##### 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 June 28, 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



AIRVANA, INC.
 QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED June 28, 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 June 28, 2009
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 29, 2008 and June 28, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three and Six Months
Ended June 29, 2008 and June 28, 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    50Item 4. Controls and Procedures
    
    50PART II. OTHER INFORMATION
    
    51Item 1A. Risk Factors
    
    51Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    67Item 4. Submission of Matters to a Vote of Security Holders
    
    67Item 6. Exhibits
    
    68SIGNATURES
    
    69Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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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,
    
    
    June 28,2008
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,425
    
    
    $
    19,310Investments
    
    
    197,941
    
    
    
    176,310Accounts receivable
    
    
    3,354
    
    
    
    9,493Deferred product cost, current
    
    
    1,913
    
    
    
    2,618Prepaid taxes
    
    
    
    
    
    
    15,913Deferred tax assets, current, net
    
    
    2,168
    
    
    
    2,167Prepaid expenses and other current assets
    
    
    2,758
    
    
    
    4,495Total current assets
    
    
    238,559
    
    
    
    230,306Property and equipment
    
    
    14,425
    
    
    
    17,033Less: accumulated depreciation and amortization
    
    
    9,603
    
    
    
    11,2024,822
    
    
    
    5,831Investments, long-term
    
    
    
    
    
    
    15,381Prepaid tax, long-term
    
    
    
    
    
    
    3,543Deferred service cost
    
    
    1,300
    
    
    
    3,874Deferred tax assets, long term, net
    
    
    956
    
    
    
    499Restricted investments
    
    
    193
    
    
    
    403Goodwill and intangible assets, net
    
    
    11,096
    
    
    
    10,562Other assets
    
    
    410
    
    
    
    421Total assets
    
    $
    257,336
    
    
    $
    270,820Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    4,455
    
    
    $
    2,746Accrued expenses and other current liabilities
    
    
    14,365
    
    
    
    12,808Accrued income taxes
    
    
    1,897
    
    
    
    614Deferred revenue, current
    
    
    61,310
    
    
    
    99,500Total current liabilities
    
    
    82,027
    
    
    
    115,668Deferred revenue, long-term
    
    
    5,550
    
    
    
    10,685Accrued income taxes, long-term
    
    
    5,703
    
    
    
    5,950Other liabilities
    
    
    1,174
    
    
    
    914Total long-term liabilities
    
    
    12,427
    
    
    
    17,549Commitments and Contingencies (Note 8)
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.001 par
value per share: 10,000,000
shares authorized, no shares issued
or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value per
share: 350,000,000 shares
authorized, 62,931,171 and
62,145,236 shares issued and outstanding at
December 28, 2008 and June 28, 2009,
respectively (Note 9)
    
    
    63
    
    
    
    62Additional paid-in capital
    
    
    186,824
    
    
    
    182,782Accumulated deficit
    
    
    (24,005
    )
    
    
    (45,241
    )Total stockholders equity
    
    
    162,882
    
    
    
    137,603Total liabilities and stockholders equity
    
    $
    257,336
    
    
    $
    270,820
   3




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##### Table of Contents



AIRVANA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
  Three Months Ended
    
    
    Six Months EndedJune 29,
    
    
    June 28,
    
    
    June 29,
    
    
    June 28,2008
    
    
    2009
    
    
    2008
    
    
    2009Revenue:Product
    
    $
    54,784
    
    
    $
    1,717
    
    
    $
    60,317
    
    
    $
    8,276Service
    
    
    4,235
    
    
    
    3,163
    
    
    
    6,340
    
    
    
    5,867Total revenue
    
    
    59,019
    
    
    
    4,880
    
    
    
    66,657
    
    
    
    14,143Cost of revenue:Product
    
    
    1,314
    
    
    
    524
    
    
    
    1,434
    
    
    
    868Service
    
    
    2,013
    
    
    
    2,878
    
    
    
    3,806
    
    
    
    5,081Total cost of revenue
    
    
    3,327
    
    
    
    3,402
    
    
    
    5,240
    
    
    
    5,949Gross profit
    
    
    55,692
    
    
    
    1,478
    
    
    
    61,417
    
    
    
    8,194Operating expenses:Research and development
    
    
    18,091
    
    
    
    18,092
    
    
    
    37,350
    
    
    
    35,759Selling and marketing
    
    
    3,825
    
    
    
    4,324
    
    
    
    7,403
    
    
    
    8,100General and administrative
    
    
    2,321
    
    
    
    2,370
    
    
    
    4,394
    
    
    
    4,873Total operating expenses
    
    
    24,237
    
    
    
    24,786
    
    
    
    49,147
    
    
    
    48,732Operating income (loss)
    
    
    31,455
    
    
    
    (23,308
    )
    
    
    12,270
    
    
    
    (40,538
    )Interest and other income, net
    
    
    1,792
    
    
    
    1,542
    
    
    
    4,377
    
    
    
    2,666Income (loss) before income tax expense (benefit)
    
    
    33,247
    
    
    
    (21,766
    )
    
    
    16,647
    
    
    
    (37,872
    )Income tax expense (benefit)
    
    
    12,684
    
    
    
    (7,733
    )
    
    
    7,758
    
    
    
    (16,636
    )Net income (loss)
    
    $
    20,563
    
    
    $
    (14,033
    )
    
    $
    8,889
    
    
    $
    (21,236
    )Net income (loss) per share:Basic
    
    $
    0.32
    
    
    $
    (0.23
    )
    
    $
    0.14
    
    
    $
    (0.34
    )Diluted
    
    $
    0.29
    
    
    $
    (0.23
    )
    
    $
    0.13
    
    
    $
    (0.34
    )Weighted average common shares outstanding:Basic
    
    
    64,601
    
    
    
    62,230
    
    
    
    64,248
    
    
    
    62,455Diluted
    
    
    70,763
    
    
    
    62,230
    
    
    
    70,398
    
    
    
    62,455
   4




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AIRVANA, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
  Three Months Ended
    
    
    Six Months EndedJune 29,
    
    
    June 28,
    
    
    June 29,
    
    
    June 28,2008
    
    
    2009
    
    
    2008
    
    
    2009Operating activitiesNet income (loss)
    
    $
    20,563
    
    
    $
    (14,033
    )
    
    $
    8,889
    
    
    $
    (21,236
    )Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation
    
    
    814
    
    
    
    806
    
    
    
    1,621
    
    
    
    1,578Amortization of intangible assets
    
    
    267
    
    
    
    267
    
    
    
    534
    
    
    
    534Stock-based compensation
    
    
    1,179
    
    
    
    1,442
    
    
    
    2,264
    
    
    
    2,813Deferred tax provision (benefit)
    
    
    12,684
    
    
    
    (417
    )
    
    
    7,758
    
    
    
    458Excess tax benefit related to exercise of stock
options
    
    
    (1,497
    )
    
    
    (504
    )
    
    
    (1,497
    )
    
    
    (900
    )Amortization of investments
    
    
    (1,149
    )
    
    
    49
    
    
    
    (2,410
    )
    
    
    (472
    )Amortization of leasehold incentive
    
    
    (131
    )
    
    
    (130
    )
    
    
    (261
    )
    
    
    (260
    )Unrealized gain on forward foreign currency
exchange contracts
    
    
    
    
    
    
    (701
    )
    
    
    
    
    
    
    (717
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    3,098
    
    
    
    3,612
    
    
    
    6,230
    
    
    
    (6,139
    )Deferred product and service costs
    
    
    297
    
    
    
    (1,798
    )
    
    
    (304
    )
    
    
    (3,279
    )Prepaid taxes
    
    
    618
    
    
    
    (7,936
    )
    
    
    115
    
    
    
    (18,556
    )Prepaid expenses and other current assets
    
    
    379
    
    
    
    (1,094
    )
    
    
    783
    
    
    
    (1,020
    )Accounts payable
    
    
    (1,647
    )
    
    
    511
    
    
    
    (2,214
    )
    
    
    (1,709
    )Accrued expenses and other current liabilities
    
    
    1,651
    
    
    
    2,736
    
    
    
    (1,911
    )
    
    
    (1,552
    )Accrued income taxes
    
    
    (701
    )
    
    
    296
    
    
    
    (15,776
    )
    
    
    (1,036
    )Deferred revenue
    
    
    (32,740
    )
    
    
    33,061
    
    
    
    (2,582
    )
    
    
    43,325Net cash provided by (used in) operating activities
    
    
    3,685
    
    
    
    16,167
    
    
    
    1,239
    
    
    
    (8,168
    )Investing activitiesPurchases of property and equipment
    
    
    (455
    )
    
    
    (811
    )
    
    
    (1,033
    )
    
    
    (2,587
    )Purchases of investments
    
    
    (68,803
    )
    
    
    (77,163
    )
    
    
    (175,793
    )
    
    
    (139,068
    )Maturities of investments
    
    
    74,504
    
    
    
    68,065
    
    
    
    147,809
    
    
    
    145,790Proceeds from sale of investments
    
    
    
    
    
    
    
    
    
    
    16,631
    
    
    
    Decrease (increase) in other assets
    
    
    16
    
    
    
    (5
    )
    
    
    19
    
    
    
    (221
    )Net cash provided by (used in) by investing activities
    
    
    5,262
    
    
    
    (9,914
    )
    
    
    (12,367
    )
    
    
    3,914Financing activitiesPayments on long-term debt
    
    
    (94
    )
    
    
    
    
    
    
    (112
    )
    
    
    Payments of cash dividend
    
    
    (5
    )
    
    
    
    
    
    
    (50
    )
    
    
    (5
    )Purchase of treasury stock
    
    
    
    
    
    
    (3,740
    )
    
    
    
    
    
    
    (8,922
    )Excess tax benefit related to exercise of stock options
    
    
    1,497
    
    
    
    504
    
    
    
    1,497
    
    
    
    900Proceeds from exercise of stock options
    
    
    670
    
    
    
    541
    
    
    
    1,486
    
    
    
    1,166Net cash provided by (used in) financing activities
    
    
    2,068
    
    
    
    (2,695
    )
    
    
    2,821
    
    
    
    (6,861
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    59
    
    
    
    
    
    
    
    72
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    11,074
    
    
    
    3,558
    
    
    
    (8,235
    )
    
    
    (11,115
    )Cash and cash equivalents at beginning of period
    
    
    24,238
    
    
    
    15,752
    
    
    
    43,547
    
    
    
    30,425Cash and cash equivalents at end of period
    
    $
    35,312
    
    
    $
    19,310
    
    
    $
    35,312
    
    
    $
    19,310Supplemental Disclosure of Cash Flow InformationCash paid for income taxes
    
    $
    78
    
    
    $
    38
    
    
    $
    15,578
    
    
    $
    2,213
   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
    6




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Use of Estimates
    Fiscal Year
  Cash and Cash Equivalents
  Investments and Restricted Investments
   Deferred Product and Service Cost
 Software Revenue Recognition Restatement and Revision of
Accounting Research Bulletins Inventory Cost
  7




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Accounting
for Nonrefundable Fees and Costs Associated With Originating or Acquiring Loans and Initial Direct
Costs of Leases
 Property and Equipment
  As ofDecember 28,
    
    
    June 28,Estimated Useful Life
    
    2008
    
    
    2009Computer equipment and purchased software
    
    1.5  3 years
    
    $
    2,513
    
    
    $
    2,521Test and lab equipment
    
    3 years
    
    
    4,510
    
    
    
    7,104Leasehold 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
    
    
    
    17,033Less: Accumulated depreciation and amortization
    
    
    
    
    
    
    (9,603
    )
    
    
    (11,202
    )$
    4,822
    
    
    $
    5,831
 Revenue Recognition
 Software Revenue Recognition.
   8




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9




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10




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Accounting for
Shipping and Handling Fees Income Statement
Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred
    Concentrations of Credit Risk and Significant Customers
       11




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Segment and Geographic Information
 Disclosures About Segments of an Enterprise and Related Information
    December 28, 2008
    
    
    June 28, 2009United States
    
    $
    5,501
    
    
    $
    38,473United Kingdom
    
    
    12,178
    
    
    
    1,110Other foreign locations
    
    
    1,098
    
    
    
    931$
    18,777
    
    
    $
    40,514
 Stock-Based Compensation
  Comprehensive Income (Loss)
 Reporting
Comprehensive Income,
 Net Income Per Share
 Earnings Per
Share Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
  12




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Income Taxes
 Accounting for Income
Taxes
 Accounting for Uncertainty in Income Taxes
 Fair Value of Financial Instruments
  Recently Issued Accounting Pronouncements
 Business Combinations
      13




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Fair Value Measurements
 Noncontrolling Interests in Consolidated
Financial Statements
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
  
    
    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.
  Disclosures about
Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 , Accounting for Derivative Instruments and Hedging Activities
  14




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Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting,
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles
 3. Investments
 Accounting for Certain Investments in Debt and Equity
Securities,
  December 28, 2008
    
    
    June 28, 2009Amortized
    
    
    Fair Market
    
    
    Amortized
    
    
    Fair MarketCost
    
    
    Value
    
    
    Cost
    
    
    ValueCorporate debt securities
    
    $
    86,140
    
    
    $
    86,674
    
    
    $
    47,943
    
    
    $
    48,115Debt securities of U.S. government agencies
    
    
    111,801
    
    
    
    112,709
    
    
    
    143,748
    
    
    
    143,972$
    197,941
    
    
    $
    199,383
    
    
    $
    191,691
    
    
    $
    192,087
     15




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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
 June 28, 2009Gross
    
    
    Accumulated
    
    
    NetIntangible
    
    
    Amortization
    
    
    IntangibleGoodwill
    
    $
    7,998
    
    
    $
    
    
    
    $
    7,998Developed technology
    
    
    3,340
    
    
    
    1,448
    
    
    
    1,892Customer relationships
    
    
    1,350
    
    
    
    731
    
    
    
    619Non-compete agreements
    
    
    190
    
    
    
    137
    
    
    
    53Total goodwill and intangible assets
    
    $
    12,878
    
    
    $
    2,315
    
    
    $
    10,562
  Fiscal year:Remainder of 2009
    
    $
    5342010
    
    
    1,0262011
    
    
    7802012
    
    
    223$
    2,563
 Accounting for the Impairment or Disposal of
Long-Lived Assets
   16




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5. Fair Value Measurements
  
    
    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,
    
    
    June 28,2008
    
    
    2009Corporate debt securities
    
    $
    86,674
    
    
    $
    48,115Government sponsored entities
    
    
    112,709
    
    
    
    143,972$
    199,383
    
    
    $
    192,087
  Level 1 Inputs
    
    
    Level 2 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
   Accounting for Derivative
Instruments and Hedging Activities
  17




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6. Derivative Instruments and Hedging Activities
     June 28, 2009ApproximateLocal Currency
    
    
    U.S. DollarHedge Type
    
    Amount
    
    
    EquivalentBritish pound
    
    Sale
    
    
    500
    
    
    $
    826British pound
    
    Sale
    
    
    475
    
    
    
    785British pound
    
    Sale
    
    
    475
    
    
    
    785British pound
    
    Sale
    
    
    475
    
    
    
    785British pound
    
    Sale
    
    
    475
    
    
    
    785British pound
    
    Sale
    
    
    475
    
    
    
    785British pound
    
    Sale
    
    
    500
    
    
    
    8263,375
    
    
    $
    5,577
    18




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7. Income Taxes
 Consolidated Financial Statements
       19




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8. Commitments and Contingencies
   Accounting for Leases
  Fiscal year:Remainder of 2009
    
    $
    7812010
    
    
    1,5142011
    
    
    1,4952012
    
    
    4922013
    
    
    10$
    4,292
   Fiscal year:Remainder of 2009
    
    $
    3,7432010
    
    
    1222011
    
    
    100$
    3,965
  20




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Indemnification
  9. Stock Plans
 Stock Options
 Share-Based Payments and SFAS 123(R).
  WeightedWeighted
    
    
    Average
    
    
    
    
    
    
    WeightedAverage
    
    
    Remaining
    
    
    
    
    
    
    AverageNumber of
    
    
    Range of
    
    
    Exercise Price
    
    
    Contractual
    
    
    Aggregate
    
    
    Fair ValueShares
    
    
    Exercise Prices
    
    
    per Share
    
    
    Term in Years
    
    
    Intrinsic Value
    
    
    per ShareOutstanding at December 28,
2008
    
    
    12,729,531
    
    
    $
    0.0017.89
    
    
    $
    2.94
    
    
    
    6.68
    
    
    $
    37,866Granted
    
    
    2,588,322
    
    
    $
    5.225.93
    
    
    $
    5.38
    
    
    
    
    
    
    
    
    
    
    $
    5.38Exercised
    
    
    (823,322
    )
    
    
    0.115.71
    
    
    
    1.42
    
    
    
    
    
    
    $
    3,360Cancelled
    
    
    (197,276
    )
    
    $
    1.517.44
    
    
    
    5.46Outstanding at June 28, 2009
    
    
    14,297,255
    
    
    $
    0.0017.89
    
    
    $
    3.43
    
    
    
    6.92
    
    
    $
    39,932Exercisable at June 28, 2009
    
    
    7,603,985
    
    
    $
    0.0017.89
    
    
    $
    2.17
    
    
    
    5.47
    
    
    $
    30,702Options vested or expected
to vest at June 28, 2009
(1)
    
    
    13,822,575
    
    
    $
    0.0017.89
    
    
    $
    3.37
    
    
    
    6.84
    
    
    $
    39,469Available for grant at June
28, 2009
    
    
    14,532,955
 
 1.
    
    This represents the number of vested stock options as of June 28, 2009 plus the unvested
outstanding options at June 28, 2009 expected to vest in the future, adjusted for estimated
forfeitures.  21




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 29,
    
    
    June 28,
    
    
    June 29,
    
    
    June 28,2008
    
    
    2009
    
    
    2008
    
    
    2009Cost of service revenue
    
    $
    49
    
    
    $
    105
    
    
    $
    111
    
    
    $
    188Research and development
    
    
    684
    
    
    
    810
    
    
    
    1,355
    
    
    
    1,635Selling and marketing
    
    
    274
    
    
    
    284
    
    
    
    497
    
    
    
    534General and administrative
    
    
    172
    
    
    
    243
    
    
    
    301
    
    
    
    456Total stock-based compensation
    
    $
    1,179
    
    
    $
    1,442
    
    
    $
    2,264
    
    
    $
    2,813
 Common Stock Repurchase Plans
    ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares That Mayas Part of
    
    
    Yet Be PurchasedTotal Number
    
    
    Average 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
    
    
    $
    
  22




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##### Table of Contents



ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares That Mayas Part of
    
    
    Yet Be PurchasedTotal Number
    
    
    Average 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
    
    
    $
    17,753Total
    
    
    403,748
    
    
    $
    5.57
    
    
    
    403,748
    
    
    $
    17,753
 10. Deferred Revenue and Deferred Product and Service Costs
     23




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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
    
    
    47,192
    
    
    
    
    
    
    
    47,192Deferred revenue related to May 2009 specified upgrade
    
    
    13,327
    
    
    
    
    
    
    
    13,327Other deferred revenue
    
    
    1,206
    
    
    
    10,685
    
    
    
    11,891Total deferred revenue
    
    $
    99,500
    
    
    $
    10,685
    
    
    $
    110,185Deferred 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
    
    
    228
    
    
    
    
    
    
    
    228Other deferred product and service costs
    
    
    400
    
    
    
    3,874
    
    
    
    4,274Total deferred product and service costs
    
    $
    2,618
    
    
    $
    3,874
    
    
    $
    6,492
 11. Accrued Expenses and Other Current Liabilities
  December 28,
    
    
    June 28,2008
    
    
    2009Payroll and payroll-related accruals
    
    $
    9,497
    
    
    $
    8,080Accrued rent expense
    
    
    603
    
    
    
    598Accrued legal fees
    
    
    161
    
    
    
    181Accrued audit and tax
    
    
    722
    
    
    
    378Accrued royalties
    
    
    1,644
    
    
    
    1,857Other accruals
    
    
    1,738
    
    
    
    1,714$
    14,365
    
    
    $
    12,808
 12. Related Party Transactions
   24




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13. Nortel Networks Bankruptcy
        25




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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, and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include any expectation of earnings, revenues, billings or other
financial items; development of femtocell alliances and shipments; statements related to 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
     26




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27




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##### Table of Contents



Our OEM Business Model
   28




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Software Revenue Recognition.
 Impact of SOP No. 97-2, Software Revenue Recognition
      29




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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.
    
    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.  30




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Key Elements of Financial Performance
 Revenue
  Product Revenue.
     31




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Service Revenue.
     32




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Product and Service Billings
      Three Months Ended
    
    
    Six Months EndedJune 29, 2008
    
    
    June 28, 2009
    
    
    June 29, 2008
    
    
    June 28, 2009(dollars in thousands)Revenue
    
    $
    59,019
    
    
    $
    4,880
    
    
    $
    66,657
    
    
    $
    14,143Deferred revenue, at end of period
    
    
    77,396
    
    
    
    110,185
    
    
    
    77,396
    
    
    
    110,185Less: deferred revenue, at beginning of period
    
    
    (110,136
    )
    
    
    (77,124
    )
    
    
    (79,978
    )
    
    
    (66,860
    )Product and service billings
    
    $
    26,279
    
    
    $
    37,941
    
    
    $
    64,075
    
    
    $
    57,468
 Deferred Revenue
   33




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##### Table of Contents



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
  Deferred Product and Service Costs
 Accounting for Nonrefundable Fees and Costs Associated With Originating
or Acquiring Loans and Initial Direct Costs of Leases.
 Gross Profit
   34




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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.
  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.
  35




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##### Table of Contents



Stock-Based Compensation Expense
 Share-Based Payment
  Operating Income on Billings
  Interest Income, Net
  Cash Flow from Operating Activities
   Cash and Investments
   36




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##### Table of Contents



Accounting for Derivative Instruments and Hedging
Activities,
  Fiscal Year
  Critical Accounting Policies and Estimates
   Revenue Recognition
 Software Revenue Recognition.
  37




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38




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39




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Accounting for Shipping and Handling Fees, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses
Incurred
    Investments and Restricted Investments
   Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for Stock-Based
Compensation Transition and Disclosure an Amendment of FASB Statement No. 123. Accounting for Equity Instruments that are Issued
to Other than Employees for Acquiring, or in Conjunction with Selling, Goods and Services,
 Share-Based Payment
  40




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Share-Based Payments and SFAS 123(R).
  Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in Income
Taxes
  41




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Results of Operations
 Comparison of Three Months Ended June 29, 2008 and June 28, 2009
 Revenue and Product and Service Billings
 Three Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(dollars in thousands)Revenue
    
    $
    59,019
    
    
    $
    4,880
    
    
    $
    (54,139
    )Deferred revenue, end of period
    
    
    77,396
    
    
    
    110,185Less: deferred revenue, beginning of period
    
    
    (110,136
    )
    
    
    (77,124
    )Product and service billings
    
    $
    26,279
    
    
    $
    37,941
    
    
    $
    11,662
   Cost of Revenue and Cost Related to Product and Service Billings
 Three Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(dollars in thousands)Cost of revenue
    
    $
    3,327
    
    
    $
    3,402
    
    
    $
    75Deferred product and service cost, end of
period
    
    
    1,354
    
    
    
    6,492Less: deferred product and service cost,
beginning of period
    
    
    (1,651
    )
    
    
    (4,694
    )Cost related to product and service billings
    
    $
    3,030
    
    
    $
    5,200
    
    
    $
    2,170
    42




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Gross Profit and Gross Profit on Billings
 Three Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(In thousands)Gross profit
    
    $
    55,692
    
    
    $
    1,478
    
    
    $
    (54,214
    )Deferred revenue, at end of period
    
    
    77,396
    
    
    
    110,185Less: Deferred revenue, at beginning of period
    
    
    (110,136
    )
    
    
    (77,124
    )Deferred product and service cost, at
beginning of period
    
    
    1,651
    
    
    
    4,694Less: Deferred product and service cost, at
end of period
    
    
    (1,354
    )
    
    
    (6,492
    )Gross profit on Billings
    
    $
    23,249
    
    
    $
    32,741
    
    
    $
    9,492
   Operating Expenses
 Period-to-PeriodThree Months Ended
    
    
    ChangeJune 29, 2008
    
    
    June 28, 2009
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development
    
    $
    18,091
    
    
    $
    18,092
    
    
    $
    1
    
    
    
    0.0
    %Sales and marketing
    
    
    3,825
    
    
    
    4,324
    
    
    
    499
    
    
    
    13.0
    %General and administrative
    
    
    2,321
    
    
    
    2,370
    
    
    
    49
    
    
    
    2.0
    %Total operating expenses
    
    $
    24,237
    
    
    $
    24,786
    
    
    $
    549
    
    
    
    2.3
    %
 Research and Development
 Sales and Marketing
 General and Administrative
  43




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Operating Profit (Loss) and Operating (Loss) Profit on Billings
 Three Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(In thousands)Operating profit (loss)
    
    $
    31,455
    
    
    $
    (23,308
    )
    
    $
    (54,763
    )Deferred revenue, at end of period
    
    
    77,396
    
    
    
    110,185Less: Deferred revenue, at beginning of period
    
    
    (110,136
    )
    
    
    (77,124
    )Deferred product and service cost, at
beginning of period
    
    
    1,651
    
    
    
    4,694Less: Deferred product and service cost, at
end of period
    
    
    (1,354
    )
    
    
    (6,492
    )Operating (loss) profit on billings
    
    $
    (988
    )
    
    $
    7,955
    
    
    $
    8,943
   Interest Income, Net.
 Income Taxes.
  Comparison of Six Months Ended June 29, 2008 and June 28, 2009
 Revenue and Product and Service Billings
 Six Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(dollars in thousands)Revenue
    
    $
    66,657
    
    
    $
    14,143
    
    
    $
    (52,514
    )Deferred revenue, end of period
    
    
    77,396
    
    
    
    110,185Less: deferred revenue, beginning of period
    
    
    (79,978
    )
    
    
    (66,860
    )Product and service billings
    
    $
    64,075
    
    
    $
    57,468
    
    
    $
    (6,607
    )
   44




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Cost of Revenue and Cost Related to Product and Service Billings
 Six Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(dollars in thousands)Cost of revenue
    
    $
    5,240
    
    
    $
    5,949
    
    
    $
    709Deferred product and service cost, end of
period
    
    
    1,354
    
    
    
    6,492Less: deferred product and service cost,
beginning of period
    
    
    (1,050
    )
    
    
    (3,213
    )Cost related to product and service billings
    
    $
    5,544
    
    
    $
    9,228
    
    
    $
    3,684
    45




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Gross Profit and Gross Profit on Billings
 Six Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(In thousands)Gross profit
    
    $
    61,417
    
    
    $
    8,194
    
    
    $
    (53,223
    )Deferred revenue, at end of period
    
    
    77,396
    
    
    
    110,185Less: 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
    
    
    (1,354
    )
    
    
    (6,492
    )Gross profit on Billings
    
    $
    58,531
    
    
    $
    48,240
    
    
    $
    (10,291
    )
   Operating Expenses
 Period-to-PeriodSix Months Ended
    
    
    ChangeJune 29, 2008
    
    
    June 28, 2009
    
    
    Amount
    
    
    Percentage(dollars in thousands)Research and development
    
    $
    37,350
    
    
    $
    35,759
    
    
    $
    (1,591
    )
    
    
    -4.3
    %Sales and marketing
    
    
    7,403
    
    
    
    8,100
    
    
    
    697
    
    
    
    9.4
    %General and administrative
    
    
    4,394
    
    
    
    4,873
    
    
    
    479
    
    
    
    10.9
    %Total operating expenses
    
    $
    49,147
    
    
    $
    48,732
    
    
    $
    (415
    )
    
    
    1.0
    %
 Research and Development
 Sales and Marketing
 General and Administrative
  46




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Operating Profit (Loss) and Operating Profit (Loss) on Billings
 Six Months Ended
    
    
    Period-to-PeriodJune 29, 2008
    
    
    June 28, 2009
    
    
    Change(In thousands)Operating profit (loss)
    
    $
    12,270
    
    
    $
    (40,538
    )
    
    $
    (52,808
    )Deferred revenue, at end of period
    
    
    77,396
    
    
    
    110,185Less: 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
    
    
    (1,354
    )
    
    
    (6,492
    )Operating profit (loss) on billings
    
    $
    9,384
    
    
    $
    (492
    )
    
    $
    (9,876
    )
   Interest Income, Net.
 Income Taxes
  Liquidity and Capital Resources
   47




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As of
    
    
    As ofDecember 30,
    
    
    June 28,2008
    
    
    2009Cash and cash equivalents
    
    $
    30,425
    
    
    $
    19,310Investments, short-term
    
    
    197,941
    
    
    
    176,310Investments, long-term
    
    
    
    
    
    
    15,381Accounts receivable, net
    
    
    3,354
    
    
    
    9,493Working capital
    
    
    156,532
    
    
    
    114,638
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 29,
    
    
    June 28,2008
    
    
    2009Cash flow provided by (used in) operating activities
    
    $
    1,239
    
    
    $
    (8,168
    )Cash flow (used in) provided by investing activities
    
    
    (12,367
    )
    
    
    3,914Cash flow provided by (used in) financing activities
    
    
    2,821
    
    
    
    (6,861
    )
      48




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##### Table of Contents



Fiscal year:Remainder of 2009
    
    $
    7812010
    
    
    1,5142011
    
    
    1,4952012
    
    
    4922013
    
    
    10$
    4,292
  49




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency Exchange Risk
  Interest Rate Sensitivity
   
 Item 4. Changes in Internal Controls over Financial Reporting and Procedures
    50




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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.
  Our revenue and billings growth may be constrained by our product concentration and lack of
revenue diversification.
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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.
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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.
  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.
  56




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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.
    57




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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.
  Future interpretations of existing accounting standards or the application of new standards could
adversely affect our 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.
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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.
    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.
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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.
  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.
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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.
  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;
    
    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.
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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.
   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;
  65




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
    
    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
  ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares That Mayas Part of
    
    
    Yet Be PurchasedTotal Number
    
    
    Average Price
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Paid per
    
    
    Announced
    
    
    AnnouncedPeriod
    
    Purchased
    
    
    Share
    
    
    Program
    
    
    ProgramThrough March 29, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    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
    
    
    257,979
    (1)
    
    $
    5.78
    
    
    
    257,979
    
    
    $
    
 (1)
    
    We repurchased 257,979 shares of our common stock in the second quarter of fiscal 2009 under
a Rule 10b5-1 plan pursuant to our initial share repurchase program, which we publicly
announced on August 6, 2008. 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
initial share repurchase program, which expired on April 30, 2009.  ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares That Mayas Part of
    
    
    Yet Be PurchasedTotal Number
    
    
    Average Price
    
    
    Publicly
    
    
    Under theof Shares
    
    
    Paid per
    
    
    Announced
    
    
    AnnouncedPeriod
    
    Purchased
    
    
    Share
    
    
    Program
    
    
    ProgramThrough 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
    
    
    $
    17,753Total
    
    
    403,748
    (2)
    
    $
    5.57
    
    
    
    403,748
    
    
    $
    17,753
 (1)
    
    We repurchased 403,748 shares of our common stock in the second quarter of fiscal 2009 under
a Rule 10b5-1 plan 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
share repurchase program, which expires on April 29, 2009 or earlier if we so elect. 
 Item 4. Submission of Matters to a Vote of Security Holders.
  
    
    Our stockholders re-elected the three persons listed below as Class II directors, each to
serve until our 2012 annual meeting of stockholders and until his successor is duly elected
and qualified. The table below lists the number of shares of our common stock voted in favor
of election of each such person, as well as the number of shares withheld for the election of
such person:
 Number of Shares For
    
    
    Number of Shares WithheldHassan Ahmed, Ph.D.
    
    
    53,324,989
    
    
    
    564,263Gururaj Deshpande,
Ph.D.
    
    
    53,327,075
    
    
    
    562,177Anthony S. Thornley
    
    
    53,265,828
    
    
    
    623,424
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
    
    Our stockholders ratified the appointment by our board of directors of Ernst & Young LLP as
our independent registered public accounting firm for the fiscal year
ending January 3, 2010. The holders of 53,391,226 shares of our
common stock voted in favor of this proposal. The holders of 435,039
shares voted against this proposal. The holders of 62,987 shares
abstained from voting on this matter. There were no broker non-votes
with respect to this matter.
 
 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: August 5, 2009
    
    President and Chief Executive Officer
(Principal Executive Officer)By:
    /s/ Jeffrey D. GliddenJeffrey D. GliddenDate: August 5, 2009
    
    Vice President, Chief Financial Officer
(Principal Financial Officer)  69




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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.
  70