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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|(XBOX) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

For the quarterly period ended March 29, 2002

OR

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|(BOX) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

For the transition period from ______________ to ________________

Commission file number 000-30993

PROXIM CORPORATION

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


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

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (XBOX) No (BOX)

The number of shares outstanding of the Companys Class A common stock, par
value $.01 per share, as of May 3, 2002 was 119,143,217. No shares of the
Companys Class B common stock, par value $.01 per share, are outstanding.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                 |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS                    
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS          
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q                                                    
|SIGNATURE                    



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##### Table of Contents



TABLE OF CONTENTS

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|        |  |                                                                                       |  |  |    |     
|PART I  |  | FINANCIAL INFORMATION                                                                 |  |  |    |     
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|Item 1  |  | Financial Statements                                                                  |  |  |    |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|        |  | Condensed Consolidated Balance Sheets at March 29, 2002 and December 31, 2001         |  |  | 3  |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|        |  | Condensed Consolidated Statements of Operations for the three months ended March 29,  |  |  |    |     
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|        |  | 2002 and March 30, 2001                                                               |  |  | 4  |     
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|        |  | Condensed Consolidated Statements of Cash Flows for the three months ended March 29,  |  |  |    |     
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|        |  | 2002 and March 30, 2001                                                               |  |  | 5  |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|        |  | Notes to Condensed Consolidated Financial Statements                                  |  |  | 6  |     
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|Item 2  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |  | 17 |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |  | 41 |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|PART II |  | OTHER INFORMATION                                                                     |  |  |    |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|Item 1  |  | Legal Proceedings                                                                     |  |  | 41 |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|Item 4  |  | Submission of
Matters to a vote of Security Holders                                   |  |  | 42 |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|Item 6  |  | Exhibits and Reports on Form 8-K                                                      |  |  | 42 |     
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|        |  |                                                                                       |  |  |    |      |  | 
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|        |  | Signature                                                                             |  |  | 43 |     

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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




PROXIM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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


|                                                |                                               |                                            |                                      |         |         |           |   |              |         |  |  | 
|----------------------------------------------- | --------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------- | ------- | --------- | - | ------------ | ------- |  |  | 
|                                                |                                               |                                            |                                      |         |         | March 29, |   | December 31,
|                                                |                                               |                                            |                                      |         |         | 2002      |   | 2001        
|                                                |                                               |                                            |                                      |         |         |           |   |             
|                                                |                                               |                                            |                                      |         |         |           |   |             
|                                                |                                               |                                            |                                      | ASSETS  |         |           |   |              |         |  |  | 
|                                               
|                                               
|                                               
|                                               
|Current assets:                                 |                                               |                                            |                                      |         |         |           |   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                     |                                            | $                                    | 43,392  |         |           | $ | 16,552       |        
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term investments                        |                                            |                                      | 5,035   |         |           |   | 6,738        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts receivable, net                      |                                            |                                      | 43,022  |         |           |   | 27,396       |        
|                                               
|                                               
|                                               
|                                               
|                                                | Inventory, net                                |                                            |                                      | 26,885  |         |           |   | 19,906       |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other current assets                          |                                            |                                      | 12,098  |         |           |   | 2,413        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred tax assets                           |                                            |                                      |        |         |           |   | 8,224        |        
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                | Total current assets                          |                                            |                                      | 130,432 |         |           |   | 81,229       |        
|                                               
|                                               
|                                               
|                                               
|                                                | Property and equipment, net                   |                                            |                                      | 10,470  |         |           |   | 8,776       
|                                               
|                                               
|                                               
|                                               
|                                                | Goodwill and other intangible assets, net     |                                            |                                      | 146,912 |         |           |   | 36,613      
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred tax assets, net of current portion   |                                            |                                      |        |         |           |   | 3,125       
|                                               
|                                               
|                                               
|                                               
|                                                | Restricted cash and long-term investments     |                                            |                                      | 1,589   |         |           |   | 2,084       
|                                               
|                                               
|                                               
|                                               
|                                                | Other long-term assets                        |                                            |                                      | 4,619   |         |           |   | 2,571       
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                | Total assets                                  |                                            | $                                    | 294,022 |         |           | $ | 134,398      |        
|                                               
|                                               
|                                               
|                                               
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                |                                               |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |         |         |           |   |              |         |  | 
|                                               
|                                               
|                                               
|                                               
|Current liabilities:                            |                                               |                                            |                                      |         |         |           |   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable                              |                                            | $                                    | 14,968  |         |           | $ | 7,549        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued liabilities                           |                                            |                                      | 30,296  |         |           |   | 8,597        |        
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                |                                               | Total current liabilities                  |                                      |         | 45,264  |           |   |              | 16,146  | 
|                                               
|                                               
|                                               
|                                               
|Long-term debt                                  |                                               |                                            | 311                                  |         |         |           |  |             
|                                               
|                                               
|                                               
|                                               
|Restructuring accruals, long-term portion       |                                               |                                            | 28,579                               |         |         |           |  |             
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                |                                               | Total liabilities                          |                                      |         | 74,154  |           |   |              | 16,146  | 
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|Commitments
and contingencies (notes 10 and 11) |                                               |                                            |                                      |         |         |           |   |             
|                                               
|                                               
|                                               
|                                               
|Stockholders equity:                           |                                               |                                            |                                      |         |         |           |   |             
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, Class A, par value $.01;        |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | authorized 200,000,000 shares: 59,218,105 and |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | 118,798,386 shares issued and outstanding at  |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | December 31, 2001 and March 29, 2002,         |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | respectively                                  |                                            |                                      | 1,608   |         |           |   | 1,013        |        
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, Class B, par value $.01;        |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | authorized
100,000,000 shares: no shares      |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | issued and outstanding at December 31, 2001   |                                            |                                      |         |         |           |   |              |        
|                                               
|                                               
|                                               
|                                               
|                                                | and March 29, 2002, respectively              |                                            |                                      |        |         |           |   |             |        
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid-in capital                    |                                            |                                      | 319,028 |         |           |   | 159,626      |        
|                                               
|                                               
|                                               
|                                               
|                                                | Notes receivable from employees               |                                            |                                      | (898    | )       |           |   | (918         | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Treasury stock                                |                                            |                                      | (21,400 | )       |           |   | (21,400      | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred stock compensation                   |                                            |                                      | (369    | )       |           |   | (614         | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Unrealized gain on investments                |                                            |                                      | 31      |         |           |   | 75           |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated deficit                           |                                            |                                      | (78,132 | )       |           |   | (19,530      | )      
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                |                                               | Total stockholders equity                 |                                      |         | 219,868 |           |   |              | 118,252 | 
|                                                |                                               |                                            |                                      |         |         |           |   |              |        
|                                                |                                               | Total liabilities and stockholders equity |                                      | $       | 294,022 |           |   | $            | 134,398 | 
|                                                |                                               |                                            |                                      |         |         |           |   |              |        

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

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##### Table of Contents






PROXIM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


|                                                               |                                                      |                          |            |                    |        |           |            |       |        | 
|-------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ---------- | ------------------ | ------ | --------- | ---------- | ----- | ------ | 
|                                                               |                                                      |                          |            | Three Months Ended
|                                                               |                                                      |                          |            |                   
|                                                               |                                                      |                          |            | March 29,          |        | March 30,
|                                                               |                                                      |                          |            | 2002               |        | 2001     
|                                                               |                                                      |                          |            |                    |        |          
|Revenue                                                        |                                                      | $                        | 25,414     |                    |        | $         | 37,585     |      
|                                                              
|                                                              
|                                                              
|                                                              
|Cost of revenue                                                |                                                      |                          | 14,662     |                    |        |           | 18,899     |      
|                                                               |                                                      |                          |            |                    |        |           |            |      
|                                                               |                                                      | Gross profit             |            |                    | 10,752 |           |            |       | 18,686 | 
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Operating expenses:                                            |                                                      |                          |            |                    |        |           |            |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Research and development                             |                          |            | 4,549              |        |           |            | 4,077 |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Selling, general and administrative                  |                          |            | 8,750              |        |           |            | 9,989 |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Amortization
of goodwill and other intangible assets |                          |            | 144                |        |           |            | 822   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Amortization of deferred stock compensation          |                          |            | 245                |        |           |            | 1,941 |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Impairment of goodwill and intangible assets         |                          |            |                   |        |           |            | 4,331 |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Restructuring charges                                |                          |            | 48,037             |        |           |            | 1,108 |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | In-process research and development                  |                          |            | 4,536              |        |           |            |      |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Merger costs                                         |                          |            |                   |        |           |            | 30    |       
|                                                               |                                                      |                          |            |                    |        |           |            |      
|                                                               |                                                      | Total operating expenses |            |                    | 66,261 |           |            |       | 22,298 | 
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Loss from operations                                           |                                                      |                          | (55,509    | )                  |        |           | (3,612     | )    
|                                                              
|                                                              
|                                                              
|                                                              
|Interest income, net                                           |                                                      |                          | 131        |                    |        |           | 472        |      
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Loss before taxes                                              |                                                      |                          | (55,378    | )                  |        |           | (3,140     | )    
|                                                              
|                                                              
|                                                              
|                                                              
|Income tax provision                                           |                                                      |                          | 3,224      |                    |        |           | 1,346      |      
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Net loss                                                       |                                                      | $                        | (58,602    | )                  |        | $         | (4,486     | )    
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Net loss per share   basic and diluted                        |                                                      | $                        | (0.96      | )                  |        | $         | (0.08      | )    
|                                                               |                                                      |                          |            |                    |        |           |            |      
|Shares used to compute net loss per share   basic and diluted |                                                      |                          | 61,275,000 |                    |        |           | 55,999,230 |      
|                                                               |                                                      |                          |            |                    |        |           |            |      

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

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##### Table of Contents






PROXIM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)


|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |        |        |         |  
|---------------------------------------------------- | ------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------------------- | ------- | ------------------ | ------- | --------- | ------ | ------ | ------- | -
|                                                     |                                                                     |                                                                            |                                          |                                                     |         | Three Months Ended
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                   
|                                                     |                                                                     |                                                                            |                                          |                                                     |         | March 29,          |         | March 30,
|                                                     |                                                                     |                                                                            |                                          |                                                     |         | 2002               |         | 2001     
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|Cash flows from operating activities:                |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                                            |                                                                            | $                                        | (58,602                                             | )       |                    | $       | (4,486    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net loss to net cash provided by (used in) |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | operating activities:                                                      |                                          |                                                     |         |                    |         |           |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Deferred
tax assets                                                        |                                          |                                                     | 12,624  |                    |         |           | 110    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Depreciation and amortization                                              |                                          |                                                     | 1,078   |                    |         |           | 3,669  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Impairment of goodwill and other intangible assets                         |                                          |                                                     |        |                    |         |           | 4,331  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | In-process research and development                                        |                                          |                                                     | 4,536   |                    |         |           |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Provision
for bad debts, sales returns and price protection                |                                          |                                                     |        |                    |         |           | 500    |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Provision for restructuring charges                                        |                                          |                                                     | 48,037  |                    |         |           |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | Changes in assets and liabilities, net of effect of business combinations: |                                          |                                                     |         |                    |         |           |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     |                                                                            | Accounts receivable, net                 |                                                     |         | (6,712             | )       |           |        | (3,696 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     |                                                                            | Inventory, net                           |                                                     |         | (1,831             | )       |           |        | (7,701 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     |                                                                            | Other current assets                     |                                                     |         | (8,583             | )       |           |        | 2,627  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     |                                                                            | Accounts payable and accrued liabilities |                                                     |         | 4,650              |         |           |        | 6,861  |        
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                     |                                                                     |                                                                            |                                          | Net cash provided by (used in) operating activities |         |                    | (4,803  | )         |        |        | 2,215   |  
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Cash flows from investing activities:                |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of property and equipment                                  |                                                                            |                                          | (632                                                | )       |                    |         | (2,501    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale (purchase) of short-term investments                           |                                                                            |                                          | 3,146                                               |         |                    |         | (6,495    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net cash provided by (used in) acquisitions                         |                                                                            |                                          | 28,975                                              |         |                    |         | (10,428   | )     
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                     |                                                                     |                                                                            |                                          | Net cash provided by (used in) investing activities |         |                    | 31,489  |           |        |        | (19,424 | )
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Cash flows from financing activities:                |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayment of long-term debt                                         |                                                                            |                                          |                                                    |         |                    |         | (705      | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from repayments of notes receivable from employees         |                                                                            |                                          | 20                                                  |         |                    |         |          |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock, net                                       |                                                                            |                                          | 134                                                 |         |                    |         | 1,502     |       
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                     |                                                                     |                                                                            |                                          | Net cash provided by financing activities           |         |                    | 154     |           |        |        | 797     |  
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Net increase (decrease) in cash and cash equivalents |                                                                     |                                                                            | 26,840                                   |                                                     |         |                    | (16,412 | )        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                                     |                                                                            | 16,552                                   |                                                     |         |                    | 31,094  |          
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Cash and cash equivalents at end of period           |                                                                     | $                                                                          | 43,392                                   |                                                     |         | $                  | 14,682  |          
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Supplemental disclosures:                            |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid (received) during the period for:                         |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     |                                                                            | Income taxes                             |                                                     | $       | (403               | )       |           | $      | 120    |        
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|Non-cash transactions:                               |                                                                     |                                                                            |                                          |                                                     |         |                    |         |          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock and stock options assumed in connection    |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                     | with acquisitions                                                          |                                          | $                                                   | 158,589 |                    |         | $         | 15,300 |       
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       
|                                                     | Restructuring charges                                               |                                                                            | $                                        | 9,892                                               |         |                    | $       | 226       |       
|                                                     |                                                                     |                                                                            |                                          |                                                     |         |                    |         |           |       

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

5



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##### Table of Contents






PROXIM CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1  The Company

Proxim Corporation (the Company) is the company created by the merger of
Proxim, Inc. and Western Multiplex Corporation on March 26, 2002. The first
quarter 2002 results include the financial results of the former Western
Multiplex Corporation for the period from January 1, 2002 to March 29, 2002,
and the results of the former Proxim, Inc. for the three-day period from March
27, 2002 to March 29, 2002, in accordance with accounting principles generally
accepted in the United States of America. The Company was founded in 1979 in
Sunnyvale, California, as a vendor of radio components and related services. In
1992, the Company changed its strategy, and became a designer and manufacturer
of broadband wireless systems and launched its Lynx broadband wireless systems.
These point-to-point systems are primarily used by wireless operators to
connect their base stations to other base stations and to existing wire line
networks. In 1999, the Company introduced its Tsunami point-to-point broadband
wireless systems, which primarily enable service providers, businesses and
other enterprises to expand or establish private networks by bridging Internet
traffic among multiple facilities. Based on the Companys core technologies and
the technology acquired through its purchase of WirelessHome
Corporation ("WirelessHome") in
March 2001, the Company has developed point-to-multipoint systems
designed to enable service providers, businesses and other enterprises to connect multiple
facilities within a geographic area to a central hub. The Company began
shipping its first generation of these products at the end of the fourth
quarter of 2001. In March 2002, the Company merged with Proxim, Inc. located in
Sunnyvale, California which designs, manufactures and markets high performance
wireless local area networking, or LAN, and building-to-building network
products based on radio frequency, or RF, technology.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The condensed
consolidated balance sheet as of March 29, 2002,
condensed consolidated statements of operations for the three months
ended March 29, 2002 and March 30, 2001 and condensed consolidated statements of cash flows for the three months ended March 29, 2002
and March 30, 2001 are unaudited, but include all adjustments (consisting of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for
the periods presented. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates, and such differences may be material to the financial statements.
The balance sheet at December 31, 2001 has been derived from audited financial
statements. Certain information and footnote information normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Results for any interim period are not necessarily indicative of
results for any future interim period or for the entire year. The accompanying
condensed consolidated financial statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Annual Report on Form
10-K for the year ended December 31, 2001.

Principles of Consolidation

The consolidated financial statements include the accounts of Proxim
Corporation and all of its subsidiaries. The financial condition and results of
operations for the three months ended March 29, 2002 and March 30, 2001 include
the results of acquired subsidiaries from their effective dates. All
significant intercompany transactions and balances are eliminated in
consolidation.

Note 2  Summary of Significant Accounting Policies

Critical Accounting Policies,
Judgments and Estimates

The preparation of financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets,
liabilities, stockholders' equity, revenues, cost of revenue and
expenses, charges and related disclosure of contingent assets
and liabilities. On an on-going basis, the

6



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##### Table of Contents



Company evaluates its estimates,
including those related to customer programs and incentives, product returns,
bad debts, inventories, investments, intangible assets, income taxes, financing
operations, warranty obligations, excess component order cancellation costs,
restructuring, long-term service contracts, pensions and other post-retirement
benefits, and contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities
that may not be readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company records estimated reductions to revenue for customer programs
and incentive offerings including special pricing agreements, price protection,
promotions, historical returns, the distributors inventory levels and other volume-based incentives. If market conditions were to
decline, the Company may take actions to increase customer incentive offerings
possibly resulting in an incremental reduction of revenue at the time the
incentive is offered. Revenue generated from the LAN product line is
deferred until shipments to end customers by the distributors.

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

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

The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory
and the estimated market value based upon assumption about future demand and
market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be required.

The
Company holds minority interest investments in companies having operations or
technology in areas within its strategic focus, one of which is publicly traded
and has highly volatile share prices. The Company records an investment
impairment charge when it believes an investment has experienced a decline in
value that is other-than-temporary. Future adverse changes in market conditions
or poor operating results of an investee could result in losses or
an inability to recover the carrying value of the investments that may not be
reflected in an investments current carrying value, thereby possibly requiring
an impairment charge in the future.

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

Note 3  Business Combinations

Merger with Proxim, Inc.

On
March 26, 2002, the merger between Western Multiplex Corporation
and Proxim Inc. was completed, resulting in Proxim Corporation as the
combined company. Western Multiplex Corporation provides broadband, or
high speed, wireless access products to service providers, businesses
and other enterprises. Proxim, Inc. provides high performance wireless LAN and building-to-building network products
based on RF technology. Total consideration of $172.6 million for the purchase
comprised of:



| |  |  | 59,506,503 shares of Class A common stock valued at approximately $133.3 million;
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | options and warrants having an
assumed value of approximately $25.3 million; and 

7



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##### Table of Contents





| |  |  | transaction expenses of approximately $14.0 million.
| | - |  | ----------------------------------------------------

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

|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Cash
and cash equivalents                    |  | $ | 35,961  |  
|                                            
|                                            
|                                            
|                                            
|Marketable
securities                        |  |   | 991     |  
|                                            
|                                            
|                                            
|                                            
|Accounts receivable, net                     |  |   | 8,914   |  
|                                            
|                                            
|                                            
|                                            
|Inventory, net                               |  |   | 12,834  |  
|                                            
|                                            
|                                            
|                                            
|Other current assets                         |  |   | 1,150   |  
|                                            
|                                            
|                                            
|                                            
|Other long-term assets                       |  |   | 2,000   |  
|                                            
|                                            
|                                            
|                                            
|Property, plant and equipment                |  |   | 3,958   |  
|                                            
|                                            
|                                            
|                                            
|Core technology                              |  |   | 18,010  |  
|                                            
|                                            
|                                            
|                                            
|Developed technology                         |  |   | 12,042  |  
|                                            
|                                            
|                                            
|                                            
|Patents                                      |  |   | 3,210   |  
|                                            
|                                            
|                                            
|                                            
|Liabilities assumed                          |  |   | (8,199  | )
|                                            
|                                            
|                                            
|                                            
|Acquired in-process research and development |  |   | 4,536   |  
|                                            
|                                            
|                                            
|                                            
|Goodwill                                     |  |   | 77,182  |  
|                                             |  |   |         |  
|                                             |  | $ | 172,589 |  
|                                             |  |   |         |  

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

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

As of the valuation date, it was assumed that there was some value
attributable to patents and patent applications of Proxim, Inc. The Company
assumed that the patents and patent applications will continue to be used but
will be phased out over time as new technology is developed. To value the
patents and patent applications, we utilized the relief from royalty
methodology. The relief from royalty methodology assumes that the value of the
asset equals the amount a third party would pay to use the asset and capitalize
on the related benefits of the asset. Therefore, a revenue stream for the
asset is estimated, and then an estimated royalty rate is applied to the forecasted
revenue to estimate the pre-tax income associated with the asset. The pre-tax
income is then tax-affected to estimate the after-tax net income associated
with the asset. Finally, the after tax net income is discounted to the present
value using an appropriate rate of return that considers both the risk of the
asset and the associated cash flow estimates. The resulting cash flows were
then discounted back to their present value using a discount rate of 25%. The
fair value assigned to the patents totaled $3.2 million and is being amortized
over the expected life of its cash flows.

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

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

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

8



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##### Table of Contents



Acquisition of WirelessHome

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



| |  |  | 1,649,324 shares of Class A common stock valued at $12.1 million;            
| | - |  | -----------------------------------------------------------------------------
|
| |  |  | $10.5 million in cash;                                                       
|
| |  |  | options and warrants having an
assumed value of $0.7 million;                
|
| |  |  | a stock price protection contingent consideration valued at $2.5 million; and
|
| |  |  | transaction expenses of $2.4 million.                                        

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

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

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

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

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

9



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##### Table of Contents



Acquisition of Ubiquity Communication, Inc.

On
March 24, 2000, we acquired Ubiquity Communication, Inc.
(Ubiquity), 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 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
options we assumed. The value of the consideration paid for the
acquisition of Ubiquity 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.

Pro Forma Financial Information

The following table represents unaudited pro forma financial information
for the three months ended March 29, 2002 and March 30, 2001 had Proxim
Corporation, Proxim, Inc. and WirelessHome been combined as of January 1, 2001.
The pro forma financial information is presented for illustrative purposes only
and is not necessarily indicative of the combined financial position or
results of operations of future periods or the results that actually would have
resulted had Proxim Corporation, Proxim, Inc. and WirelessHome been a combined
company during the specified periods. The pro forma results include the effects
of the amortization of identifiable intangible assets and goodwill and
adjustments to the income tax provision or benefits. The pro forma combined
results exclude the $4.5 million and $6.4 million charges for acquired
in-process technology from Proxim, Inc. and WirelessHome acquisitions (in
thousands except per share amounts).

|                                     |  |                    |         |                |  |   |         |  
|------------------------------------ |  | ------------------ | ------- | -------------- |  | - | ------- | -
|                                     |  | Three months ended
|                                     |  | March 29, 2002     |         | March 30, 2001
|                                     |  |                    |         |               
|Revenue                              |  | $                  | 33,052  |                |  | $ | 67,086  |  
|                                    
|                                    
|                                    
|                                    
|Net loss from continuing operations  |  | $                  | (86,304 | )              |  | $ | (15,324 | )
|                                    
|                                    
|                                    
|                                    
|Basic and diluted net loss per share |  | $                  | (0.73   | )              |  | $ | (0.13   | )
|                                     |  |                    |         |                |  |   |         |  

Goodwill and Other Intangible Assets

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

Goodwill represents the excess of cost over the fair market value of net
assets acquired. Goodwill pushed down from the 1995 acquisition of the Company
by GTI totals $22.0 million. Prior to December 31, 2001 this goodwill was
amortized on a straight-line basis over its estimated useful life of 30 years,
or $0.7 million per year. As a result of the Companys adoption of SFAS 142,
as of January 1, 2002, the Company no longer amortizes goodwill.

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

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

10



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##### Table of Contents



Assembled work force related to the acquisition of WirelessHome totaled
$1.0 million and is being amortized on a straight-line basis over an estimated
useful life of two years.

Goodwill related to the merger with Proxim, Inc. totaled $77.2 million.
As a result of the Companys adoption of SFAS 142, as of January 1, 2002, the
Company no longer amortizes goodwill.

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

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

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

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

|                            |              |   |           |        |              |   |        |        | 
|--------------------------- | ------------ | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                            |              |   | March 29, |        | December 31,
|                            |              |   |           |        |             
|                            |              |   | 2002      |        | 2001        
|                            |              |   |           |        |             
|Goodwill:                   |              |   |           |        |              |   |        |       
|                           
|                           
|                           
|                           
|                            | GTI          |   | $         | 17,126 |              |   | $      | 17,126 | 
|                           
|                           
|                           
|                           
|                            | WirelessHome |   |           | 18,775 |              |   |        | 18,775 | 
|                           
|                           
|                           
|                           
|                            | Proxim, Inc. |   |           | 77,182 |              |   |        |       | 
|                            |              |   |           |        |              |   |        |        | 
|                            |              | $ | 113,083   |        |              | $ | 35,901 |       
|                            |              |   |           |        |              |   |        |        | 
|Acquired intangible assets: |              |   |           |        |              |   |        |       
|                           
|                           
|                           
|                           
|                            | Ubiquity     |   |           | 76     |              |   |        | 95     | 
|                           
|                           
|                           
|                           
|                            | WirelessHome |   |           | 492    |              |   |        | 617    | 
|                           
|                           
|                           
|                           
|                            | Proxim, Inc. |   |           | 33,261 |              |   |        |       | 
|                            |              |   |           |        |              |   |        |        | 
|                            |              |   | 33,829    |        |              |   | 712    |       
|                            |              |   |           |        |              |   |        |        | 

Purchased In-Process Research and Development

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

The amount expensed to purchased in-process research and development in
the three months ended March 29, 2002 relates to 802.11a and Home RF 2.0
technology acquired with the Proxim, Inc. transaction and was calculated by
estimating the fair value

11



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##### Table of Contents



of technology currently under development using the income approach, which
discounts expected future cash flows to present value.

The following table
summarizes the key assumptions underlying the
valuation for the Companys purchase acquisition completed in
the three months
ended March 29, 2002 and March 30, 2001 (in thousands):

|             |  |      |      |                     |  |                        |       |                     |  |                        |      |  
|------------ |  | ---- | ---- | ------------------- |  | ---------------------- | ----- | ------------------- |  | ---------------------- | ---- | -
|             |  |      |      |                     |  |                        |       |                     |  | Risk-Adjusted Discount
|             |  |      |      |                     |  | Estimated Cost to      |       | Rate for In-Process
|             |  |      |      |                     |  | complete Technology at |       | Research and       
|             |  | Year |      | Time of Acquisition |  | Development           
|             |  |      |      |                     |  |                       
|Proxim, Inc. |  |      | 2002 |                     |  | $                      | 2,387 |                     |  |                        | 30.0 | %
|            
|            
|            
|            
|WirelessHome |  |      | 2001 |                     |  | $                      | 1,425 |                     |  |                        | 35.0 | %

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

Development of this technology remains a significant risk due to the
remaining effort to achieve technological feasibility, rapidly changing
customer markets, uncertain standards for new products, and significant
competitive threats. The nature of the efforts to develop the acquired
technology into commercially viable products consists principally of developing
a new operating system, developing a new processor and interface, planning and
testing activities necessary to determine that the product can meet market
expectations, including functionality and technical requirements. Failure to
bring these products to market in a timely manner could result in a loss of
market share, or a lost opportunity to capitalize on emerging markets, and
could have a material adverse impact on the value of assets acquired.

Note 4  Balance Sheet Components

|                          |                                                          |                                                                    |        |                |         |              |        |        |        |  
|------------------------- | -------------------------------------------------------- | ------------------------------------------------------------------ | ------ | -------------- | ------- | ------------ | ------ | ------ | ------ | -
|                          |                                                          |                                                                    |        | March 29,      |         | December 31,
|                          |                                                          |                                                                    |        | 2002           |         | 2001        
|                          |                                                          |                                                                    |        |                |         |             
|                          |                                                          |                                                                    |        | (in thousands)
|Marketable securities:    |                                                          |                                                                    |        |                |         |              |        |       
|                         
|                         
|                         
|                         
|                          | Corporate bonds and time deposits                        |                                                                    | $      | 5,788          |         |              | $      | 8,192  |       
|                         
|                         
|                         
|                         
|                          | Auction rate securities                                  |                                                                    |        | 630            |         |              |        | 630    |       
|                         
|                         
|                         
|                         
|                          | Equity investment in a wireless company listed in Canada |                                                                    |        | 206            |         |              |        |       |       
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|                          |                                                          |                                                                    | 6,624  |                |         |              | 8,822  |       
|                         
|                         
|                         
|                         
|                          | Less: long-term portion                                  |                                                                    |        | (1,589         | )       |              |        | (2,084 | )     
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|                          | Current portion                                          |                                                                    | $      | 5,035          |         |              | $      | 6,738  |       
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|Accounts receivable, net: |                                                          |                                                                    |        |                |         |              |        |       
|                         
|                         
|                         
|                         
|                          |                                                          | Gross accounts receivable                                          |        | $              | 50,827  |              |        | $      | 32,802 |  
|                         
|                         
|                         
|                         
|                          |                                                          | Less: allowances
for bad debts, sales returns and price protection |        |                | (7,805  | )            |        |        | (5,406 | )
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|                          |                                                          | $                                                                  | 43,022 |                |         | $            | 27,396 |       
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|Inventories, net:         |                                                          |                                                                    |        |                |         |              |        |       
|                         
|                         
|                         
|                         
|                          |                                                          | Raw materials                                                      |        | $              | 51,898  |              |        | $      | 12,214 |  
|                         
|                         
|                         
|                         
|                          |                                                          | Work-in-process                                                    |        |                | 11,868  |              |        |        | 675    |  
|                         
|                         
|                         
|                         
|                          |                                                          | Finished goods                                                     |        |                | 18,464  |              |        |        | 10,038 |  
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|                          |                                                          |                                                                    | 82,230 |                |         |              | 22,927 |       
|                         
|                         
|                         
|                         
|                          |                                                          | Less:
reserve for excess and obsolete inventory                    |        |                | (55,345 | )            |        |        | (3,021 | )
|                          |                                                          |                                                                    |        |                |         |              |        |        |       
|                          |                                                          | $                                                                  | 26,885 |                |         | $            | 19,906 |       
|                          |                                                          |                                                                    |        |                |         |              |        |        |       

12



---



##### Table of Contents



|                                           |  |                                         |         |   |         |   |        |   |        |  
|------------------------------------------ |  | --------------------------------------- | ------- | - | ------- | - | ------ | - | ------ | -
|Property and equipment, net:               |  |                                         |         |   |         |   |        |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Computer and test equipment             |         | $ | 16,768  |   |        | $ | 6,191  |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Furniture and fixtures                  |         |   | 528     |   |        |   | 6,850  |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Leasehold improvements                  |         |   |        |   |        |   | 1,871  |  
|                                           |  |                                         |         |   |         |   |        |   |       
|                                           |  |                                         | 17,296  |   |         |   | 14,912 |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Less: accumulated depreciation          |         |   | (6,826  | ) |        |   | (6,136 | )
|                                           |  |                                         |         |   |         |   |        |   |       
|                                           |  | $                                       | 10,470  |   |         | $ | 8,776  |  
|                                           |  |                                         |         |   |         |   |        |   |       
|                                          
|                                          
|                                          
|                                          
|Goodwill and other intangible assets, net: |  |                                         |         |   |         |   |        |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Goodwill                                |         | $ | 122,681 |   |        | $ | 44,500 |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Core technology                         |         |   | 18,010  |   |        |   |       |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Developed technology                    |         |   | 12,042  |   |        |   |       |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Acquired workforce                      |         |   |        |   |        |   | 1,000  |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Patents                                 |         |   | 3,439   |   |        |   | 229    |  
|                                           |  |                                         |         |   |         |   |        |   |       
|                                           |  |                                         | 156,172 |   |         |   | 45,729 |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Less: Accumulated amortization          |         |   | (9,260  | ) |        |   | (9,116 | )
|                                           |  |                                         |         |   |         |   |        |   |       
|                                           |  | $                                       | 146,912 |   |         | $ | 36,613 |  
|                                           |  |                                         |         |   |         |   |        |   |       
|Other current liabilities:                 |  |                                         |         |   |         |   |        |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Restructuring accruals, current portion |         | $ | 10,966  |   |        | $ | 430    |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Accrued merger costs                    |         |   | 7,014   |   |        |   |       |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Accrued compensation                    |         |   | 3,609   |   |        |   | 3,129  |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Accrued warranty costs                  |         |   | 1,084   |   |        |   | 869    |  
|                                          
|                                          
|                                          
|                                          
|                                           |  | Other accrued liabilities               |         |   | 7,623   |   |        |   | 4,169  |  
|                                           |  |                                         |         |   |         |   |        |   |       
|                                           |  | $                                       | 30,296  |   |         | $ | 8,597  |  
|                                           |  |                                         |         |   |         |   |        |   |       

Note 5  Revenue Information and Concentration of Credit Risks:

The Companys products are grouped into two product lines: Wide Area
Network, or WAN, product line, and; Local Area Network, or LAN, product line.
The WAN product line includes Lynx, Tsunami, Tsunami Multipoint and Stratum
products. The LAN product line includes 900 MHz, RangeLAN, Harmony, 802.11b,
802.11a and Skyline products for the Enterprise/Commercial markets; and Symphony
HomeRF and HomeRF 2.0 products and Netline products for the Home/SOHO markets.

Revenue
for the first quarter of 2002 included three days of revenue related
to the merger with Proxim, Inc. Accordingly, revenue generated from
the LAN production line was less than 10% for the quarter ended
March 29, 2002.

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

|                  |               |      |                    |        |           |   |        |        | 
|----------------- | ------------- | ---- | ------------------ | ------ | --------- | - | ------ | ------ | 
|                  |               |      | Three Months Ended
|                  |               |      | March 29,          |        | March 30,
|Geographic Region |               | 2002 |                    | 2001  
|                  |               |      |                    |       
|North America     |               | $    | 14,132             |        |           | $ | 31,572 |       
|                 
|                 
|                 
|                 
|International     |               |      | 11,282             |        |           |   | 6,013  |       
|                  |               |      |                    |        |           |   |        |       
|                  | Total revenue |      | $                  | 25,414 |           |   | $      | 37,585 | 
|                  |               |      |                    |        |           |   |        |       

One customer accounted for 25.7% of total revenue for the first quarter of
2002, and three customers accounted for 20.3%, 17.8% and 14.8% of total revenue
in the first quarter of 2001.

13



---



##### Table of Contents



Note 6  Restructuring Charges

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

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

As a result of the merger with Proxim, Inc. during the first quarter of
2002, the Company recorded $48.0 million of restructuring charges related to
closure of certain facilities, discontinued product lines and severance pay.
The charges include $38.1 million of cash provisions, which include severance
of $1.4 million for 5 employees, $31.7 million for future lease commitments and
exit costs related to the closure of two facilities and $5.0 million related
to purchase order commitments. The charge also includes $9.9 million of non-cash
provisions of which $7.7 million relates to an additional reserve for
excess and obsolete inventory on hand and $2.2 million relates to fixed assets that will
no longer be used at the facilities.

Included
in the restructuring charge was the increase in the reserve for
excess and obsolete inventory of $7.7 million and purchase
commitments of $5.0 million. Inventory purchases and commitments are based
upon future sales forecast. To mitigate the component supply constraints that
have existed in the past, the Company built inventory levels for certain
components with long lead times and entered into longer-term commitments for
certain components. The excess inventory charges were due to the following
factors:



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

Due to these factors inventory levels exceeded the Companys requirements
based on current 12-month sales forecasts. The additional excess and
obsolete inventory charge was calculated based on the inventory levels in excess of 12-month
demand for each specific product family. The Company does not currently
anticipate that the excess inventory subject to this reserve will be used at
a later date based on our current 12-month demand forecast. The Company uses
a 12-month demand forecast because the wireless communications industry is
characterized by rapid technological changes such that if the Company has not
sold a product after a 12-month period it is unlikely that the product will be
sold. The following is a summary of the movements in the reserve for excess
and obsolete inventory during the period ended March 29, 2002:

| |                                                      |  |   |        |  
| | ---------------------------------------------------- |  | - | ------ | -
|
|
|
|
| | Balance
as of December 31, 2001                      |  | $ | 3,021  |  
|
|
|
|
| | Additional
reserve for excess and obsolete inventory |  |   | 7,686  |  
|
|
|
|
| | Balance
acquired with Proxim, Inc.                   |  |   | 45,114 |  
|
|
|
|
| | Inventory scrapped                                   |  |   | (476   | )
| |                                                      |  |   |        |  
| | Balance
as of March 29, 2002                         |  | $ | 55,345 |  
| |                                                      |  |   |        |  

14



---



##### Table of Contents



The following table summarizes the restructuring activity in 2001 and the
first quarter 2002 (in thousands):

|                                   |  |            |        |            |  |           |        |       |  |       |        |   |  |   |        |   |  |   |        |  
|---------------------------------- |  | ---------- | ------ | ---------- |  | --------- | ------ | ----- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                   |  | Severances |        | Facilities |  | Inventory |        | Other |  | Total
|                                   |  |            |        |            |  |           |        |       |  |      
|Balance as of December 31, 2000    |  | $          |       |            |  | $         |       |       |  | $     |       |   |  | $ |       |   |  | $ |       |  
|                                  
|                                  
|                                  
|                                  
|Provision charged to operations    |  |            | 1,382  |            |  |           | 208    |       |  |       |       |   |  |   | 226    |   |  |   | 1,816  |  
|                                  
|                                  
|                                  
|                                  
|Charges utilized                   |  |            | (1,184 | )          |  |           | (156   | )     |  |       |       |   |  |   | (46    | ) |  |   | (1,386 | )
|                                   |  |            |        |            |  |           |        |       |  |       |        |   |  |   |        |   |  |   |        |  
|Balance as of December 31, 2001    |  |            | 198    |            |  |           | 52     |       |  |       |       |   |  |   | 180    |   |  |   | 430    |  
|                                  
|                                  
|                                  
|                                  
|Balance
acquired with Proxim, Inc. |  |            |       |            |  |           | 1,066  |       |  |       |       |   |  |   |       |   |  |   | 1,066  |  
|Provision charged to operations    |  |            | 1,430  |            |  |           | 31,742 |       |  |       | 12,659 |   |  |   | 2,206  |   |  |   | 48,037 |  
|                                  
|                                  
|                                  
|                                  
|Charges utilized                   |  |            | (96    | )          |  |           |       |       |  |       | (7,686 | ) |  |   | (2,206 | ) |  |   | (9,988 | )
|                                   |  |            |        |            |  |           |        |       |  |       |        |   |  |   |        |   |  |   |        |  
|Balance as of March 29, 2002       |  | $          | 1,532  |            |  | $         | 32,860 |       |  | $     | 4,973  |   |  | $ | 180    |   |  | $ | 39,545 |  
|                                   |  |            |        |            |  |           |        |       |  |       |        |   |  |   |        |   |  |   |        |  

Note 7  Income Taxes

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

Note 8  Loss Per Share

Basic and diluted net loss per share are presented in conformity with SFAS
No. 128, Earnings Per Share. Basic earnings per share under SFAS 128 were
computed using the weighted average number of shares outstanding of 61,275,000
and 55,999,230 for the three months ended March 29, 2002 and March 30, 2001,
respectively. Diluted earnings per share is determined in the same manner as
basic earnings per share except that the number of shares is increased assuming
dilutive stock options and warrants using the treasury stock method. Diluted
earnings per share were computed using the weighted average number of shares
outstanding of 61,275,000 and 55,999,230 for the three months ended March 29,
2002 and March 30, 2001, respectively. For the three months ended March 29,
2002 and March 30, 2001, the incremental shares from the assumed exercise of
stock options were not included in computing diluted per share amounts as the
effect would be antidilutive.

Note 9  Stockholders Equity

Common Stock

On March 26, 2002, as discussed in Note 1, the Company acquired Proxim,
Inc. for 59,506,503 of Class A common stock.

As of March 29, 2002, there were 118,798,386 shares of Class A common
stock issued and outstanding and 42,000,000 shares of Class A treasury stock.

Stock Plans

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

Note 10  Commitments and Contingencies

The company occupies its facilities under several non-cancelable operating
lease agreements expiring at various dates through November 2010, and require
payment of property taxes, insurance, maintenance and utilities. Future
minimum lease payments under non-cancelable operating leases at March 29, 2002
were as follows (in thousands):

15



---



##### Table of Contents



|                                     |  |   |        | 
|------------------------------------ |  | - | ------ | 
|Nine months ending December 31, 2002 |  | $ | 6,587  | 
|                                    
|                                    
|                                    
|                                    
|Year
ending December 31:             |  |   |        | 
|                                    
|                                    
|                                    
|                                    
|2003                                 |  |   | 9,154  | 
|                                    
|                                    
|                                    
|                                    
|2004                                 |  |   | 9,780  | 
|                                    
|                                    
|                                    
|                                    
|2005                                 |  |   | 9,422  | 
|                                    
|                                    
|                                    
|                                    
|2006                                 |  |   | 7,924  | 
|                                    
|                                    
|                                    
|                                    
|Thereafter                           |  |   | 25,047 | 
|                                     |  |   |        | 
|Total minimum lease payments         |  | $ | 67,914 | 
|                                     |  |   |        | 

During the three months ended March 29, 2002 the Company recorded a
restructuring charge relating to the committed future lease payment for closed
facilities, net of estimated future sublease receipt, of $31.7 million, which
are included in the above disclosures.

Note 11  Legal Proceedings

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

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

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

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

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

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

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

16



---



##### Table of Contents



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

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

Note 12  Supplemental Cash Flow Data

The Company acquired cash of $35,961,000 and paid cash of $10,428,000 in
connection with its merger with Proxim, Inc. and WirelessHome in the first
quarter ended March 29, 2002 and March 30, 2001, respectively, described below
(in thousands):

|                                                        |  |                    |          |           |  |   |         |  
|------------------------------------------------------- |  | ------------------ | -------- | --------- |  | - | ------- | -
|                                                        |  | Three months ended
|                                                        |  | March 29,          |          | March 30,
|                                                        |  | 2002               |          | 2001     
|                                                        |  |                    |          |          
|Purchase price                                          |  | $                  | 172,589  |           |  | $ | 28,200  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Common stock issued                                     |  |                    | (158,589 | )         |  |   | (15,300 | )
|                                                       
|                                                       
|                                                       
|                                                       
|Accrued transactions costs                              |  |                    | (7,014   | )         |  |   | (2,400  | )
|                                                        |  |                    |          |           |  |   |         |  
|Cash paid                                               |  |                    | 6,986    |           |  |   | 10,500  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Less: cash acquired                                     |  |                    | (35,961  | )         |  |   | (72     | )
|                                                        |  |                    |          |           |  |   |         |  
|Net cash (received) paid from acquisition of businesses |  | $                  | (28,975  | )         |  | $ | 10,428  |  
|                                                        |  |                    |          |           |  |   |         |  




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

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

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

Proxim Corporation is the company created by the March 26, 2002 merger of
Proxim, Inc. and Western Multiplex Corporation. The first quarter 2002
results include the financial results of the former Western Multiplex
Corporation for the period from January 1, 2002 to March 29, 2002, and the
results of the former Proxim, Inc. for the three-day period from March 27, 2002
to March 29, 2002, in accordance with generally accepted accounting principles
for accounting for business combinations. We were founded in 1979 in
Sunnyvale, California as a vendor of radio components and related services. In
1992,

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we changed our strategy, became a designer and manufacturer of broadband
wireless systems and launched our Lynx broadband wireless systems. These
point-to-point systems are primarily used by wireless operators to connect
their base stations to other base stations and to existing wire line networks.
In 1999, we introduced our Tsunami point-to-point broadband wireless systems,
which primarily enable service providers, businesses and other enterprises to
expand or establish private networks by bridging Internet traffic among
multiple facilities. Based on our core technologies and the technology acquired
through our purchase of WirelessHome Corporation in March 2001, we have
developed 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. We began shipping our first generation of
these products at the end of the fourth quarter of 2001. In March 2002, we
merged with Proxim, Inc. located in Sunnyvale, California which designs,
manufactures and markets high performance wireless LAN and building-to-building
network products based on RF technology.

On August 4, 2000, we completed our 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 us of approximately $91.0 million
after payment of the underwriters commission and deduction of offering
expenses. Simultaneously with the closing of the initial public offering, all
of our 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.

Revenue.We primarily generate revenue from the sale of our Lynx and
Tsunami systems for our WAN product line and 802.11a and HomeRF 2.0 standards
based products, acquired in the Proxim, Inc. acquisition, for our LAN product
line. We introduced the Tsunami products at the end of the fourth quarter of
1999. While our Tsunami products and Lynx products have similar pricing for
comparable models, our Lynx product line contributes the largest part of our
revenue. We began selling our Tsunami point-to-multipoint systems in the last month of
2001. We also generate a small percentage of our revenue from the sale of
services and parts and rentals of our systems. We sell worldwide to service
providers, businesses and other enterprises directly through our sales force
and indirectly through distributors, value added resellers and system
integrators. Sales to certain distributors are made under terms allowing
certain rights of return, protection against subsequent price declines on our
products held by our distributors and co-op marketing programs. We recognize
revenue from the sale of our systems and products when all the following
conditions are met: the system or product has been shipped, evidence of an
arrangement exists and we have the right to invoice the customer, the
collection of the receivable is probable, and we have no post-delivery
obligations remaining. Revenue from services, such as preinstallation
diagnostic testing and product repair services, is recognized over the period
for which the services are performed, which is typically less than one month. Revenue
from product rentals is recognized over the period of the rental.

Revenue consists of product revenues reduced by estimated sales
returns and allowances. Provisions for estimated sales returns and allowances,
which are based on historical trends, contractual terms and other available
information, are recorded at the time of sale.

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. Additionally, we sell directly to OEM
customers. We
sell both design-in products for integration into their wireless computing
platforms, and branded products as private label models. Any significant
decline in direct sales to end-users or in sales to our distributors or
value-added resellers, or the loss of any of our distributors or value-added
resellers or OEM customers, could materially adversely affect our revenue.

During
the three months ended March 29, 2002, we sold our products
to approximately 170 customers in 45 countries. In the first three months
ending March 29, 2002, international sales accounted for approximately 45.6% of
our total sales. We expect international sales to vary but remain significant as a percentage of overall sales in the future. Currently, all of our sales are denominated in
U.S. dollars. Accordingly, we are not 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 higher reliance on distributors and value-added resellers for international sales,
and also because our lower speed products, with significantly lower prices, are
being sold in larger quantities internationally than domestically. 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. We expect to realize lower per unit product costs as we continue
to outsource more of our in-house manufacturing as well as have our
products produced at lower cost off-shore locations. However, we cannot assure you
when or if cost reductions will occur. The failure to achieve these cost
reductions could materially adversely affect our gross margins and operating
results.

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

Research and development.Research and development expenses consist
primarily of salaries and related personnel expenses, prototype development
expenses, consultant fees and allocated overhead related to the design,
development, testing and enhancement of our products and underlying
technologies. We expense all research and development expenses as incurred. We
expect to increase our research and development expenses as we continue to
develop new products and improve our core technologies.

Selling, general and administrative.Selling, general and administrative
expenses consist of salaries, commissions, product marketing, sales support
functions, advertising, trade show and other promotional expenses and allocated
overhead. We intend to increase our selling, general and administrative
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 selling, general and
administrative expenses to increase as we expand our sales operations to
support and develop leads for our distributors and value-added
resellers,
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
highly skilled and qualified business
and technical personnel. Prior to our initial public offering, we recorded
deferred stock compensation on certain options for the difference between the
exercise price and the deemed fair value of our common stock on the date the
stock options were granted. This amount is included as a reduction of
stockholders equity and is being amortized by charges to operations over the
vesting period. The amortization expense relates to options awarded to
employees in all operating expense categories.

Critical Accounting Policies, Judgments and Estimates

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

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

We record estimated reductions to revenue for customer programs and
incentive offerings including special pricing agreements, price protection,
promotions, historical returns, the distributor inventory levels and other volume-based incentives. If market conditions were to
decline, we may take actions to increase customer incentive offerings possibly
resulting in an incremental reduction of revenue at the time the incentive is
offered. Revenue generated from the LAN product line is deferred
until shipment to end customers by the distributors.

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

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

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

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

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

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Results of Operations

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

|                |              |  |       |                    |  |           |       |      |  | 
|--------------- | ------------ |  | ----- | ------------------ |  | --------- | ----- | ---- |  | 
|                |              |  |       | Three Months Ended
|                |              |  |       |                   
|                |              |  |       | March 29,          |  | March 30,
|                |              |  |       | 2002               |  | 2001     
|                |              |  |       |                    |  |          
|Revenue         |              |  | 100.0 | %                  |  |           | 100.0 | %   
|               
|               
|               
|               
|Cost of revenue |              |  | 57.7  |                    |  |           | 50.3  |     
|                |              |  |       |                    |  |           |       |     
|                | Gross profit |  |       | 42.3               |  |           |       | 49.7 | 
|                |              |  |       |                    |  |           |       |     

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|                                                     |  |                          |       |  |        |    |      |  |       |   
|---------------------------------------------------- |  | ------------------------ | ----- |  | ------ | -- | ---- |  | ----- | --
|Operating expenses:                                  |  |                          |       |  |        |    |      | 
|                                                    
|                                                    
|                                                    
|                                                    
|Research and development                             |  |                          | 17.9  |  |        |    | 10.8 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Selling, general and administrative                  |  |                          | 34.4  |  |        |    | 26.6 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Amortization of goodwill and other intangible assets |  |                          | 0.6   |  |        |    | 2.2  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Amortization of deferred stock compensation          |  |                          | 1.0   |  |        |    | 5.2  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Impairment
of goodwill and other intangible assets   |  |                          |      |  |        |    | 11.5 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Restructuring charges                                |  |                          | 189.0 |  |        |    | 2.9  | 
|                                                    
|                                                    
|                                                    
|                                                    
|In-process research and development                  |  |                          | 17.8  |  |        |    |     | 
|                                                    
|                                                    
|                                                    
|                                                    
|Merger costs                                         |  |                          |      |  |        |    | 0.1  | 
|                                                     |  |                          |       |  |        |    |      | 
|                                                     |  | Total operating expenses |       |  | 260.7  |    |      |  | 59.3  |   
|                                                     |  |                          |       |  |        |    |      | 
|                                                     |  | Loss from operations     |       |  | (218.4 | )  |      |  | (9.6  | ) 
|                                                    
|                                                    
|                                                    
|                                                    
|Interest
income, net                                 |  |                          | 0.5   |  |        |    | 1.3  | 
|                                                     |  |                          |       |  |        |    |      | 
|                                                     |  | Loss before taxes        |       |  | (217.9 | )  |      |  | (8.4  | ) 
|                                                    
|                                                    
|                                                    
|                                                    
|Income tax provision                                 |  |                          | 12.7  |  |        |    | 3.6  | 
|                                                     |  |                          |       |  |        |    |      | 
|                                                     |  | Net loss                 |       |  | (230.6 | )% |      |  | (11.9 | )%
|                                                     |  |                          |       |  |        |    |      | 

Comparison of Three Months Ended March 29, 2002 and March 30, 2001

Revenue

Revenue decreased 32.4% from $37.6 million in the first quarter of 2001 to
$25.4 million in the first quarter of 2002. Revenue decreased primarily due to
a 48% decrease in average selling prices of our products offset by a 34%
increase in the volume of products shipped in the first quarter of 2002 as
compared to the first quarter of 2001. The decrease in the average selling
prices is primarily attributable to product mix. One customer accounted for
25.7% of total revenue in the first quarter of 2002, and three customers
accounted for 20.3%, 17.8% and 14.8% of total revenue in the first quarter of
2001. Revenue for the first quarter of 2002 included three days of
revenue related to the merger with Proxim, Inc. on March 26, 2002.

Cost of revenue

Cost of revenue decreased 22.4% from $18.9 million in the first quarter of
2001 to $14.7 million in the first quarter of 2002. The decrease was primarily
attributable to lower revenues in the first quarter of 2002. As a percentage
of revenue, cost of revenue increased from 50.3% in the first quarter of 2001
to 57.7% in the first quarter of 2002. The increase in cost of revenue as a
percentage of sales was primarily attributable to lower than expected revenue
and production volume, resulting in under absorption of manufacturing overhead.

Research and development

Research and development expenses increased 11.6% from $4.1 million in the
first quarter of 2001 to $4.5 million in the first quarter of 2002. The
increase in research and development expenses 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 10.8% in the first quarter of
2001 to 17.9% in the first quarter of 2002. As a percentage of revenue,
research and development expenses increased primarily due to lower than
expected revenue during the first quarter of 2002. Research and
development expenses for the first quarter of 2002 included three
days of expenses related to the merger with Proxim, Inc. on March 26,
2002. We expect that research and development expenses will increase
in the second quarter of 2002 as the former Proxim, Inc. research and
development expenses will be included for the whole quarter.

Selling, general and administrative

Selling, general and administrative expenses decreased 12.4% from $10.0
million in the first quarter of 2001 to $8.8 million in the first quarter of
2002. The decrease in selling, general and administrative expenses is primarily
attributable to decreased personnel expenses, advertising, tradeshow, public
relations expenses and consulting costs. As a percentage of revenue, selling,
general and administrative expenses increased from 26.6% in the first quarter
of 2001 to 34.4% in the first quarter of 2002, due

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primarily to lower revenues during the first
quarter of 2002. Selling, general and administrative expenses for the
first quarter of 2002 included three days of expenses related to the
merger with Proxim, Inc. on March 26, 2002. We expect that selling,
general and administrative expenses will increase in the second
quarter of 2002 and through the end of 2002, as the former Proxim,
Inc. selling, general and administrative expenses will increase in
the second quarter of 2002 and through the end of 2002, as the former
Proxim, Inc. selling, general and administrative expenses will be
included for the whole period.

Amortization of goodwill and other intangible assets

Amortization of goodwill and other intangible assets decreased from
$822,000 in the first quarter of 2001 to $144,000 in the first quarter of 2002.
Amortization of goodwill and other intangible assets decreased primarily
because we ceased amortizing goodwill beginning January 1, 2002 as a result of
adopting SFAS 142.

Amortization of deferred stock compensation

Amortization of deferred stock compensation was $1.9 million in the first
quarter of 2001 and $245,000 in the first quarter of 2002. As a result of
closing the Ubiquity operations in March 2001, we reversed in the first quarter
of 2001 both a portion of the deferred stock compensation associated with the
Ubiquity employees expensed in previous quarters and the remaining unamortized
portion of the deferred stock compensation associated with those employees.
Consequently, the amortization of deferred stock compensation in the first
quarter of 2002 is lower than in the first quarter of 2001.

Impairment of goodwill and other
intangible assets

We recorded $4.3 million of impairment for goodwill related to our former
Ubiquity operations during the first quarter of 2001. The amount of the charge
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 our point-to-multipoint systems.

Restructuring charges

During the first quarter of 2001, we recorded $1.1 million of
restructuring charges related to the closure of our former Ubiquity operations.
The charges include $0.9 million of cash provisions which include severance of
$0.7 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 March 29, 2002, approximately $0.9 million of these cost were
incurred with the remainder expected to be paid in 2002. In addition, we
recorded $0.6 million associated with restructuring the Sunnyvale operations.

During the first quarter of 2002, as a result of the merger with Proxim,
Inc., we recorded $48.0 million of restructuring charges in connection with the
closure of certain facilities, discontinued product lines and severance pay.
The charges include $38.1 million of cash provisions, which include severance
of $1.4 million for 5 employees, $31.7 million for future lease commitments and
exit costs related to the closure of two facilities and $5.0 million related
purchase order commitments. The charges also include $9.9 million of non-cash
provisions of which $7.7 million related to an additional reserve for
excess and obsolete inventory on hand and $2.2 million related to fixed assets that will
no longer be used at the facility.

In-process Research and Development

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

Interest Income, net

Interest income, net decreased from $472,000 in the first quarter of 2001 to
$131,000 in the first quarter of 2002. The decrease in interest income is
primarily due to the decrease in investments.

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Income Tax Provision

The income tax provision for the three months ended March 29, 2002 is
primarily due to establishing a valuation allowance to offset deferred tax
assets brought forward from December 31, 2001. As a result of the losses
incurred there is significant uncertainty whether a benefit of the deferred tax
assets would be realized. We will carry back losses to prior years and claim
income tax refunds totaling $10.4 million, which was recorded in other current
asset as of March 29, 2002. Accordingly, we believes
that it is necessary to establish a full valuation allowance of $11.3 million.

Liquidity and Capital Resources

Our principal source of funding has been from the net proceeds of
approximately $91.0 million from our initial public offering in August 2000.
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. We used $28.9 million of the net proceeds to repay
outstanding indebtedness under our term notes and outstanding borrowings under
our revolving credit facility. We also used approximately $4.0 million to
invest in short-term and long-term interest-bearing, investment-grade
securities, approximately $8.0 million for the purchase of equipment and
leasehold improvements, approximately $3.0 million to pay a security deposit in
connection with a new noncancellable operating lease, approximately $13.0
million in connection with the WirelessHome acquisition, approximately $2.0
million to repay debt assumed from WirelessHome, approximately $4.0 million in
payments for income taxes, and approximately $17.0 million to finance our
operations and working capital requirements. We estimate
approximately $11.0
million of the net proceeds has not yet been used. In March 2002, we received
net proceeds of $29.0 million in connection with the Proxim, Inc. merger.

As of March 29, 2002, we had not allocated the remaining net proceeds of
our initial public 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.

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,
activities in connection with acquiring complementary businesses and the amount
of cash we generate from operations, if any. Pending the use of the proceeds
described above, we will continue to invest the remainder of the net proceeds
in short-term, 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 increased by $26.8 million from $16.6 million at
December 31, 2001 to $43.4 million at March 29, 2002. Cash and cash equivalents
decreased by $16.4 million from $31.1 million at December 31, 2000 to $14.7
million at March 30, 2001.

Net
cash used in operating activities was $4.8 million in the three
months ended March 29, 2002 primarily due to net loss after the effect of non cash
charges, an increase in gross inventories, accounts receivable and other
current assets, partially offset by an increase in accounts payable
and accrued liabilities. Net cash provided by operating activities was $2.2 million in the three months
ended March 31, 2001 primarily due to an increase in accounts payable and
accrued liabilities and a decrease in other current assets partially offset by
net loss after the effect of non cash charges, a decrease in inventory and
accounts receivable.

Net
cash provided by investing activities was $31.5 million in the first three
months ended March 29, 2002 due to $29.0 million in cash provided by merger
with Proxim, Inc. and $3.1 million in net proceeds from the sale of investment
securities partially offset by $0.6 million in capital spending. Net cash used
in investing activities was $19.4 million in the first three months ended March
30, 2001 due to capital spending of $2.5 million, purchases of investments
securities of $6.5 million and $10.4 million of

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spending associated with the acquisition of WirelessHome.

Net cash provided by financing activities was $154,000 in the three months
ended March 29, 2002 due to issuance of common stock as a result of the
exercise of employee stock options and the employee stock purchase plan
purchases. Net cash provided by financing activities was $797,000 in the three
months ended March 30, 2001 due to issuance of common
stock as a result of the exercise of employee stock options and the employee
stock purchase plan purchases offset by repayment of long-term debt.

We occupy our facilities under several non-cancelable operating lease
agreements expiring at various dates through November 2010, and require payment
of property taxes, insurance, maintenance and utilities. Future minimum lease
payments under non-cancelable operating leases at March 29, 2002 were as
follows (in thousands):

|                                     |                              |   |       |        | 
|------------------------------------ | ---------------------------- | - | ----- | ------ | 
|Nine
months ending December 31, 2002 |                              | $ | 6,587 |       
|                                    
|                                    
|                                    
|                                    
|Year ending December 31:             |                              |   |       |       
|                                    
|                                    
|                                    
|                                    
|                                     | 2003                         |   |       | 9,154  | 
|                                    
|                                    
|                                    
|                                    
|                                     | 2004                         |   |       | 9,780  | 
|                                    
|                                    
|                                    
|                                    
|                                     | 2005                         |   |       | 9,422  | 
|                                    
|                                    
|                                    
|                                    
|                                     | 2006                         |   |       | 7,924  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Thereafter                   |   |       | 25,047 | 
|                                     |                              |   |       |       
|                                     | Total minimum lease payments |   | $     | 67,914 | 
|                                     |                              |   |       |       

As of March 29, 2002 we had unconditional purchase order commitments of
$5.0 million, which were accrued for as restructuring charges.

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

RISK FACTORS

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

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

This Form 10-Q also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this Form
10-Q.
24



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We may not achieve certain benefits and synergies expected from the merger,
which may have a material adverse effect on our business, financial condition
and operating results and/or could result in the loss of key personnel.

We will need to overcome significant challenges in order to realize any
benefits or synergies from the merger, including the timely, efficient and
successful execution of a number of post-merger events, including:



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

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



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

The combined company may not succeed in addressing these risks or any
other problems encountered in connection with the merger.

The market price of our common stock may decline as a result of the merger.

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



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

The merger may adversely affect our financial results.

We have incurred transaction costs of approximately $14 million in
connection with the merger. If the benefits of the merger do not exceed the
associated costs, including costs associated with integrating the two companies
and dilution to our stockholders resulting from the issuance of shares in
connection with the merger, our financial results, including earnings per
share, could be materially harmed.

25



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Products sales could decline if customer relationships are disrupted by the
merger.

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

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

For the three months ended March 29, 2002 we had a $58.6 million net loss.
We cannot assure you that our revenue will increase or continue at current
levels or growth rates or that we will achieve profitability or generate cash
from operations in future periods. In view of the rapidly evolving nature of
our business and the limited histories of Western Multiplex and Proxim, Inc. in
producing many of their products, period-to-period comparisons of operating
results are not necessarily meaningful and you should not rely on them as
indicating what our future performance will be.

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

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

Proxim, Inc. produced its 802.11a and HomeRF 2.0 products for a limited
amount of time and Western Multiplex had just began production of its Tsunami
point-to-multipoint product. The combined companys prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in developing industries, particularly companies in
relatively new and rapidly evolving markets. These risks include:



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

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

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

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

Factors that may harm operating results include:



| |  |  | the effectiveness of our distribution channels and the success
in maintaining our current distribution channels and developing new
distribution channels;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

26



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| |  |  | our ability to effectively manage the development of new business segments and markets;                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to successfully manage the integration of operations;                                                                                                      
|
| |  |  | the sell-through rate of our Symphony HomeRF products through consumer retail channels;                                                                                
|
| |  |  | market adoption of radio frequency, or RF, standards-based
products (such as those compliant with the HomeRF, IEEE 802.11b, IEEE
802.11a, or Bluetooth specifications);
|
| |  |  | market demand for our point-to-point Lynx and Tsunami systems;                                                                                                         
|
| |  |  | market demand for our point-to-multipoint systems;                                                                                                                     
|
| |  |  | technical difficulties, system downtime or other similar failures;                                                                                                     
|
| |  |  | our ability to upgrade and develop our systems and infrastructure;                                                                                                     
|
| |  |  | difficulties in expanding and conducting international operations; and                                                                                                 
|
| |  |  | general economic conditions and economic conditions specific to the wireless communications industry.                                                                  

Historically, Proxim, Inc. and Western Multiplex did not operate with a
significant order backlog and a substantial portion of their revenues in any
quarter were derived from orders booked and shipped in that quarter.
Accordingly, a significant component of our revenue expectations will be based
almost entirely on internal estimates of future demand and not on firm customer
orders. Planned operating expense levels are relatively fixed in the short
term and are based in large part on these estimates. If orders and revenue do
not meet expectations, our operating results could be materially adversely
affected.

Our future operating results could be adversely affected as a result of
purchase accounting treatment and the impact of amortization and impairment of
intangible assets relating to the merger.

In accordance with generally accepted accounting principles, we have
accounted for the merger using the purchase method of accounting. Under the
purchase method of accounting, we have recorded the market value of our common
stock issued in connection with the merger, the fair value of the options to
purchase Proxim, Inc. common stock that became options to purchase Proxim
Corporation common stock and the amount of direct transaction costs as the cost
of combining with Proxim, Inc. We have allocated the cost of the individual
assets acquired and liabilities assumed, including various identifiable
intangible assets (such as acquired technology and acquired trademarks and
trade names) and in-process research and development, based on their respective
fair values at the date of the completion of the merger. Intangible assets
will be required to be amortized prospectively over their estimated useful
lives. The purchase price will also be allocated to deferred compensation,
based on the portion of the intrinsic value of the unvested Proxim, Inc.
options we have assumed to the extent that service is required after completion
of the merger in order to vest. Any excess of the purchase price over those
fair market values will be accounted for as goodwill. We are not required to
amortize goodwill against income but goodwill will be subject to periodic
reviews for impairment. If we are required to recognize an impairment charge,
the charge will negatively impact reported earnings in the period of the
charge.

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

The potential for post-merger sales of substantial amounts of our common
stock into the public market may adversely affect the market price of our
common stock. We have approximately 119.1 million shares of common stock
outstanding. Of these shares, approximately 32.1 million are held by
affiliates of Ripplewood Investments L.L.C. and an aggregate of
approximately 6.0
million are held by Jonathan Zakin, who is our Chairman and Chief Executive
Officer, and his affiliates. The shares of common stock held by these stockholders
are restricted securities within the meaning of Rule 144 under the Securities
Act and are eligible for resale subject to the volume, manner of sale, holding

27



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period and other limitations of Rule 144 or in a registered offering. In
the event that the affiliates of Ripplewood Investments L.L.C. distribute shares
that they hold to their members and partners that are not affiliates of the
Company, those distributed shares could be immediately sold without regard to
any volume limitations. However, in connection with the execution of the
merger agreement, the affiliates of Ripplewood Investments L.L.C. that now hold
shares of Proxim Corporation common stock entered into a stockholders
agreement that sets limitations on their ability to transfer their shares,
including distributions to members and partners, for a limited period of time
and will provide registration rights with respect to their shares. In general,
these limitations permitted transfers of at least five million shares during
the first 30 days after the merger and, during each subsequent 30-day period
prior to the expiration of the limitations, will permit transfers of an
additional number of shares equal to the average weekly trading volume in our
common stock during the prior four-week period.

In
addition to outstanding shares eligible for sale, as of
March 29, 2002, options and
warrants to acquire 28.5 million shares of common stock of Proxim Corporation
were outstanding. Also, as of
March 29, 2002, approximately an additional 14.4 million
shares of Proxim Corporation common stock were reserved for issuance to
employees of Proxim Corporation under existing and/or assumed stock
option plans.

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

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

We could be at a disadvantage to competitors, particularly Alcatel, Agere
Systems (formerly part of Lucent Technologies), Business Networks AB, Cisco
Systems, Ericsson, Linksys and Nortel Networks Corporation, that have broader
distribution channels, brand recognition, extensive patent portfolios and more
diversified product lines. We have several competitors in our commercial
wireless business, including without limitation Agere Systems, Alvarion (the
merger of Breezecom and Floware), Cisco Systems (which acquired Aironet
Wireless Communications), Enterasys, Intersil, Nokia, Symbol Technologies and
3Com.

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

Many of our present and potential competitors have substantially greater
financial, marketing, technical and other resources with which to pursue
engineering, manufacturing, marketing, and distribution of their products.
These competitors may succeed in establishing technology standards or strategic
alliances in the wireless LAN and building to building markets, obtain more
rapid market acceptance for their products, or otherwise gain a competitive
advantage. We can offer no assurance that we will succeed in developing
products or technologies that are more effective than those developed by our
competitors. Furthermore, we compete with companies that have high volume
manufacturing and extensive marketing and distribution capabilities, areas in
which we have only limited experience. We can offer no assurance that the we
will be able to compete successfully against existing and new competitors as
wireless markets evolve and the level of competition increases.

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

We have expended substantial resources in developing products that are
designed to conform to the IEEE 802.11 standards and the HomeRF specification.
There can be no assurance, however, that the IEEE 802.11 compliant products and
Symphony HomeRF products will have a meaningful commercial impact. In 1999,
the IEEE approved a new 2.4 GHz wireless LAN standard, designated as 802.11b.
Based on direct sequence spread spectrum technology, this new standard
increased the nominal data rate from 2 Mbps to 11 Mbps. There can be no
assurance that the 802.11b products will be competitive in the market. In
addition, we have developed higher-speed frequency hopping technology based on
the FCC Part 15 rule change adopted in August 2000, that allows for wider band
hopping channels and increases the data rate from 1.6 Mbps to up to 10 Mbps.
There can be no assurance that any such new products will compete effectively
with IEEE 802.11b standard compliant products.

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

In 2000, the IEEE approved a new 5 GHz wireless LAN standard designated as
802.11a. This new standard is based on Orthogonal Frequency Division
Multiplexing, or OFDM, technology with multiple data rates ranging from below
10 Mbps to approximately 50 Mbps. In 1999, the European Telecommunications
Standards Institute Project BRAN (Broadband Radio Access Networks) committee
approved a new 5 GHz wireless LAN standard designated as HiperLAN2, also based
on OFDM technology. We are currently shipping commercial units of
802.11a products, and certain competitors have announced their intention to
ship 802.11a products during the first quarter of 2002. In August 2001,
Proxim, Inc. acquired Card Access, Inc. a developer of 802.11a wireless
networking products. We are working to develop products based on the 802.11a
standard, but there can be no assurance that the 802.11a products will have a
meaningful commercial impact.

The IEEE is evaluating a number of improvements and enhancements to the
802.11a at 5 GHz and 802.11b at 2.4 GHz standards. The 802.11g proposal is a
high speed extension of 802.11b, offering up to 54 Mbps of throughput, that is
expected to be approved during 2002 and commercial products are expected to be
available by early 2003. The 802.11e proposal is a quality of service
enhancement to the 802.11a and 802.11b protocol for streaming multimedia
support. The 802.11i proposal addresses enhanced security for both 802.11a and
802.11b. The 802.11h proposal addresses dynamic frequency selection and
transmit power control for worldwide radio regulation.

In addition, we are a core member of the HomeRF Working Group,
an industry consortium that is establishing an open industry standard, called
the HomeRF specification, for wireless digital communications between PCs and
consumer electronic devices, including a common interface specification that
supports wireless data and voice services in and around the home. There can be
no assurance that our HomeRF specification, or the Symphony HomeRF products
developed to comply with the specification, will have a meaningful commercial
impact. Further, given the emerging nature of the wireless LAN market, there
can be no assurance that the RangeLAN2 and Symphony products and technology, or
our other products or technology, will not be rendered obsolete by alternative
or competing technologies. If we are unable to enter a particular market in a
timely manner with internally developed products, we may license technology
from other businesses or acquire other businesses as an alternative to internal
research and development.

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

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



| |  |  | our personnel, systems, procedures and controls will be adequate to support our future operations;
| | - |  | --------------------------------------------------------------------------------------------------

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| |  |  | our management will be able to identify, hire, train, motivate or manage required personnel; or              
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | our management will be able to successfully identify and exploit existing and potential market opportunities.

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

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

During
the three months ending March 29, 2002, international sales
accounted for approximately 46% of our total sales. Revenue from shipments by Western Multiplex to customers outside of the
United States, principally to a limited number of distributors, represented
24%, 33% and 23% of total revenue during the calendar years 2001, 2000 and
1999, respectively. Revenue from shipments by Proxim, Inc. to customers
outside the United States, principally to a limited number of distributors and
OEM customers, represented 33%, 18% and 21% of total revenue during the
calendar years 2001, 2000 and 1999, respectively. We expect that our revenue
from shipments to international customers will vary as a percentage of total
revenue.

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



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

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

While we may extend limited credit terms, fluctuations in currency
exchange rates could cause our products to become relatively more expensive to
customers in a particular country, leading to a reduction in sales or
profitability in that country. There can be no assurance that foreign markets
will continue to develop or that we will receive additional orders to supply
our

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products to foreign customers. Our business and operating results could
be materially adversely affected if foreign markets do not continue to develop
or if we do not receive additional orders to supply our products for use by
foreign customers.

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

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

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



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

We have experienced the effects of many of the factors listed above in
interactions with customers selecting wireless versus wire line technology.
For example, because of the frequency with which individuals using cellular
phones experience fading or a loss of signal, customers often hold the
perception that all broadband wireless technologies will have the same
reliability constraints even though the wireless technology we use does not
have the same problems as cellular phones. In some geographic areas, because
of adverse weather conditions that affect wireless transmissions, but not wire
line technologies, we are not able to sell products as successfully as
competitors with wire line technology. In addition, future legislation, legal
decisions and regulation relating to the wireless telecommunications industry
may slow or delay the deployment of wireless networks. We may also lose
customers to different types of wireless technologies. For example, we have
only a limited offering of products that operate in licensed radio spectrums.
Some customers, however, may want to operate in licensed radio spectrums
because they sometimes offer less interference than license free radio
spectrums or have other advantages.

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

Our future success is dependent upon the continued growth of the data
communications and wireless industries, particularly with regard to Internet
usage. The global data communications and Internet industries are evolving
rapidly and it is difficult to predict potential growth rates or future trends
in technology development. We cannot assure you that the deregulation,

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privatization and economic globalization of the worldwide
telecommunications market that has resulted in increased competition and
escalating demand for new technologies and services will continue in a manner
favorable to us or our business strategies. In addition, there can be no
assurance that the growth in demand for wireless and Internet services, and the
resulting need for high speed or enhanced data communications products and
wireless systems, will continue at its current rate or at all.

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

A limited number of OEM customers may contribute a significant percentage
of our pro forma revenue. Sales to one Proxim, Inc. customer in calendar years
2000 and 1999 represented approximately 12% and 30% of total revenue,
respectively. Sales to a limited number of OEM customers are expected to
continue to account for a substantial portion of our revenue for the
foreseeable future. Proxim, Inc. also experienced quarter to quarter
variability in sales to each of its major OEM customers. Sales of many of
Proxim, Inc.s wireless networking products depended upon the decision of a
prospective OEM customer to develop and market wireless solutions which
incorporated Proxim, Inc.s wireless technology. OEM customers orders are
affected by a variety of factors, including the following:



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

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

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

Western Multiplex generated a significant amount of revenue from a limited
number of distributors. The loss of business from any of these distributors or
the delay of significant orders from any of them, even if only temporary, could
significantly

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reduce our revenue, delay recognition of revenue, harm our reputation or
reduce our ability to accurately predict cash flow. One customer
accounted for approximately 26% of our total revenue in the first quarter
of 2002. For the year ended
December 31, 2001, approximately 52% of Western Multiplexs revenue was derived
from three distributors, and approximately 30% of its revenue was derived from
one of the three distributors. Western Multiplex did not have long-term
contracts with any of these distributors. While we will have a more
diversified and expansive customer base, the future success of our business
will depend significantly on the timing and size of future purchase orders, if
any, from a limited number of distributors.

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

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

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

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

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

Proxim, Inc. outsourced manufacturing for its HomeRF products with
Flextronics International, Inc., a turnkey contract manufacturer. Western
Multiplex depended on three contract manufacturers to produce the majority of
its products, and it depended on one of these manufacturers for the entire
production of its Tsunami point-to-multipoint product. Changes in our
manufacturing operations to incorporate new products and processes, or to
manufacture at lower cost locations outside the United States, could cause
disruptions, which, in turn, could adversely affect customer relationships,
cause a loss of market opportunities and negatively affect our business and
operating results. In addition, our reliance on a limited number of
manufacturers involves a number of risks, including the risk that these
manufacturers may terminate their relationship with us, may choose not to
devote adequate capacity to produce our products or may delay production of our
products. If any of these risks are realized, we could experience an
interruption in supply, which could have an adverse impact on the timing and
amount our revenues.

Each of Western Multiplex and Proxim, Inc. experienced higher than
expected demand for its products. This resulted in delays in the delivery of
certain products due to temporary shortages of certain components, particularly
components with long lead times, and insufficient manufacturing capacity. Due
to the complex nature of our products and manufacturing processes,

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including products manufactured by our licensing partners, the worldwide
demand for some wireless technology components and other factors, there can be
no assurance that delays in the delivery of products will not occur in the
future.

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

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

Failure to develop new systems would cause our revenue to decline or to
increase more slowly.

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

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

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



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

End-users have discovered errors in the products of Proxim, Inc. and
Western Multiplex in the past and may discover errors in products of the
combined company in the future. Because customers often delay deployment of a
full system until the products have been tested by them and any defects have
been corrected, we expect these revisions to cause delays in orders by our
customers for our systems. Because our strategy is to introduce more complex
products in the future, this risk will intensify over time.

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To compete effectively, we will need to establish and expand new distribution
channels for Proxim, Inc.s home networking products and Western Multiplexs
point-to-multipoint products.

Western Multiplex sold its point-to-multipoint products and Proxim, Inc.
sold its branded RangeLAN2 and Harmony products through domestic and
international distributors. We intend to add new distributors and value added
resellers for the Symphony HomeRF family of cordless home and small office
networking products and the Tsunami point-to-multipoint products. Symphony
HomeRF products are currently sold through computer retailers, leading computer
catalogs and numerous on-line retail sites over the Internet. In general,
distributors, value added resellers and retailers offer products of several
different companies, including products that may compete with our products.
Accordingly, they may give higher priority to products of other suppliers, thus
reducing our efforts to sell our products. In addition they often focus on
specific markets and we will need to add new distributors and value added
resellers as we expand our sales to new markets. Agreements with distributors
and retailers are generally terminable at their option. Any reduction in sales
efforts or termination of a relationship may materially and adversely affect
our business and operating results. Use of distributors and retailers also
entails the risk that they will build up inventories in anticipation of
substantial growth in sales. If such growth does not occur as anticipated,
they may substantially decrease the amount of products ordered in subsequent
quarters. Such fluctuations could contribute to significant variations in our
future operating results.

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

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

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

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

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

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

Our success depends to a large extent on the continued services of Mr.
Jonathan N. Zakin, Chairman and Chief Executive Officer, Mr. David C. King,
President and Chief Operating Officer and Keith E. Glover, Executive
Vice President and Chief Financial Officer and other members of the combined
companys senior management team. The loss of the services of any of these
management members could harm our business because of the crucial role each of
them is expected to play in our operations and strategic development. In order
to be successful, we must also retain and motivate key employees, including
those in managerial, technical, marketing and sales positions. In particular,
our product generation efforts depend on hiring and retaining qualified
engineers. Experienced management and technical, sales, marketing and support
personnel in the wireless networking industry are in high demand and
competition for their talents is intense. This is particularly the case in
Silicon Valley, where our headquarters are located. In particular, our
employees may experience uncertainty about their future role with the combined
company until or after strategies with regard to the combined company are

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announced or executed. This circumstance may adversely affect our ability
to attract and retain key management, technical, sales and marketing personnel.
We must also continue to motivate employees and keep them focused on the
strategies and goals of the combined company, which may be particularly
difficult due to the potential distractions of the merger and morale challenges
posed by any workforce reduction that may be implemented.

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

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



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

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

Affiliates of Ripplewood Investments L.L.C. beneficially own a significant
percentage of our common stock, which will allow them to significantly
influence matters requiring shareholder approval and could discourage potential
acquisitions of the combined company.

Affiliates
of Ripplewood Investments L.L.C. control approximately 26.9% of
our outstanding common stock. These stockholders will be able to exert
significant influence over actions requiring the approval of our stockholders,
including many types of change of control transactions and any amendments to
our certificate of incorporation. The interests of the affiliates of
Ripplewood Investments L.L.C. may be different than those of other stockholders of
our company. In addition, the significant ownership percentage of affiliates
of Ripplewood Investments L.L.C. could have the effect of delaying or preventing a
change of control of our company or otherwise discouraging a potential acquiror
from obtaining control of our company.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our products are also subject to regulatory requirements in international
markets and, therefore, we must monitor the development of spread spectrum and
other radio frequency regulations in certain countries that represent potential
markets for our products. While there can be no assurance that we will be able
to comply with regulations in any particular country, we will design our
RangeLAN2, RangeLAN-DS, Harmony, Symphony and Symphony HomeRF products to
minimize the design modifications required to meet various 2.4 GHz
international spread spectrum regulations. In addition, we will seek to obtain
international certifications for the Symphony and Symphony HomeRF product line
in countries where there is a substantial market for home PCs and Internet
connectivity. Changes in, or the failure by us to comply with, applicable
domestic and international regulations could materially adversely affect our
business and operating results. In addition, with respect to those countries
that do not follow FCC regulations, we may need to modify our products to meet
local rules and regulations.

Regulatory changes by the FCC or by regulatory agencies outside the United
States, including changes in the allocation of available frequency spectrum,
could significantly affect our operations by restricting our development
efforts, rendering current products obsolete or increasing the opportunity for
additional competition. Several changes by the FCC were approved within the

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last eight years including changes in the allocation and use of available
frequency spectrum, as well as the granting of an interim waiver. These
approved changes could create opportunities for other wireless networking
products and services. There can be no assurance that new regulations will not
be promulgated, that could materially and adversely affect our business and
operating results.

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



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

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

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

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



| |  |  | quarterly variations in revenues and operating results;                               
| | - |  | --------------------------------------------------------------------------------------
|
| |  |  | announcements of innovations and new products;                                        
|
| |  |  | strategic developments or business combinations by us or our competitors;             
|
| |  |  | changes in our expected operating expense levels;                                     
|
| |  |  | changes in financial estimates and recommendations of financial and industry analysts;
|
| |  |  | the operating and securities price performance of comparable companies; and           
|
| |  |  | news reports relating to trends in the wireless communications industry.              

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

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

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



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

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

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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

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

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

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

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

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

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

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

On December 4, 2001, Symbol filed suit in the U.S. District Court for the
District of Delaware alleging that Proxim, Inc. infringed four Symbol patents
related to systems for packet data transmission. Symbol sought an award for
unspecified damages

41



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##### Table of Contents



and a permanent injunction against Proxim, Inc. based on alleged patent
infringement counterclaims. On December 18, 2001 Proxim, Inc. filed an answer
and counterclaims seeking declaratory judgments for non-infringement,
invalidity and unenforceability of the four asserted Symbol patents, injunctive
and monetary relief for Symbols infringement of a Proxim, Inc. patent,
monetary relief for Symbols false patent marking, and injunctive and monetary
relief for Symbols unfair competition under the Lanham Act, common law unfair
competition and tortious interference.

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




ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS

On March 26, 2002
a special meeting of stockholders
of Proxim Corporation (formerly Western Multiplex Corporation) was
held at 11:00 a.m., local time, at the Sheraton Hotel,
1108 North Mathilda Avenue, Sunnyvale, California.

The matter voted on
was the proposal to approve the
issuance of Western Multiplex Corporation common stock pursuant to
the Agreement and Plan of Reorganization, dated as of
January 16, 2002, among Western Multiplex Corporation,
Walnut-Pine Merger Corp., a wholly owned subsidiary of Western
Multiplex Corporation, and Proxim, Inc. The number of affirmative
votes for this proposal was 40,886,941, the number of negative votes
was 568,990 and the number of abstained votes was 3,570.




ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q



|A. |  | Exhibits:
|-- |  | ---------

|           |  |                                                                                                                                                                                                                                                                      
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.5(1)     |  | Warrant to Purchase Common Stock of Proxim, Inc. issued to Motorola
Corporation on June 2, 1999.                                                                                                                                                                     
|          
|          
|          
|          
|4.6(1)     |  | Investor Rights Agreement dated as of June 2, 1999 between Proxim, Inc.
and Motorola Corporation.                                                                                                                                                                    
|          
|          
|          
|          
|4.7(2)     |  | Registration Rights Agreement between Proxim, Inc. and Siemens
Aktiengesellshaft and Siemens Information and Communication Mobile LLC
dated September 27, 2000.                                                                                                      
|          
|          
|          
|          
|4.8(3)     |  | Common Stock and Warrant Purchase Agreement dated as of November 27,
2001 by and between Proxim, Inc. and each of the purchasers named in
Exhibit A thereto.                                                                                                         
|          
|          
|          
|          
|4.9(3)     |  | Form of Proxim, Inc. Common Stock Warrant issued to each of the
purchasers (other than UBS Global Equity Arbitrage Master Ltd. and PIPES
Corporate Strategies Ltd.) in connection with the Common Stock and
Warrant Purchase Agreement dated as of November 27, 2001.
|          
|          
|          
|          
|4.10(3)    |  | Form of Proxim, Inc. Common Stock Warrant issued to UBS Global Equity
Arbitrage Master Ltd. and PIPES Corporate Strategies Ltd. in connection
with the Common Stock and Warrant Purchase Agreement dated as of November
27, 2001.                                    
|          
|          
|          
|          
|4.11(3)    |  | Form of Proxim, Inc. Irrevocable Proxy executed by each of UBS Global
Equity Arbitrage Master Ltd. and PIPES Corporate Strategies Ltd. in
connection with the Common Stock and Warrant Purchase Agreement dated as
of November 27, 2001.                             
|          
|          
|          
|          
|10.38(4)*  |  | Form of Proxim, Inc. Indemnification Agreement for Officers and
Directors, Delaware.                                                                                                                                                                                 
|          
|          
|          
|          
|10.39(5)*  |  | Proxim, Inc. 1994 Director Option Plan, as amended and restated.                                                                                                                                                                                                     
|          
|          
|          
|          
|10.40(6)*  |  | Proxim, Inc. Form of 1994 Director Option Plan Subscription
Agreement.                                                                                                                                                                                               
|          
|          
|          
|          
|10.41(7)*  |  | Proxim, Inc. 1995 Long-Term Incentive Plan, as amended and restated.                                                                                                                                                                                                 
|          
|          
|          
|          
|10.42(8)*  |  | Proxim, Inc. Form of 1995 Long-Term Incentive Plan Subscription Agreement.                                                                                                                                                                                           
|          
|          
|          
|          
|10.43(9)*  |  | Proxim, Inc. 1999 Nonstatutory Stock Option Plan, as amended and restated.                                                                                                                                                                                           
|          
|          
|          
|          
|10.44(10)* |  | Proxim, Inc. Form of 1999 Nonstatutory Stock Option Plan
Subscription Agreement.                                                                                                                                                                                     
|          
|          
|          
|          
|10.45(11)* |  | Change of Control Severance Agreement entered into June 18, 1998
between Proxim, Inc. and David C. King.                                                                                                                                                             
|          
|          
|          
|          
|10.46(11)* |  | Change of Control Severance Agreement entered into June 18, 1998
between Proxim, Inc. and Keith E. Glover.                                                                                                                                                           
|          
|          
|          
|          
|10.47(12)  |  | Sublease Agreement between Applied Materials , Inc. (sublandlord) and
Proxim, Inc. (subtenant) dated March 3, 1999.                                                                                                                                                  
|          
|          
|          
|          
|10.48(13)* |  | Reimbursement and Security Agreement between Proxim, Inc. and David
C. King dated March 15, 2001.                                                                                                                                                                    



---

|*    |  | Management contract or compensating plan or arrangement.                                                                                                 
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(1)  |  | Incorporated by reference to Proxim, Inc.s report on Form 10-Q filed with
the Securities and Exchange Commission on August 13, 1999.                    
|    
|    
|    
|    
|(2)  |  | Incorporated by reference to Proxim, Inc.s report on Form 10-Q filed with
the Securities and Exchange Commission on November 14, 2000.                  
|    
|    
|    
|    
|(3)  |  | Incorporated by reference to Proxim, Inc.s current report on Form 8-K
filed with the Securities and Exchange Commission on November 28, 2001.           
|    
|    
|    
|    
|(4)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
33-70712 filed with the Securities and Exchange Commission on December 15,
1993.  
|    
|    
|    
|    
|(5)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-88369
filed with the Securities and Exchange Commission on October 4, 1999.   
|    
|    
|    
|    
|(6)  |  | Incorporated by reference to Proxim, Inc.s definitive proxy materials
filed with the Securities and Exchange Commission on April 15, 1994.              
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-54390 filed with the Securities and Exchange Commission on January 26,
2001.  
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
33-94910 filed with the Securities and Exchange Commission on July 24, 1995.      
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to Proxim Corporations registration statement on
Form S-8 filed with the Securities and Exchange Commission on March 27, 2002.
|    
|    
|    
|    
|(10) |  | Incorporated by reference to Proxim, Inc.s Registration Statement No.
333-54390 filed with the Securities and Exchange Commission on January 26,
2001.  
|    
|    
|    
|    
|(11) |  | Incorporated by reference to Proxim, Inc.s report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1999.                     
|    
|    
|    
|    
|(12) |  | Incorporated by reference to Proxim, Inc.s report on Form 10-Q filed with
the Securities and Exchange Commission on May 17, 1999.                       
|    
|    
|    
|    
|(13) |  | Incorporated by reference to Proxim, Inc.s report on Form 10-Q filed with
the Securities and Exchange Commission on August 14, 2001.                    





|B. |  | Reports on Form 8-K:
|-- |  | --------------------

The Company filed six reports on Form 8-K during the quarter ended March 29,
2002. Information regarding the items reported on is as follows:

|                  |  |                                                                                                                                                                                                                                                                                                                              
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date              |  | Item Reported On                                                                                                                                                                                                                                                                                                             
|                  |  |                                                                                                                                                                                                                                                                                                                              
|January 18, 2002  |  | The Company announced the signing of the Agreement and Plan of
Reorganization between Western Multiplex Corporation and
Proxim, Inc.                                                                                                                                                                                         
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                                                                                                                                                              
|                 
|                 
|                 
|                 
|February 24, 2002 |  | In connection with the announced Agreement and Plan of
Reorganization between Proxim, Inc. and Western
Multiplex Corporation, the Company filed amended
financials statements.                                                                                                                                               
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                                                                                                                                                              
|                 
|                 
|                 
|                 
|February 28, 2002 |  | Western Multiplex Corporation announced that it had
received an unsolicited merger proposal in a letter from
DMC Stratex Networks, Inc. in which DMC Stratex proposed
that Western Multiplex stockholders would receive 0.5215
shares of DMC Stratex common stock for each share of
Western Multiplex common stock.          
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                                                                                                                                                              
|                 
|                 
|                 
|                 
|March 5, 2002     |  | Western Multiplex Corporation announced that it had
determined not to pursue the unsolicited offer made by
DMC Stratex Networks, Inc. The Board of Directors of
Western Multiplex, after consultation with management
and its financial and legal advisors, reaffirmed its
commitment to the pending merger with Proxim, Inc.
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                                                                                                                                                              
|                 
|                 
|                 
|                 
|March 8, 2002     |  | In connection with the announced Agreement and Plan of
Reorganization between Proxim, Inc. and Western
Multiplex Corporation, the Company announced that three
class action lawsuits were filed.                                                                                                                             
|                 
|                 
|                 
|                 
|                  |  |                                                                                                                                                                                                                                                                                                                              
|                 
|                 
|                 
|                 
|March 26, 2002    |  | Following receipt of approval of the stockholders of
Western Multiplex Corporation and Proxim, Inc., Western
Multiplex and Proxim consummated a merger pursuant to
the terms of the previously reported Agreement and Plan
of Reorganization.                                                                                

42



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##### Table of Contents






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: May 13, 2002 |  | Proxim Corporation                                                                                                                                  
|                  
|                   |  |                                                                                                                                                     
|                  
|                   |  | By:  /s/ Keith E. Glover
Keith E. Glover
Executive Vice President
Chief Financial Officer and
Secretary
(Principal Financial and Accounting Officer)

43