##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 27, 2009
 OR
 o
    
    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: 001-33576
 
 Airvana, Inc.
 (Exact name of registrant as specified in its charter)
 
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    04-3507654
(I.R.S. Employer
Identification Number)
 19 Alpha Road
Chelmsford, Massachusetts 01824
(Address of Principal Executive Offices including Zip Code)
 (978) 250-3000
(Registrants Telephone Number, Including Area Code)
 
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AIRVANA, INC.
 QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED September 27, 2009
Table of Contents
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of December 28, 2008 and September 27, 2009
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 28, 2008 and September 27, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended
September 28, 2008 and September 27, 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4. Controls and Procedures
    
    
    45PART II. OTHER INFORMATION
    
    
    45Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    59Item 6. Exhibits
    
    
    60SIGNATURES
    
    
    61Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. Financial Information
 
 Item 1.
    
    Condensed Consolidated Financial Statements (unaudited)
 AIRVANA, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (unaudited)
  December 28,
    
    
    September 27,2008
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,425
    
    
    $
    12,819Investments
    
    
    197,941
    
    
    
    163,484Restricted investments
    
    
    
    
    
    
    210Accounts receivable
    
    
    3,354
    
    
    
    18,436Deferred product cost, current
    
    
    1,913
    
    
    
    3,017Prepaid taxes
    
    
    
    
    
    
    11,664Deferred tax assets, current, net
    
    
    2,168
    
    
    
    17,245Prepaid expenses and other current assets
    
    
    2,758
    
    
    
    3,861Total current assets
    
    
    238,559
    
    
    
    230,736Property and equipment
    
    
    14,425
    
    
    
    17,822Less: accumulated depreciation and amortization
    
    
    9,603
    
    
    
    12,0394,822
    
    
    
    5,783Investments, long-term
    
    
    
    
    
    
    29,023Prepaid tax, long-term
    
    
    
    
    
    
    3,408Deferred service cost
    
    
    1,300
    
    
    
    4,865Deferred tax assets, long term, net
    
    
    956
    
    
    
    350Restricted investments
    
    
    193
    
    
    
    193Goodwill and intangible assets, net
    
    
    11,096
    
    
    
    10,295Other assets
    
    
    410
    
    
    
    877Total assets
    
    $
    257,336
    
    
    $
    285,530Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    4,455
    
    
    $
    3,159Accrued expenses and other current liabilities
    
    
    14,365
    
    
    
    12,074Accrued income taxes
    
    
    1,897
    
    
    
    954Deferred revenue, current
    
    
    61,310
    
    
    
    124,260Total current liabilities
    
    
    82,027
    
    
    
    140,447Deferred revenue, long-term
    
    
    5,550
    
    
    
    14,447Accrued income taxes, long-term
    
    
    5,703
    
    
    
    6,025Other liabilities
    
    
    1,174
    
    
    
    783Total long-term liabilities
    
    
    12,427
    
    
    
    21,255Commitments and Contingencies (Note 8)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.001 par value per share: 10,000,000 shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $0.001 par value per share: 350,000,000 shares authorized, 62,931,171 and
62,554,501 shares issued and outstanding at December 28, 2008 and September 27, 2009,
respectively (Note 9)
    
    
    63
    
    
    
    63Additional paid-in capital
    
    
    186,824
    
    
    
    185,861Accumulated deficit
    
    
    (24,005
    )
    
    
    (62,096
    )Total stockholders equity
    
    
    162,882
    
    
    
    123,828Total liabilities and stockholders equity
    
    $
    257,336
    
    
    $
    285,530
   3




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##### Table of Contents



AIRVANA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    September 28,
    
    
    September 27,2008
    
    
    2009
    
    
    2008
    
    
    2009Revenue:Product
    
    $
    5,362
    
    
    $
    242
    
    
    $
    65,679
    
    
    $
    8,518Service
    
    
    2,885
    
    
    
    2,484
    
    
    
    9,225
    
    
    
    8,351Total revenue
    
    
    8,247
    
    
    
    2,726
    
    
    
    74,904
    
    
    
    16,869Cost of revenue:Product
    
    
    426
    
    
    
    359
    
    
    
    1,860
    
    
    
    1,227Service
    
    
    2,226
    
    
    
    2,541
    
    
    
    6,032
    
    
    
    7,622Total cost of revenue
    
    
    2,652
    
    
    
    2,900
    
    
    
    7,892
    
    
    
    8,849Gross profit (loss)
    
    
    5,595
    
    
    
    (174
    )
    
    
    67,012
    
    
    
    8,020Operating expenses:Research and development
    
    
    18,859
    
    
    
    18,443
    
    
    
    56,209
    
    
    
    54,202Selling and marketing
    
    
    3,809
    
    
    
    4,245
    
    
    
    11,212
    
    
    
    12,345General and administrative
    
    
    2,281
    
    
    
    3,438
    
    
    
    6,675
    
    
    
    8,311Total operating expenses
    
    
    24,949
    
    
    
    26,126
    
    
    
    74,096
    
    
    
    74,858Operating loss
    
    
    (19,354
    )
    
    
    (26,300
    )
    
    
    (7,084
    )
    
    
    (66,838
    )Interest and other income, net
    
    
    1,505
    
    
    
    426
    
    
    
    5,882
    
    
    
    3,092Loss before income taxes
    
    
    (17,849
    )
    
    
    (25,874
    )
    
    
    (1,202
    )
    
    
    (63,746
    )Income tax (benefit) expense
    
    
    (5,404
    )
    
    
    (9,019
    )
    
    
    2,354
    
    
    
    (25,655
    )Net loss
    
    $
    (12,445
    )
    
    $
    (16,855
    )
    
    $
    (3,556
    )
    
    $
    (38,091
    )Net loss per share:Basic
    
    $
    (0.19
    )
    
    $
    (0.27
    )
    
    $
    (0.06
    )
    
    $
    (0.61
    )Diluted
    
    $
    (0.19
    )
    
    $
    (0.27
    )
    
    $
    (0.06
    )
    
    $
    (0.61
    )Weighted average common shares outstanding:Basic
    
    
    64,965
    
    
    
    62,341
    
    
    
    64,487
    
    
    
    62,417Diluted
    
    
    64,965
    
    
    
    62,341
    
    
    
    64,487
    
    
    
    62,417
   4




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##### Table of Contents



AIRVANA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    September 28,
    
    
    September 27,2008
    
    
    2009
    
    
    2008
    
    
    2009Operating activitiesNet loss
    
    $
    (12,445
    )
    
    $
    (16,855
    )
    
    $
    (3,556
    )
    
    $
    (38,091
    )Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation
    
    
    814
    
    
    
    832
    
    
    
    2,435
    
    
    
    2,410Amortization of intangible assets
    
    
    267
    
    
    
    267
    
    
    
    801
    
    
    
    801Stock-based compensation
    
    
    1,278
    
    
    
    1,687
    
    
    
    3,542
    
    
    
    4,500Deferred tax provision (benefit)
    
    
    (5,404
    )
    
    
    (14,823
    )
    
    
    2,354
    
    
    
    (14,365
    )Excess tax benefit related to exercise of stock options
    
    
    (481
    )
    
    
    (892
    )
    
    
    (1,978
    )
    
    
    (1,792
    )Amortization of investments
    
    
    (971
    )
    
    
    477
    
    
    
    (3,381
    )
    
    
    5Amortization of leasehold incentive
    
    
    (130
    )
    
    
    (131
    )
    
    
    (391
    )
    
    
    (391
    )Unrealized gain (loss) on forward foreign currency
exchange contracts
    
    
    
    
    
    
    513
    
    
    
    
    
    
    
    (188
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    152
    
    
    
    (8,943
    )
    
    
    6,078
    
    
    
    (15,082
    )Deferred product and service costs
    
    
    (1,043
    )
    
    
    (1,390
    )
    
    
    (1,347
    )
    
    
    (4,669
    )Prepaid taxes
    
    
    (8,877
    )
    
    
    5,170
    
    
    
    (8,762
    )
    
    
    (13,386
    )Prepaid expenses and other current assets
    
    
    (960
    )
    
    
    121
    
    
    
    (177
    )
    
    
    (915
    )Accounts payable
    
    
    1,027
    
    
    
    413
    
    
    
    (1,187
    )
    
    
    (1,296
    )Accrued expenses and other current liabilities
    
    
    4,535
    
    
    
    (734
    )
    
    
    2,624
    
    
    
    (2,286
    )Accrued income taxes
    
    
    (125
    )
    
    
    415
    
    
    
    (15,901
    )
    
    
    (621
    )Deferred revenue
    
    
    34,738
    
    
    
    28,522
    
    
    
    32,156
    
    
    
    71,847Net cash provided by (used in) operating activities
    
    
    12,071
    
    
    
    (5,351
    )
    
    
    13,310
    
    
    
    (13,519
    )Investing activitiesPurchases of property and equipment
    
    
    (534
    )
    
    
    (784
    )
    
    
    (1,567
    )
    
    
    (3,371
    )Purchases of investments
    
    
    (72,834
    )
    
    
    (53,793
    )
    
    
    (248,627
    )
    
    
    (192,861
    )Maturities of investments
    
    
    83,490
    
    
    
    52,500
    
    
    
    231,299
    
    
    
    198,290Proceeds from sale of investments
    
    
    
    
    
    
    
    
    
    
    16,631
    
    
    
    Decrease (increase) in other assets and restricted investments
    
    
    32
    
    
    
    (456
    )
    
    
    51
    
    
    
    (677
    )Net cash provided by (used in) by investing activities
    
    
    10,154
    
    
    
    (2,533
    )
    
    
    (2,213
    )
    
    
    1,381Financing activitiesPayments on long-term debt
    
    
    (7
    )
    
    
    
    
    
    
    (119
    )
    
    
    Payments of cash dividend
    
    
    (21
    )
    
    
    
    
    
    
    (71
    )
    
    
    (5
    )Purchase of treasury stock
    
    
    (3,547
    )
    
    
    (369
    )
    
    
    (3,547
    )
    
    
    (9,291
    )Excess tax benefit related to exercise of stock options
    
    
    481
    
    
    
    892
    
    
    
    1,978
    
    
    
    1,792Proceeds from exercise of stock options
    
    
    733
    
    
    
    870
    
    
    
    2,219
    
    
    
    2,036Net cash (used in) provided by financing activities
    
    
    (2,361
    )
    
    
    1,393
    
    
    
    460
    
    
    
    (5,648
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    144
    
    
    
    
    
    
    
    216
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    20,008
    
    
    
    (6,491
    )
    
    
    11,773
    
    
    
    (17,606
    )Cash and cash equivalents at beginning of period
    
    
    35,312
    
    
    
    19,310
    
    
    
    43,547
    
    
    
    30,425Cash and cash equivalents at end of period
    
    $
    55,320
    
    
    $
    12,819
    
    
    $
    55,320
    
    
    $
    12,819Supplemental Disclosure of Cash Flow InformationCash paid for income taxes
    
    $
    9,025
    
    
    $
    217
    
    
    $
    24,603
    
    
    $
    2,430
   5




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##### Table of Contents



AIRVANA, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
  1. Operations
 Business Description
   2. Summary of Significant Accounting Policies
   Unaudited Interim Financial Statements
   Use of Estimates
   6




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##### Table of Contents



Fiscal Year
  Cash and Cash Equivalents
  Investments and Restricted Investments
   Deferred Product and Service Cost
 Software Revenue
Recognition Inventory
 Accounting for Nonrefundable Fees and Costs
Associated With Originating or Acquiring Loans and Initial Direct Costs of Leases
  7




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##### Table of Contents



Property and Equipment
  As ofEstimated Useful
    
    
    December 28,
    
    
    September 27,Life
    
    
    2008
    
    
    2009Computer equipment and purchased software
    
    1.5  3 years
    
    $
    2,513
    
    
    $
    2,545Test and lab equipment
    
    3 years
    
    
    4,510
    
    
    
    7,869Leasehold improvements
    
    Shorter of original contractual life of the lease or 5 years
    
    
    6,546
    
    
    
    6,559Office furniture and equipment
    
    3  5 years
    
    
    856
    
    
    
    849Total property and equipment
    
    
    
    
    
    
    14,425
    
    
    
    17,822Less: Accumulated depreciation and amortization
    
    
    
    
    
    
    (9,603
    )
    
    
    (12,039
    )$
    4,822
    
    
    $
    5,783
 Revenue Recognition
 .
      8




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##### Table of Contents



9




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##### Table of Contents



Principal Agent Considerations
   Concentrations of Credit Risk and Significant Customers
       10




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##### Table of Contents



Segment and Geographic Information
 Segment Reporting
    December 28,
    
    
    September 27,2008
    
    
    2009United States
    
    $
    5,501
    
    
    $
    52,975United Kingdom
    
    
    12,178
    
    
    
    958Other foreign locations
    
    
    1,098
    
    
    
    861$
    18,777
    
    
    $
    54,794
 Stock-Based Compensation
  Comprehensive Income (Loss)
 Comprehensive Income,
 Net Income (Loss) Per Share
 Earnings
Per Share
  11




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##### Table of Contents



Income Taxes
 Income Taxes
  Fair Value of Financial Instruments
  Recently Issued Accounting Pronouncements
 Business Combinations
     Fair Value Measurements and
Disclosures
 Noncontrolling Interests in
Consolidated Financial Statements
  12




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##### Table of Contents



General Intangibles Other Than Goodwill Intangibles  Goodwill and Other
  
    
    The weighted-average period prior to the next renewal or extension
(whether explicit and implicit) for each major intangible asset class;
    
    The entitys accounting policy for the treatment of costs
incurred to renew or extend the term of a recognized
intangible asset; and
    
    For intangible asset renewed or extended during the period:
 
    
    For entities that capitalize renewal or extension costs, the costs
incurred to review or extend the asset, for each major intangible
asset class and
    
    The weighted-average period prior to the next renewal or extension
(whether explicit and implicit) for each major intangible asset class.
  Derivative and
Hedging,
 Financial Instruments
 Subsequent Events
    13




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##### Table of Contents



3. Investments
 Investments  Debt and Equity Securities,
  December 28, 2008
    
    
    September 27, 2009Fair
    
    
    
    
    
    
    FairAmortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    ValueCertificate of deposits
    
    $
    
    
    
    $
    
    
    
    $
    1,694
    
    
    $
    1,694Corporate debt securities
    
    
    86,140
    
    
    
    86,674
    
    
    
    34,651
    
    
    
    34,713Debt securities of U.S. government agencies
    
    
    111,801
    
    
    
    112,709
    
    
    
    156,162
    
    
    
    156,305$
    197,941
    
    
    $
    199,383
    
    
    $
    192,507
    
    
    $
    192,712
      4. Goodwill and Intangible Assets
  December 28, 2008Gross
    
    
    Accumulated
    
    
    NetIntangible
    
    
    Amortization
    
    
    IntangibleGoodwill
    
    $
    7,998
    
    
    $
    
    
    
    $
    7,998Developed technology
    
    
    3,340
    
    
    
    1,113
    
    
    
    2,227Customer relationships
    
    
    1,350
    
    
    
    563
    
    
    
    787Non-compete agreements
    
    
    190
    
    
    
    106
    
    
    
    84Total goodwill and intangible assets
    
    $
    12,878
    
    
    $
    1,782
    
    
    $
    11,096
  14




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##### Table of Contents



September 27, 2009Gross
    
    
    Accumulated
    
    
    NetIntangible
    
    
    Amortization
    
    
    IntangibleGoodwill
    
    $
    7,998
    
    
    $
    
    
    
    $
    7,998Developed technology
    
    
    3,340
    
    
    
    1,614
    
    
    
    1,726Customer relationships
    
    
    1,350
    
    
    
    816
    
    
    
    534Non-compete agreements
    
    
    190
    
    
    
    153
    
    
    
    37Total goodwill and intangible assets
    
    $
    12,878
    
    
    $
    2,583
    
    
    $
    10,295
  Fiscal year:Remainder of 2009
    
    $
    2672010
    
    
    1,0272011
    
    
    7802012
    
    
    223$
    2,297
 When to Test a Long-Lived Asset for
Recoverability
 Intangibles  Goodwill and Other (ASC 350-10)
 5. Fair Value Measurements
 Fair Value Measurements
and Disclosures
 
    
    Level 1  Quoted prices
in active markets for identical assets or liabilities.
    
    Level 2  Observable inputs other than quoted prices included in Level
1, such as quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and liabilities
in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data.
    
    Level 3  Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities. This includes certain pricing models,
discounted cash flow methodologies and similar techniques that use
significant unobservable inputs.
  December 28,
    
    
    September 27,2008
    
    
    2009Corporate debt securities
    
    $
    86,674
    
    
    $
    34,713Government sponsored entities
    
    
    112,709
    
    
    
    156,305$
    199,383
    
    
    $
    191,018
  15




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##### Table of Contents



Level 1
    
    
    Level 2Inputs
    
    
    Inputs
    
    
    TotalsCorporate debt securities
    
    $
    
    
    
    $
    3,099
    
    
    $
    3,099Government sponsored entities
    
    
    
    
    
    
    1,500
    
    
    
    1,500Money market mutual funds
    
    
    20,665
    
    
    
    
    
    
    
    20,665$
    20,665
    
    
    $
    4,599
    
    
    $
    25,264
   Derivatives and Hedging
  6. Derivative Instruments and Hedging Activities
     16




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September 27, 2009Local
    
    
    ApproximateCurrency
    
    
    U.S. DollarHedge Type
    
    
    Amount
    
    
    EquivalentBritish pound
    
    Sale
    
    
    475
    
    
    
    757British pound
    
    Sale
    
    
    475
    
    
    
    757British pound
    
    Sale
    
    
    500
    
    
    
    7971,450
    
    
    $
    2,311
    7. Income Taxes
 Consolidation
   17




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##### Table of Contents



8. Commitments and Contingencies
   Leases
  Fiscal year:Remainder of 2009
    
    $
    4002010
    
    
    1,5872011
    
    
    1,4912012
    
    
    4922013
    
    
    10$
    3,980
  18




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##### Table of Contents



Fiscal year:Remainder of 2009
    
    $
    2,6182010
    
    
    8972011
    
    
    213$
    3,728
 Indemnification
  9. Stock Plans
 Stock Options
 . Stock Compensation
  19




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    
    
    
    
    WeightedRange of
    
    
    Exercise
    
    
    Contractual
    
    
    Aggregate
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Price
    
    
    Term in
    
    
    Intrinsic
    
    
    Fair ValueShares
    
    
    Prices
    
    
    per Share
    
    
    Years
    
    
    Value
    
    
    per ShareOutstanding at
December 28, 2008
    
    
    12,729,531
    
    
    $
    0.0017.89
    
    
    $
    2.94
    
    
    
    6.68
    
    
    $
    37,866Granted
    
    
    2,963,822
    
    
    $
    5.225.99
    
    
    $
    5.46
    
    
    
    
    
    
    
    
    
    
    $
    5.46Exercised
    
    
    (1,293,863
    )
    
    
    0.116.44
    
    
    
    1.57
    
    
    
    
    
    
    $
    5,454Cancelled
    
    
    (408,051
    )
    
    $
    1.517.44
    
    
    
    5.36Outstanding at
September 27, 2009
    
    
    13,991,439
    
    
    $
    0.0017.89
    
    
    $
    3.53
    
    
    
    6.79
    
    
    $
    46,314Exercisable at
September 27, 2009
    
    
    7,609,158
    
    
    $
    0.0017.89
    
    
    $
    2.30
    
    
    
    5.37
    
    
    $
    34,496Options vested
or expected to vest
at September 27,
2009 (1)
    
    
    13,572,675
    
    
    $
    0.0017.89
    
    
    $
    3.47
    
    
    
    6.72
    
    
    $
    45,692Available for
grant at September
27, 2009
    
    
    14,358,782
 
 1.
    
    This represents the number of vested stock options as of September
27, 2009 plus the unvested outstanding options at September 27,
2009 expected to vest in the future, adjusted for estimated
forfeitures.   Three Months Ended
    
    
    Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    September 28,
    
    
    September 27,2008
    
    
    2009
    
    
    2008
    
    
    2009Cost of service revenue
    
    $
    70
    
    
    $
    104
    
    
    $
    181
    
    
    $
    292Research and development
    
    
    757
    
    
    
    984
    
    
    
    2,112
    
    
    
    2,620Selling and marketing
    
    
    266
    
    
    
    342
    
    
    
    763
    
    
    
    875General and administrative
    
    
    185
    
    
    
    257
    
    
    
    486
    
    
    
    713Total stock-based compensation
    
    $
    1,278
    
    
    $
    1,687
    
    
    $
    3,542
    
    
    $
    4,500
 Common Stock Repurchase Plans
    20




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##### Table of Contents



ApproximateDollar ValueTotal
    
    
    ofNumber of
    
    
    Shares ThatShares
    
    
    MayPurchased
    
    
    Yet BeTotal
    
    
    Average
    
    
    as Part of
    
    
    PurchasedNumber
    
    
    Price
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Paid per
    
    
    Announced
    
    
    AnnouncedPeriod
    
    Purchased
    
    
    Share
    
    
    Program
    
    
    ProgramThrough December 28, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,673December 29, 2008  January 25, 2009
    
    
    318,400
    
    
    $
    5.43
    
    
    
    318,400
    
    
    $
    4,944January 26, 2009  February 22, 2009
    
    
    329,400
    
    
    $
    5.34
    
    
    
    329,400
    
    
    $
    3,185February 23, 2009  March 29, 2009
    
    
    299,730
    
    
    $
    5.65
    
    
    
    299,730
    
    
    $
    1,492March 30, 2009  April 26, 2009
    
    
    206,918
    
    
    $
    5.80
    
    
    
    206,918
    
    
    $
    292April 27, 2009  May 24, 2009
    
    
    51,061
    
    
    $
    5.69
    
    
    
    51,061
    
    
    $
    Total
    
    
    1,205,509
    
    
    $
    5.54
    
    
    
    1,205,509
    
    
    $
    
  ApproximateDollar ValueTotal
    
    
    ofNumber of
    
    
    Shares ThatShares
    
    
    MayPurchased
    
    
    Yet BeTotal
    
    
    Average
    
    
    as Part of
    
    
    PurchasedNumber
    
    
    Price
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Paid per
    
    
    Announced
    
    
    AnnouncedPeriod
    
    Purchased
    
    
    Share
    
    
    Program
    
    
    Program$
    20,000December 29, 2008  January 25, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    20,000January 26, 2009  February 22, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    20,000February 23, 2009  March 29, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    20,000March 30, 2009  April 26, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    20,000April 27, 2009  May 24, 2009
    
    
    188,482
    
    
    $
    5.33
    
    
    
    188,482
    
    
    $
    18,995May 25, 2009  June 28, 2009
    
    
    215,266
    
    
    $
    5.77
    
    
    
    215,266
    
    
    $
    17,753June 29, 2009  July 26, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    17,753July 27, 2009  August 23, 2009
    
    
    61,276
    
    
    $
    6.03
    
    
    
    61,276
    
    
    $
    17,384August 24, 2009  September 27, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    17,384Total
    
    
    465,024
    
    
    $
    5.63
    
    
    
    465,024
    
    
    $
    17,384
 10. Deferred Revenue and Deferred Product and Service Costs
   21




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Current
    
    
    Long-Term
    
    
    TotalDeferred revenue related to December 2007 specified upgrade
    
    $
    7,397
    
    
    $
    
    
    
    $
    7,397Deferred revenue related to July 2008 specified upgrade
    
    
    37,775
    
    
    
    
    
    
    
    37,775Deferred revenue related to October 2008 specified upgrade
    
    
    13,663
    
    
    
    
    
    
    
    13,663Other deferred revenue
    
    
    2,475
    
    
    
    5,550
    
    
    
    8,025Total deferred revenue
    
    $
    61,310
    
    
    $
    5,550
    
    
    $
    66,860Deferred product cost related to December 2007 specified upgrade
    
    $
    79
    
    
    $
    
    
    
    $
    79Deferred product cost related to July 2008 specified upgrade
    
    
    742
    
    
    
    
    
    
    
    742Deferred product cost related to October 2008 specified upgrade
    
    
    566
    
    
    
    
    
    
    
    566Other deferred product and service costs
    
    
    526
    
    
    
    1,300
    
    
    
    1,826Total deferred product and service costs
    
    $
    1,913
    
    
    $
    1,300
    
    
    $
    3,213
  Current
    
    
    Long-Term
    
    
    TotalDeferred revenue related to July 2008 specified upgrade
    
    $
    37,775
    
    
    $
    
    
    
    $
    37,775Deferred revenue related to October 2008 specified upgrade
    
    
    47,359
    
    
    
    
    
    
    
    47,359Deferred revenue related to May 2009 specified upgrade
    
    
    37,987
    
    
    
    
    
    
    
    37,987Other deferred revenue
    
    
    1,139
    
    
    
    14,447
    
    
    
    15,586Total deferred revenue
    
    $
    124,260
    
    
    $
    14,447
    
    
    $
    138,707Deferred product cost related to July 2008 specified upgrade
    
    $
    742
    
    
    $
    
    
    
    $
    742Deferred product cost related to October 2008 specified upgrade
    
    
    1,248
    
    
    
    
    
    
    
    1,248Deferred product cost related to May 2009 specified upgrade
    
    
    720
    
    
    
    
    
    
    
    720Other deferred product and service costs
    
    
    307
    
    
    
    4,865
    
    
    
    5,172Total deferred product and service costs
    
    $
    3,017
    
    
    $
    4,865
    
    
    $
    7,882
 11. Accrued Expenses and Other Current Liabilities
  December 28,
    
    
    September 27,2008
    
    
    2009Payroll and payroll-related accruals
    
    $
    9,497
    
    
    $
    6,872Accrued rent expense
    
    
    603
    
    
    
    595Accrued legal fees
    
    
    161
    
    
    
    464Accrued audit and tax
    
    
    722
    
    
    
    401Accrued royalties
    
    
    1,644
    
    
    
    1,811Other accruals
    
    
    1,738
    
    
    
    1,931$
    14,365
    
    
    $
    12,074
  22




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12.
    
    Related Party Transactions     13. Nortel Networks Bankruptcy
        23




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
 This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they never materialize
or prove incorrect, could cause our results to differ materially from those expressed or
implied by such forward-looking statements. The statements contained in this Quarterly
Report on Form 10-Q that are not purely historical are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities
Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act. Such forward-looking statements include any expectation of earnings, revenues,
billings or other financial items; development of femtocell alliances and shipments;
statements related to our relationship with Nortel Networks, Inc., or Nortel Networks,
the effect of Nortel Networks bankruptcy or the anticipated sale of Nortel Networks
CDMA business to Ericsson; any statements of the plans, strategies and objectives of
management for future operations; factors that may affect our operating results;
statements concerning new products or services; statements related to future capital
expenditures; statements related to future economic conditions or performance; statements
as to industry trends and other matters that do not relate strictly to historical facts
or statements of assumptions underlying any of the foregoing. These statements are often
identified by the use of words such as, but not limited to, anticipate, believe,
continue, could, estimate, expect, intend, may, will, plan, target,
continue, and similar expressions or variations intended to identify forward-looking
statements. These statements are based on the beliefs and assumptions of our management
based on information currently available to management. Such forward-looking statements
are subject to risks, uncertainties and other important factors that could cause actual
results and the timing of certain events to differ materially from future results
expressed or implied by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those identified below,
and those discussed in the section titled Risk Factors included elsewhere in this
Quarterly Report on Form 10-Q and in our other filings with the SEC. Furthermore, such
forward-looking statements speak only as of the date of this report. We undertake no
obligation to update any forward-looking statements to reflect events or circumstances
after the date of such statements.
 Overview
     24




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25




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Our OEM Business Model
    Software Revenue Recognition .
 Impact of ASC 985-605, Software Revenue Recognition
   26




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##### Table of Contents




    
    Software release A is delivered and related
product and service billings are recognized as
revenue because there are no outstanding
commitments for upgrades.
 
    
    Software upgrade B is committed in Period 1 and,
therefore, product and service billings for
shipments of software release A after that point
cannot be recognized as revenue before software
upgrade B is delivered.
  27




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
    
    Before software upgrade B is delivered, software
upgrade C is committed in Period 2 and,
therefore, product and service billings for
shipments of software release A after that point
cannot be recognized before software upgrade C is
delivered.
    
    When software upgrade B is delivered in Period 3,
all deferred revenue, which consists of deferred
revenue from billings of software release A, from
the time of the commitment of software upgrade B
until the time of the commitment of software
upgrade C is recognized, subject to being able to
establish VSOE of fair value for maintenance and
support services.When software upgrade C is delivered in Period 4,
all remaining deferred revenue from the time of
the commitment of software upgrade C, which
consists of deferred revenue from billings of
software release A and software upgrade B, is
recognized because no commitments are
outstanding, subject to being able to establish
VSOE of fair value for maintenance and support
services.
  Key Elements of Financial Performance
 Revenue
  Product Revenue.
    28




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Service Revenue.
    Product and Service Billings
   29




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    September 28,
    
    
    September 27,2008
    
    
    2009
    
    
    2008
    
    
    2009(dollars in thousands)Revenue
    
    $
    8,247
    
    
    $
    2,726
    
    
    $
    74,904
    
    
    $
    16,869Deferred revenue, at end of period
    
    
    112,134
    
    
    
    138,707
    
    
    
    112,134
    
    
    
    138,707Less: deferred revenue, at beginning of period
    
    
    (77,396
    )
    
    
    (110,185
    )
    
    
    (79,978
    )
    
    
    (66,860
    )Product and service billings
    
    $
    42,985
    
    
    $
    31,248
    
    
    $
    107,060
    
    
    $
    88,716
 Deferred Revenue
     30




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Current
    
    
    Long-Term
    
    
    TotalDeferred revenue related to December 2007 specified upgrade
    
    $
    7,397
    
    
    $
    
    
    
    $
    7,397Deferred revenue related to July 2008 specified upgrade
    
    
    37,775
    
    
    
    
    
    
    
    37,775Deferred revenue related to October 2008 specified upgrade
    
    
    13,663
    
    
    
    
    
    
    
    13,663Other deferred revenue
    
    
    2,475
    
    
    
    5,550
    
    
    
    8,025Total deferred revenue
    
    $
    61,310
    
    
    $
    5,550
    
    
    $
    66,860
 Deferred revenue at September 27, 2009 consisted of the following:
 Current
    
    
    Long-Term
    
    
    TotalDeferred revenue related to July 2008 specified upgrade
    
    $
    37,775
    
    
    $
    
    
    
    $
    37,775Deferred revenue related to October 2008 specified upgrade
    
    
    47,359
    
    
    
    
    
    
    
    47,359Deferred revenue related to May 2009 specified upgrade
    
    
    37,987
    
    
    
    
    
    
    
    37,987Other deferred revenue
    
    
    1,139
    
    
    
    14,447
    
    
    
    15,586Total deferred revenue
    
    $
    124,260
    
    
    $
    14,447
    
    
    $
    138,707
  Cost of Revenue
  
    
    cost for channel card hardware provided by contract manufacturers;
    
    cost of hardware for our RNCs and network management systems;
    
    license fees for third-party software and other intellectual property used in our products; and
    
    other related overhead costs.
   Cost Related to Product and Service Billings
   31




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Deferred Product and Service Costs
 .
 Gross Profit
  Gross Profit on Billings
   Operating Expenses
 Research and Development.
 
    
    salaries, benefits and stock-based compensation related to our engineers;
    
    cost of prototypes and test equipment relating to the development of
new products and the enhancement of existing products;
    
    payments to suppliers for design and consulting services; and
    
    other related overhead costs.
  Sales and Marketing.
 
    
    salaries, benefits and stock-based compensation related to our sales, marketing and customer support personnel;
    
    commissions payable to our sales personnel;
    
    travel, lodging and other out-of-pocket expenses;
    
    marketing program expenses; and
    
    other related overhead costs.
   32




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General and Administrative.
 
    
    salaries, benefits and stock-based compensation related to
our executive, finance, legal, human resource and
administrative personnel;
    
    professional services costs; and
    
    other related overhead costs.
  Stock-Based Compensation Expense
 Stock Compensation
  Operating Income on Billings
  Interest Income, Net
  Cash Flow from Operating Activities
   Cash and Investments
   33




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Fiscal Year
  Critical Accounting Policies and Estimates
   Revenue Recognition
 .
     34




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35




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, Principal Agent Considerations ,
    Investments and Restricted Investments
   Stock-Based Compensation
 . Equity Based Payments to Non-Employees,
  36




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.
  Income Taxes
 Income Taxes
   37




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Results of Operations
 Comparison of Three Months Ended September 28, 2008 and September 27, 2009
 Revenue and Product and Service Billings
 Three Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(dollars in thousands)Revenue
    
    $
    8,247
    
    
    $
    2,726
    
    
    $
    (5,521
    )Deferred revenue, end of period
    
    
    112,134
    
    
    
    138,707Less: deferred revenue, beginning of period
    
    
    (77,396
    )
    
    
    (110,185
    )Product and service billings
    
    $
    42,985
    
    
    $
    31,248
    
    
    $
    (11,737
    )
   Cost of Revenue and Cost Related to Product and Service Billings
 Three Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(dollars in thousands)Cost of revenue
    
    $
    2,652
    
    
    $
    2,900
    
    
    $
    248Deferred product and service cost, end of period
    
    
    2,397
    
    
    
    7,882Less: deferred product and service cost, beginning of period
    
    
    (1,354
    )
    
    
    (6,492
    )Cost related to product and service billings
    
    $
    3,695
    
    
    $
    4,290
    
    
    $
    595
   Gross Profit and Gross Profit on Billings
 Three Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(In thousands)Gross profit
    
    $
    5,595
    
    
    $
    (174
    )
    
    $
    (5,769
    )Deferred revenue, at end of period
    
    
    112,134
    
    
    
    138,707Less: Deferred revenue, at beginning of period
    
    
    (77,396
    )
    
    
    (110,185
    )Deferred product and service cost, at beginning of period
    
    
    1,354
    
    
    
    6,492Less: Deferred product and service cost, at end of period
    
    
    (2,397
    )
    
    
    (7,882
    )Gross profit on Billings
    
    $
    39,290
    
    
    $
    26,958
    
    
    $
    (12,332
    )
   38




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Operating Expenses
 Three Months Ended
    
    
    Period-to-PeriodSeptember 28,
    
    
    September 27,
    
    
    Change2008
    
    
    2009
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development
    
    $
    18,859
    
    
    $
    18,443
    
    
    $
    (416
    )
    
    
    (2.2
    )%Sales and marketing
    
    
    3,809
    
    
    
    4,245
    
    
    
    436
    
    
    
    11.4
    %General and administrative
    
    
    2,281
    
    
    
    3,438
    
    
    
    1,157
    
    
    
    50.7
    %Total operating expenses
    
    $
    24,949
    
    
    $
    26,126
    
    
    $
    1,177
    
    
    
    4.7
    %
 Research and Development
 Sales and Marketing
 General and Administrative
 Operating Loss and Operating Profit on Billings
 Three Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(In thousands)Operating loss
    
    $
    (19,354
    )
    
    $
    (26,300
    )
    
    $
    (6,946
    )Deferred revenue, at end of period
    
    
    112,134
    
    
    
    138,707Less: Deferred revenue, at beginning of period
    
    
    (77,396
    )
    
    
    (110,185
    )Deferred product and service cost, at beginning of period
    
    
    1,354
    
    
    
    6,492Less: Deferred product and service cost, at end of period
    
    
    (2,397
    )
    
    
    (7,882
    )Operating profit on billings
    
    $
    14,341
    
    
    $
    832
    
    
    $
    (13,509
    )
   Interest Income and Other Income, Net.
 Income Taxes.
   39




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Comparison of Nine Months Ended September 28, 2008 and September 27, 2009
 Revenue and Product and Service Billings
 Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(dollars in thousands)Revenue
    
    $
    74,904
    
    
    $
    16,869
    
    
    $
    (58,035
    )Deferred revenue, end of period
    
    
    112,134
    
    
    
    138,707Less: deferred revenue, beginning of period
    
    
    (79,978
    )
    
    
    (66,860
    )Product and service billings
    
    $
    107,060
    
    
    $
    88,716
    
    
    $
    (18,344
    )
   Cost of Revenue and Cost Related to Product and Service Billings
 Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(dollars in thousands)Cost of revenue
    
    $
    7,892
    
    
    $
    8,849
    
    
    $
    957Deferred product and service cost, end of period
    
    
    2,397
    
    
    
    7,882Less: deferred product and service cost, beginning of period
    
    
    (1,050
    )
    
    
    (3,213
    )Cost related to product and service billings
    
    $
    9,239
    
    
    $
    13,518
    
    
    $
    4,279
    40




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##### Table of Contents



Gross Profit and Gross Profit on Billings
 Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(In thousands)Gross profit
    
    $
    67,012
    
    
    $
    8,020
    
    
    $
    (58,992
    )Deferred revenue, at end of period
    
    
    112,134
    
    
    
    138,707Less: Deferred revenue, at beginning of period
    
    
    (79,978
    )
    
    
    (66,860
    )Deferred product and service cost, at beginning of period
    
    
    1,050
    
    
    
    3,213Less: Deferred product and service cost, at end of period
    
    
    (2,397
    )
    
    
    (7,882
    )Gross profit on Billings
    
    $
    97,821
    
    
    $
    75,198
    
    
    $
    (22,623
    )
   Operating Expenses
 Nine Months Ended
    
    
    Period-to-PeriodSeptember 28,
    
    
    September 27,
    
    
    Change2008
    
    
    2009
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development
    
    $
    56,209
    
    
    $
    54,202
    
    
    $
    (2,007
    )
    
    
    -3.5
    %Sales and marketing
    
    
    11,212
    
    
    
    12,345
    
    
    
    1,133
    
    
    
    10.1
    %General and administrative
    
    
    6,675
    
    
    
    8,311
    
    
    
    1,636
    
    
    
    24.5
    %Total operating expenses
    
    $
    74,096
    
    
    $
    74,858
    
    
    $
    762
    
    
    
    1.0
    %
 Research and Development
 Sales and Marketing
 General and Administrative
 Operating Loss and Operating Profit on Billings
 Nine Months EndedSeptember 28,
    
    
    September 27,
    
    
    Period-to-Period2008
    
    
    2009
    
    
    Change(In thousands)Operating loss
    
    $
    (7,084
    )
    
    $
    (66,838
    )
    
    $
    (59,754
    )Deferred revenue, at end of period
    
    
    112,134
    
    
    
    138,707Less: Deferred revenue, at beginning of period
    
    
    (79,978
    )
    
    
    (66,860
    )Deferred product and service cost, at beginning of period
    
    
    1,050
    
    
    
    3,213Less: Deferred product and service cost, at end of period
    
    
    (2,397
    )
    
    
    (7,882
    )Operating profit on Billings
    
    $
    23,725
    
    
    $
    340
    
    
    $
    (23,385
    )
  41




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Interest Income, Net.
 Income
Taxes.
  Liquidity and Capital Resources
   As of
    
    
    As ofDecember 30,
    
    
    September 27,2008
    
    
    2009Cash and cash equivalents
    
    $
    30,425
    
    
    $
    12,819Investments, short-term
    
    
    197,941
    
    
    
    163,484Investments, long-term
    
    
    
    
    
    
    29,023Accounts receivable, net
    
    
    3,354
    
    
    
    18,436Working capital
    
    
    156,532
    
    
    
    90,289
 Nine
    
    
    NineMonths
    
    
    MonthsEnded
    
    
    EndedSeptember 28,
    
    
    September 27,2008
    
    
    2009Cash flow provided by (used in) operating activities
    
    $
    13,310
    
    
    $
    (13,519
    )Cash flow (used in) provided by investing activities
    
    
    (2,213
    )
    
    
    1,381Cash flow provided by (used in) financing activities
    
    
    460
    
    
    
    (5,468
    )
  42




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Fiscal year:Remainder of 2009
    
    $
    4002010
    
    
    1,5872011
    
    
    1,4912012
    
    
    4922013
    
    
    10$
    3,980
 
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency Exchange Risk
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Interest Rate Sensitivity
   
 Item 4.
    
    Changes in Internal Controls over Financial Reporting and Procedures
   
 PART II. Other Information
 
 Item 1A.
    
    Risk Factors
 Our business is subject to numerous risks. We caution you that the following
important factors, among others, could cause our actual results to differ materially from
those expressed in forward-looking statements made by us or on our behalf in filings with
the SEC, press releases, communications with investors and oral statements. Any or all of
our forward-looking statements in this Quarterly Report on Form 10-Q and in any other
public statements we make may turn out to be wrong. They may be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties. Many factors
mentioned in the discussion below will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future results may
vary materially from those anticipated in forward-looking statements. We undertake no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise. You are advised, however, to consult any further
disclosure we make in our reports filed with the SEC.
 Risks Relating to Our Business
 We depend on a single OEM customer that recently filed for bankruptcy protection, Nortel
Networks, for almost all of our revenue and billings, and a significant shortfall in
sales to Nortel Networks or the successor to its CDMA business would significantly harm
our business and operating results; Nortel Networks CDMA business may soon be sold.
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Because our OEM business model requires us to defer the recognition of most of our
revenue from product and service sales until we deliver specified upgrades, and in some
cases to further defer a portion of our revenue until applicable warranty periods
expire, our revenue in any period is not likely to be indicative of the level of our
sales activity in that period.
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Our revenue and billings growth may be constrained by our product concentration and lack
of revenue diversification.
  A majority of our current products are based exclusively on the CDMA2000 air interface
standard for wireless communications, and therefore any movement by existing or
prospective operator customers to a different standard could impair our business and
operating results.
   The introduction of fourth generation wireless technology could reduce spending on our
EV-DO products and therefore harm our operating results.
   The variable sales and deployment cycles for our EV-DO products are likely to cause our
quarterly billings to fluctuate materially.
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If demand for mobile broadband services does not grow as quickly as we anticipate, or
develops in a manner that we do not anticipate, our revenue and billings may decline or
fail to grow, which would adversely affect our operating results.
  Deployments of our EV-DO products by two large U.S. wireless operators account for a
substantial majority of our revenue and billings, and a decision by these operators to
reduce their use of our products would harm our business and operating results.
  If the market for our FMC products does not develop as we expect, or our FMC products do
not achieve sufficient market acceptance, our business will suffer.
  Our future sales will depend on our success in generating sales to a limited number of
OEM customers, and any failure to do so would have a significant detrimental effect on
our business.
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The unpredictability of our future results may adversely affect the trading price of our
common stock.
  
    
    the effect of our OEM business model or changes to this model on our revenue recognition;
    
    the timing of agreements or commitments with our OEM customers for new products or software upgrades;
    
    the timing of our delivery of software upgrades;
    
    the timing of our delivery of maintenance and support sold with products;
    
    the ability of our customers to pay amounts owed to us as they
become due (or in the case of Nortel Networks, when they would
have become due, but for their filing for bankruptcy);
    
    the unpredictable deployment and purchasing patterns of operators;
    
    fluctuations in demand for products of our OEM customers that are
sold together with our products, and the timing and size of orders
for such products of our OEM customers;
    
    new product introductions and enhancements by our competitors and us;
    
    the timing and acceptance of software upgrades sold by our OEM customers to their installed base of operators;
    
    changes in our pricing policies or the pricing policies of our competitors;
    
    our ability to develop, introduce and deploy new products and product
upgrades that meet customer requirements in a timely manner;
    
    adjustments in the reporting of royalties and product sales by our OEM
customers resulting from reviews and audits of such reports;
    
    our and our OEM customers ability to obtain sufficient supplies of limited source components or materials;
    
    our and our OEM customers ability to attain and maintain production
volumes and quality levels for our products; and
    
    general economic conditions, as well as those specific to the
communications, networking, wireless and related industries.
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We may not be able to achieve profitability for any period in the future or sustain cash
flow from operating activities.
   Claims by other parties that we infringe their proprietary technology could force us to
redesign our products or to incur significant costs.
  
    
    stop selling, incorporating or using our products that use the challenged intellectual property;
    
    obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not
be available on reasonable terms, or at all;
    
    redesign those products that use any allegedly infringing technology, which may be costly and time-consuming; or
    
    refund deposits and other amounts received for allegedly infringing technology or products.
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If we are not successful in obtaining from third parties licenses to intellectual
property that are required for CDMA and UMTS femtocell products that we are developing,
we may not be able to expand our business as expected and our business may suffer.
  If we do not timely deliver new and enhanced products that respond to customer
requirements and technological changes, operators may not buy our products and our
revenue and product and service billings may decline significantly.
    Our revenue and product and service billings growth will be limited if our OEM customers
are unable to continue to sell our products to large wireless operators or if we have to
discount our products to support the selling efforts of our OEM customers.
  We depend on sole sources for certain components of our products and our business would
be harmed if supplies from our sole sources were disrupted.
  The market for network infrastructure products is highly competitive and continually
evolving, and if we are not able to compete effectively, we may not be able to continue
to expand our business as expected and our business may suffer.
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Our agreement with our largest OEM customer, Nortel Networks, provides Nortel Networks
with an option to license some of our intellectual property to develop internally
products competitive with the products it currently purchases from us.
  Adverse conditions in the global economy and disruption of financial and credit markets
could negatively affect our customers, and therefore our performance.
    Because our business depends on the continued strength of the communications industry,
our operating results will suffer if that industry experiences an economic downturn.
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The success of our business could be jeopardized if we are unable to protect our
intellectual property adequately.
  We may engage in future acquisitions that could disrupt our business, cause dilution to
our stockholders and harm our financial condition and operating results.
  The outcome of an ongoing IRS examination of our tax returns, future interpretations of
existing accounting standards or the application of new accounting standards could
adversely affect our cash balance and operating results.
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The loss of key personnel or an inability to attract and retain additional personnel may
impair our ability to grow our business.
   We have incurred, and will continue to incur, significant increased costs as a result of
operating as a public company as compared with our history as a private company, and our
management is required to devote substantial time to public company compliance
initiatives. If we are unable to absorb these increased costs or maintain management
focus on development and sales of our product offerings and services, we may not be able
to achieve our business plan.
  We are exposed to potential risks and will continue to incur significant costs as a
result of the internal control testing and evaluation process mandated by Section 404 of
the Sarbanes-Oxley Act of 2002.
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If we are unable to manage our growth and expand our operations successfully, our
business and operating results will be harmed and our reputation may be damaged.
   We may need additional capital in the future, which may not be available to us, and if
it is available, may dilute our existing stockholders ownership of our common stock.
  
    
    fund ongoing operations;
    
    take advantage of opportunities, including more rapid
expansion of our business or the acquisition of
complementary products, technologies or businesses;
    
    develop new products; or
    
    respond to competitive pressures.
  Our ability to sell our products depends in part on the quality of our support and
services offerings, and our failure to offer high quality support and services would
have a material adverse effect on our sales and operating results.
  Our products are highly technical and may contain undetected software or hardware
errors, which could cause harm to our reputation and adversely affect our business.
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Our international operations subject us to additional risks that can adversely affect
our operating results.
  
    
    the difficulty of managing and staffing foreign offices and the
increased travel, infrastructure and legal compliance costs associated
with multiple international locations;
    
    difficulties in enforcing contracts, collecting accounts receivable and longer
payment cycles, especially in emerging markets;
    
    the need to localize our products and licensing programs for international customers;
    
    tariffs and trade barriers and other regulatory or contractual
limitations on our ability to sell or develop our products in certain
foreign markets;
    
    increased exposure to foreign currency exchange rate risk; and
    
    reduced protection for intellectual property rights in some countries.
  If wireless devices pose safety risks, we may be subject to new regulations, and demand
for our products and those of our licensees and customers may decrease.
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Risks Relating to Ownership of Our Common Stock
 The market price of our common stock may be volatile.
  
    
    fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to
be similar to us;
    
    fluctuations in our revenue as a result of our revenue recognition policy, even during periods of significant
sales activity;
    
    changes in estimates of our financial results or recommendations by securities analysts;
    
    failure of any of our products to achieve or maintain market acceptance;
    
    any adverse change in our relationship with Nortel Networks, including as a result of Nortel Networks
bankruptcy filing;
    
    any adverse resolution of the IRS examination of the our U.S. federal income tax returns for the tax years
ended December 31, 2006 and December 30, 2007;
    
    changes in market valuations of similar companies;
    
    success of competitive products;
    
    the progress of the sale of Nortel Networks CDMA business, whether to Ericsson or another purchaser;
    
    changes in our capital structure, such as future issuances of securities or the incurrence of debt;
    
    announcements by us or our competitors of significant products, contracts, acquisitions or strategic alliances;
    
    regulatory developments in the United States, foreign countries or both;
    
    litigation involving our company, our general industry or both;
    
    additions or departures of key personnel;
    
    general perception of the future of CDMA technology;
    
    investors general perception of us; and
    
    changes in general economic, industry and market conditions.
  If equity research analysts do not publish research or reports about our business or if
they issue unfavorable commentary or downgrade our common stock, the price of our common
stock could decline.
  A significant portion of our total outstanding shares may be sold into the public market
in the near future, which could cause the market price of our common stock to drop
significantly, even if our business is doing well.
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Our directors and management will exercise significant control over our company.
  Provisions in our certificate of incorporation, our by-laws or Delaware law might
discourage, delay or prevent a change in control of our company or changes in our
management and, therefore, depress the trading price of our common stock.
  
    
    limitations on the removal of directors;
    
    a classified board of directors so that not all members of our board are elected at one time;
    
    advance notice requirements for stockholder proposals and nominations;
    
    the inability of stockholders to act by written consent or to call special meetings;
    
    the ability of our board of directors to make, alter or repeal our by-laws; and
    
    the ability of our board of directors to designate the terms of and
issue new series of preferred stock without stockholder approval,
which could be used to institute a rights plan, or a poison pill, that
would work to dilute the stock ownership of a potential hostile
acquirer, likely preventing acquisitions that have not been approved
by our board of directors.
   We do not currently intend to pay dividends on our common stock and, consequently, the
ability to achieve a return on an investment in our common stock will depend on
appreciation in the price of our common stock.
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Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  ApproximateDollar ValueTotal
    
    
    ofNumber of
    
    
    Shares ThatShares
    
    
    MayPurchased
    
    
    Yet BeTotal
    
    
    Average
    
    
    as Part of
    
    
    PurchasedNumber
    
    
    Price
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Paid per
    
    
    Announced
    
    
    AnnouncedPeriod
    
    Purchased
    
    
    Share
    
    
    Program
    
    
    ProgramThrough June 28, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,753June 29, 2009  July 26, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    17,753July 27, 2009  August 23, 2009
    
    
    61,267
    
    
    $
    6.03
    
    
    
    61,267
    
    
    $
    17,384August 24, 2009  September 27, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    17,384Total
    
    
    61,267
    (1)
    
    $
    6.03
    
    
    
    61,267
    
    
    $
    17,384
 (1)
    
    We repurchased 61,267 shares of our common stock in the third quarter of fiscal 2009 pursuant to our second share
repurchase program, which we publicly announced in February 2009. Our board of directors approved the repurchase by
us of shares of our common stock having a value of up to $20.0 million in the aggregate pursuant to the second stock
repurchase program.  59




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Item 6.
    
    Exhibits
 31.1
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, Rule 13a-14(a)/15d- 14(a), by Chief Executive Officer.31.2
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, Rule 13a-14(a)/15d-14(a), by Chief Financial Officer.32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Chief Executive Officer.32.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Chief Financial Officer.
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SIGNATURES
  AIRVANA, INC.By:
    
    /s/ Randall S. BattatRandall S. BattatDate: November 4, 2009
    
    
    
    President and Chief Executive Officer(Principal Executive Officer)By:
    
    /s/ Jeffrey D. GliddenJeffrey D. GliddenDate: November 4, 2009
    
    
    
    Vice President, Chief Financial Officer(Principal Financial Officer)
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EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, Rule 13a-14(a)/15d- 14(a), by Chief Executive
Officer.31.2
    
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, Rule 13a-14(a)/15d-14(a), by Chief Financial
Officer.32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Executive Officer.32.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, by Chief Financial Officer.
  62