stock consists of Class A and Class B common stock.
Holders of Class A common stock are

                                       7
<PAGE>

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 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 June 29, 2001, there were 57,775,243 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 new
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 compensation 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 subscription
loans to a few employees. As of June 29, 2001, the Company had $932,000 of
employee 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 $315,000, net of cancellations, and $1.1 million
for the three months ended June 29, 2001 and June 30, 2000, respectively. For
the six months ended June 29, 2001 and June 30, 2000, the Company recorded
amortization of deferred stock compensation of $2.3 million, net of
cancellations, and $2.0 million, respectively.

     As part of the WirelessHome acquisition, the Company assumed certain
unvested options that when converted 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. 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 June 29, 2001, the
total deferred stock compensation outstanding was $627,000.

                                       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 120,941 shares at
$10.20 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 our 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.


   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
non- qualified stock options to newly elected members of the board of directors
who are not employees of our 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 our 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 Ubiquity Plans and the 2000 Plan for the three months ended June 29, 2001:

                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                          Options Outstanding
                                                                     ------------------------------
                                                                                         Weighted
                                                                                          Average
                                                     Options            Number           Exercise
                                                    Available          of Shares           Price
                                                  -------------      -------------      -----------
                                                  -------------      -------------      -----------
           <S>                                    <C>                <C>                <C>
           Balance at March 30, 2001                  3,828,579         7,796,465       $     5.49
                Authorized                            3,000,000
                Granted                              (3,021,000)        3,021,000             6.56
                Exercised                                  -             (457,327)            0.67
                Cancelled                               758,639          (758,639)            5.15
                                                 --------------      ------------       ----------
           Balance at June 29, 2001                   4,566,218         9,601,499       $     6.13
                                                 ==============      ============       ==========
</TABLE>

As of June 29, 2001, 2,030,750 shares were exercisable under the 1999 Plan, the
Ubiquity Plans and the 2000 Plan.

     As part of the WirelessHome acquisition, 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. These options have a weighted
average exercise price of $5.00 per share.


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 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 16% and 23% for the six months ended June 29, 2001 and June 30,
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 accrued 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. 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

                                       11
<PAGE>

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
in all operating expense categories.


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.


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 previously acquired
us in 1995. As part of Glenayre's acquisition of us, Glenayre recognized $21.6
million of goodwill, amortized over a 30-year useful life. This goodwill amount
is reflected on our historical financial statements. As of June 29, 2001 there
was $17.0 million to be amortized over the remaining 25-year term.

     We intend to treat 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 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, and as such, 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 for future lease commitments and
exit costs related to the Petaluma office facility. As of June 29, 2001
approximately $0.8 million of these costs 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 $0.2
million associated with restructuring the Sunnyvale operations.

                                       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                           Six Months Ended
                                                             --------------------------                   -------------------------
                                                                June 29,          June 30,               June 29,         June 30,
                                                             ----------           --------               --------         ---------
                                                                  2001              2000                   2001             2000
                                                             -----------          --------               --------         ----------
<S>                                                          <C>                  <C>                    <C>              <C>
Revenue..............................................        100.0%               100.0%                 100.0%           100.0%
Cost of revenue......................................         54.2                 44.6                   51.7             44.9
                                                             -----               ------                 ------            ------
Gross profit.........................................         45.8                 55.4                   48.3             55.1
Operating expenses:
     Research and development........................         22.7                 13.5                   15.3             12.6
     Sales and marketing.............................         27.1                 15.3                   21.9             15.1
     General and administrative......................         15.5                  7.0                   10.6              6.7
     Amortization of goodwill........................          6.3                  3.6                    3.7              2.5
     Impairment of goodwill                                      -                    -                    3.8              5.2
     Amortization of deferred stock compensation.....          1.4                  5.1                    7.2                -
     Restructuring costs                                       1.4                    -                    2.4                -
     Merger costs                                                -                  0.1                      -                -
                                                            ------               ------                 -------            -----
        Total operating expenses.....................         74.4                 44.5                   65.0             42.1
                                                            ------               ------                 --------           -----
Income from operations...............................        (28.6)                10.9                  (16.7)            13.0
Interest income (expense), net.......................          2.0                 (3.0)                   1.5             (3.2)
                                                            ------                ------                ------            ------
Income before taxes..................................        (26.6)                 7.9                  (15.2)             9.8
Income tax provision.................................         (8.1)                 5.3                  (0.8)              6.3
                                                             ======               =====                 ======             =====
Net income...........................................        (18.5)                 2.6                 (14.4)              3.5
                                                             ======               =====                 ======             =====
</TABLE>

Comparison of Three and Six Months Ended June 29, 2001 and June 30, 2000

Revenue. Revenue increased 6.5% from $20.9 million in the second quarter of 2000
to $22.3 million in the second quarter of 2001. Revenue increased primarily due
to a 16.6% increase in the volume of products shipped in the second quarter of
2001 as compared to the second quarter of 2000, offset by a decrease of 6.4% in
average selling price of our products in the second quarter of 2001 as compared
to the second quarter of 2000. Two of our customers accounted for 40.7% and
11.7% of total revenue in the second quarter of 2001, and two customers
accounted for 20.5% and 18.0% of total revenue in the second quarter of 2000.

     Revenue increased 57.7% from $38.0 million in the first half of 2000 to
$59.9 million in the first half of 2001. Revenue increased primarily due to a
61.9% increase in the volume of products shipped in the first half of 2001 as
compared to the first half of 2000, combined with an increase of 0.1% in average
selling price of our products in the first half of 2001 as compared to the
second half of 2000. Three of our customers accounted for 27.9%, 12.7% and 10.2%
of total revenue during the first half of 2001, and two of our customers
accounted for 18.9% and 13.1% of total revenue during the first half of 2000.


Cost of revenue. Cost of revenue increased 29.4% from $9.3 million in the second
quarter of 2000 to $12.1 million in the second quarter of 2001. As a percentage
of revenue, cost of revenue increased from 44.6% in the second quarter of 2000
to 54.2% in the second quarter of 2001. Cost of revenue increased 81.6% from
$17.1 million in the first half of 2000 to $31.0 million in the first half of
2001. The increase in cost of revenue for both comparable periods was primarily
attributable to increased sales. As a percentage of revenue, cost of revenue
increased from 45.0% in the first half of 2000 to 51.7% in the first half of
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, resulting in under absorption of overhead.


Research and development. Research and development expenses increased 78.7% from
$2.8 million in the second quarter of 2000 to $5.1 million in the second quarter
of 2001. Research and development expenses increased 91.5% from $4.8 million in
the first half of 2000 to $9.1 million in the first half of 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 13.5% in
the second quarter of 2000 to 22.7% in the second quarter of 2001. As a
percentage of revenue, research and development expenses increased from 12.6% in
the first half of 2000 to 15.2% in the first half of 2001. As a percentage of
revenue, research and development

                                       13
<PAGE>

expenses for both comparable periods increased primarily due to lower than
expected revenue in the second quarter of 2001.

Sales and marketing. Sales and marketing expenses increased 88.6% from $3.2
million in the second quarter of 2000 to $6.0 million in the second quarter of
2001. Sales and marketing expenses increased 128.1% from $5.8 million in the
first half of 2000 to $13.1 million in the first half of 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 15.3% in the second quarter
of 2000 to 27.1% in the second quarter of 2001. As a percentage of revenue,
sales and marketing expenses increased from 15.1% in the first half of 2000 to
21.9% in the second half of 2001. As a percentage of revenue, sales and
marketing expenses for both comparable periods increased primarily due to lower
than expected revenue in the second quarter of 2001.

General and administrative. General and administrative expenses increased 135.8%
from $1.5 million in the second quarter of 2000 to $3.5 million in the second
quarter of 2001. General and administrative expenses increased 149.2% from $2.6
million in the first half of 2000 to $6.4 million in the first half of 2001. The
increase in general and administrative expenses for both comparable periods is
primarily due to increased personnel expenses, consulting costs and allowance
for bad debts. As a percentage of revenue, general and administrative expenses
increased from 7.0% in the first quarter of 2000 to 15.5% 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 in the second quarter of 2001.

     Amortization of goodwill. Amortization of goodwill increased from $751,000
in the second quarter of 2000 to $1.4 million in the second quarter of 2001.
Amortization of goodwill increased from $938,000 in the first half of 2000 to
$2.2 million in the first half of 2001. The increase in amortization of goodwill
from the second quarter of 2000 to the second quarter of 2001 is attributable to
goodwill related to the WirelessHome acquisition in March 2001. Amortization of
goodwill increased from the second half of 2000 to the second half of 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 Ubiquity has replaced by WirelessHome as the developer of the
Company's 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 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
June 29, 2001, approximately $0.8 million of these charges were incurred with
the remainder expected to be paid by the end of 2001. The charges also include
$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 $0.2 million associated with restructuring the Sunnyvale operations.

     Amortization of deferred stock compensation. Amortization of deferred stock
compensation was $1.1 million in the second quarter of 2000 and $315,000 in the
second 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 second quarter of 2001 is lower than in the
second quarter of 2000.

     Interest income (expense), net. Interest income (expense), net increased
from $(627,000) in the second quarter of 2000 to $444,000 in the second quarter
of 2001. Interest income (expense), net increased from $(1.2) million in the
second half of 2000 to $916,000 in the second half of 2001. The increase in
interest income (expense) for both comparable periods was attributable to
interest income earned on our money market account and significantly reduced
interest expense due to the repayment of our debt.

     Income tax provision. The income tax provision (benefit) decreased from
$1.1 million in the second quarter of 2000 to $(1.8) million in the first
quarter of 2001. The income tax provision (benefit) decreased from $2.4 million
in the first half of 2000 to $(451,000) in the first half of 2001. The Company
reported a net loss of $(4.1) million and $(8.6) million in the second quarter
of 2001 and in the first half of 2001, respectively, resulting in a tax benefit
for both respective periods. Our effective tax rate was

                                       14
<PAGE>

30.3% and 5.0% for the second quarter of 2001 and the first half of 2001,
respectively. Non-deductible expenses for the second quarter of 2001 include the
amortization of deferred stock compensation. For the first half of 2001, non-
deductible expenses include the impairment of goodwill in addition to the
amortization of deferred stock compensation.

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 $26 million to invest in short-term
and long-term interest-bearing, investment-grade securities, approximately
$7 million in purchases of equipment and leasehold improvements, and
approximately $4 million to finance its operations and working capital
requirements.

     As of the date of this Quarterly Report on Form 10-Q, we have not allocated
the remaining net proceeds of the offering for specific uses. We expect to use
the remainder of the net proceeds of the offering primarily for general
corporate purposes, including working capital, expansion of our engineering
organization, product development programs, sales and marketing capabilities,
and general administrative functions and capital expenditures. We may also use a
portion of the net proceeds to acquire complementary businesses, products and
technologies or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific plans, agreements or
commitments.

     We have not identified the specific use of the remainder of the net
proceeds due to the flexible nature of our planning process. The amounts that we
actually expend for general corporate and other purposes will vary significantly
depending on a number of factors, including future sales growth and the amount
of cash we generate from operations, if any. Pending the use of the proceeds
described above, we will invest the remainder of the net proceeds in interest-
bearing, investment-grade securities.

     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 $19.2 million from $31.1 million at
December 31, 2000 to $11.9 million at June 29, 2001. Cash and cash equivalents
decreased by $1.6 million from $1.9 million at December 31, 1999 to $284,000
million at June 30, 2000. Net cash used in operating activities increased from
$4.1 million during the six months ended June 30, 2000 to $8.7 million during
the six months ended June 29, 2001. This increase is primarily attributable to
increase in net loss of $9.9 million, increased changes in inventory of
$6.3 million, deferred taxes of $1.7 million, and accounts payable and accrued
liabilities of $4.5 million, offset by increase in depreciation and amortization
of $2.5 million, impairment of goodwill of $4.3 million, an increase in
provision for bad debts of $0.6 million, and increased changes in accounts
receivable of $6.0 million, prepaid expenses and other of $3.9 million, and
payable to parent company of $0.7 million.

     Net cash used in investing activities increased from $1.3 million in the
six months ended June 30, 2000 to $10.7 million in the six months ended June 29,
2001 due to increases in capital spending of $2.6 million and $10.4 million of
spending associated with the acquisition of WirelessHome offset by $3.3 million
in net proceeds from the sale of investment securities.

     Net cash provided by financing activities was $193,000 in the six months
ended June 29, 2001 resulting from employee stock purchase plan shares of $1.3
million, exercise of stock options of $516,000 offset by repayment of long-term
debt of $1.7 million. Net cash provided by financing activities in the six
months ended June 30, 2000 was $3.8 million representing net proceeds from the
issuance of shares of $2.4 million, and borrowings, net of repayments, on line
of credit of $2.6 million offset by issuances of stockholders' notes to
employees of $1.2 million.

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


Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("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 Other Intangible Assets," which supersedes APB Opinion No. 17, "Intangible
Assets". Under this statement 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 29, 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 six months ended June 30, 2001 was approximately $2.2
million.

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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


ITEM 1.  LEGAL PROCEEDINGS

  The Company is not currently a party to any material legal proceedings.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

  None


ITEM 6.  EXHIBITS AND REPORTS ON FORM  10-Q

a.  Exhibits

None

b. On June 5, 2001, the Company filed an amendment to its Current Report on Form
8-K filed on March 22, 2001 to add the financial statements of WirelessHome
Corporation required by Item 7(a) of the Form and the pro forma financial
information required by Item 7(b) of the Form. On June 18, 2001, the Company
filed a Current Report on Form 8-K in connection with its announcement of the
revision of its earnings estimates for the quarterly period covered by this
Report.

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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:    August 13, 2001            Western Multiplex Corporation

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

                                      17