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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 28, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For 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) (Zip Code)
  (978) 250-3000
  (Registrants telephone number, including area code)
     Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value

The NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      (Title of
    Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o     Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





ANNUAL
    REPORT ON
    FORM 10-K
    FOR THE FISCAL YEAR ENDED DECEMBER 28, 2008
    Table of Contents
   
 PagePART I.Item 1.


Business


4Item 1A.


Risk Factors


19Item 1B.


Unresolved Staff Comments


35Item 2.


Properties


35Item 3.


Legal Proceedings


35Item 4.


Submission of Matters to a Vote of Security
    Holders


35PART II.Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


35Item 6.


Selected Financial Data


38Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


41Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


66Item 8.


Financial Statements and Supplementary Data


68Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


106Item 9A.


Controls and Procedures


106Item 9B.


Other Information


108PART III.Item 10.


Directors, Executive Officers and Corporate
    Governance


108Item 11.


Executive Compensation


108Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


108Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


108Item 14.


Principal Accounting Fees and Services


108PART IV.Item 15.


Exhibits, Financial Statement Schedules


109Signatures


110Ex-10.11 Amendment No.11 to Development and Purchase and Sale AgreementEx-21.1 Subsidiaries of the RegistrantEx-23.1 Consent of Ernst & Young LLPEx-31.1 Section 302 Certification of President and Chief Executive OfficerEx-31.2 Section 302 Certification of the Vice President, Chief Financial OfficerEx-32 Section 906 Certification of President and Chief Executive Officer and Vice President, Chief Financial Officer   2




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Forward
    Looking Statements
  This Annual Report on
    Form 10-K
    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
    Annual Report on
    Form 10-K
    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; any statements of the plans, strategies
    and objectives of management for future operations; statements
    related to the effect of Nortel Networks bankruptcy;
    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
    Annual Report on
    Form 10-K
    and in our other filings with the Securities and Exchange
    Commission or 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.
 3




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Part I  Item 1.
    Business  Overview
      1xEV-DO,
     4




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Industry
    Background
    The
    Desire for Mobile Broadband Services
      IP-TV
  The
    Need for Fixed-Mobile Convergence
     5




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The
    Market Opportunity
    Our
    Solution
  IP-based
  Enable
    New Service Offerings
    
    Mobile Broadband Internet Access.  Our EV-DO
    network products allow operators to offer broadband-quality
    Internet access anywhere in their networks. Users can access
    EV-DO-based networks through their laptop computers and other
    mobile devices. Mobile broadband networks offer increased
    convenience and mobility and wider coverage than wireless local
    area technologies such as Wi-Fi. In addition, in some developing
    markets, EV-DO networks are being used as a wireless alternative
    to DSL or cable to provide
    last-mile
    broadband Internet access. Our products have been used to deploy
    these services in Eastern Europe and Latin America.
    Multimedia Consumer Services.  Our EV-DO
    products enable wireless operators to provide multimedia
    services, such as video, music downloads,
    IP-TV and
    gaming. Broadband speed is important to users seeking to
    download or transmit the large files associated with multimedia
    services. Reflecting the growth of this market, media companies
    and wireless operators are developing content tailored for
    mobile phones. In 2008, Juniper Research estimated that global
    mobile entertainment services revenue, consisting of
    user-generated content, gambling, adult and infotainment, would
    increase three-fold by 2012.
    Enhanced Voice Services.  Our EV-DO products
    enable the delivery of interactive voice and video services,
    such as
    IP-based
    push-to-talk, video telephony and VoIP. For example, Sprint
    Nextel has announced its intention to deliver push-to-talk over
    its EV-DO network. In the future, our technology will enable
    wireless operators to migrate from separate voice and data
    networks to a single
    IP-based
    mobile broadband network delivering both voice and data. 6




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##### Table of Contents



Provide
    Scalability and Reliability
    Reduce
    Capital and Operating Expenses
  IP-based
  Leverage
    Existing Broadband Infrastructure
    Our
    Strategy
    
    Grow our EV-DO product sales.  We plan to grow
    sales of our EV-DO products as operators continue to expand both
    the coverage and capacity of their wireless networks and
    increase their offerings of mobile broadband services. The
    continued growth of broadband service revenues for the operators
    implies a need for capacity expansion. To date, most of our
    EV-DO sales have been driven by coverage deployments. We believe
    that a much greater opportunity lies in future capacity
    expansion. We are developing new features to facilitate this
    growth, such as technologies that will improve the quality of
    both VoIP and push-to-talk services. In addition, we believe
    opportunities exist to use our EV-DO technologies to address new
    markets, such as air-to-ground, military and public safety
    communications. We have developed an air-to-ground network
    infrastructure products that enable mobile broadband services
    for airline passengers. We also have developed a compact,
    rugged, easily-transportable base station that government
    agencies can use for military and public safety applications.
    Enter the Fixed-Mobile Convergence Market.  We
    are currently developing femtocell access point products for
    in-building deployment in CDMA and UMTS networks. We plan to
    sell these FMC products directly to operators and through OEM
    customers. We have entered into agreements with Nokia Siemens
    Networks to market an end-to-end UMTS femtocell solution, as
    well as with Thomson and Pirelli Broadband Solutions to
    integrate our femtocell product into their residential gateway
    offerings. In addition, we have entered into agreements with
    Motorola and Hitachi to supply CDMA femtocell solutions and with
    Alcatel-Lucent to develop an integrated femtocell solution for
    their IP Multimedia Subsystem. 7




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
    Develop Products for the GSM/UMTS
    Markets.  While CDMA is the leading mobile
    technology used by North American operators, GSM/UMTS are the
    leading standards used elsewhere in the world. We are currently
    developing femtocell access point products to address the
    GSM/UMTS markets.
    Leverage our Expertise in All-IP Mobile Networks to Develop
    4G Technologies.  Third generation wireless
    standards enable the delivery of IP data services over mobile
    networks. While EV-DO is considered a 3G standard, it is based
    on an architecture where all multimedia services, including
    voice, are carried over a single all-IP wireless network. The
    fourth generation wireless standards, known as 4G, are expected
    to offer faster speeds and carry all multimedia services over an
    all-IP wireless network. We believe our expertise in EV-DO and
    all-IP wireless network technology positions us well to develop
    4G solutions.
    Expand our OEM Sales Channels.  Our OEM
    relationships have allowed us to reach a broad end-user market
    rapidly. By collaborating with our OEM customers to develop
    specific functionality to be incorporated into products for
    their end-customers, we enable our OEM customers to expand their
    product offering and achieve faster time to market for
    innovative products that enable new operator services. We intend
    to continue to pursue new OEM relationships to leverage their
    extensive operator relationships, industry networks and global
    reach.
    Leverage our Operator Relationships.  We have
    developed direct relationships with leading wireless operators
    to understand their needs and create demand for our products. We
    collaborate directly with these operators to develop new
    products and services for their customers. While our OEM
    customers represent our primary sales channel, we also offer
    some products for sale directly to operators.
    Acquire Selected Complementary Businesses.  We
    intend to pursue acquisitions that we believe will complement
    our strategy and broaden our customer base and technologies. For
    example, on April 30, 2007, we acquired 3Way Networks
    Limited, or 3Way Networks, a United Kingdom-based provider of
    femtocell access points and solutions for UMTS markets.  Available
    Information
  http://www.airvana.com. Form 10-K, Form 10-Q, Form 8-K
  1-800-SEC-0330. http://www.sec.gov.
  Products
    Mobile
    Network EV-DO Products
  IP-based
 8




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AIRVANA
    PRODUCTS IN AN EV-DO RADIO ACCESS NETWORK
  
  Base
    Stations and OEM Base Station Channel Cards
    Radio
    Network Controllers
    Network
    Management System
   9




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Fixed-Mobile
    Convergence Products
      
    Improved in-building coverage.  Our femtocell
    access points are designed to significantly improve in-building
    mobile network coverage.
    Improved user experience of mobile
    services.  Because our femtocell access points
    will be shared by a small number of users, they will be able to
    provide a higher performance voice and data experience compared
    to existing mobile network services.
    Compatibility with existing mobile phones.  Our
    femtocell access points will allow users to make phone calls and
    access Internet broadband services through their existing CDMA
    or UMTS mobile phones.
    Plug and play installation.  Our femtocell
    access points are being designed for consumer installation with
    minimal user configuration. They will be connected by consumers
    to their existing broadband Internet services, such as those
    provided by DSL, cable or fiber optics.  AIRVANA
    FMC PRODUCT PLAN
  
  Technology
  Our IP
    RAN
    
    mechanisms to support subscriber mobility;
    protocols to carry traffic between the various network elements
    of a RAN in a secure manner;
    methods to increase the availability of the network in case of a
    failure in any of its elements; 10




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
    designs that increase the scalability of the network;
    procedures to configure, manage and maintain the RAN; and
    quality-of-service algorithms to allocate dynamically the
    resources of the RAN to subscribers and the various applications
    they use.  IP
    Backhaul
    RNC
    Clustering
          Multi-Homing
    IP
    Quality-of-Service
   11




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IP
    Network Management
    IP RAN
    Flat Architecture
        Distance-Based
    Paging
      Universal
    Access Gateway
   12




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Multimedia
    Service Delivery with Integrated Security &
    Mobility
          High-Capacity,
    Carrier-Grade Platform for Fixed-Mobile Convergence
  gigabits-per-second
  Flexible
    Policy Enforcement and Deep Packet Inspection
    IP
    Network Management
  IP-based
 13




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Femtocells
    
    a flat network architecture;
    a flexible hardware architecture based on programmable
    processing elements;
    an extensive software/firmware technology that will implement
    the radio, networking and security functions of a femtocell;
    a suite of proprietary algorithms designed to optimize the
    performance and robustness of the femtocell system; and
    a scalable service manager to facilitate the management of our
    femtocells by the network operator.          
    managing interference between femtocells and between femtocell
    and macro cellular networks;
    providing seamless handoffs as users cross between femtocell and
    macro cellular networks;
    limiting access to a femtocell to authorized users;
    acquiring accurate timing, frequency and location
    information; and
    managing the use of a wireless operators spectrum.    Operators
    Deploying Our Products
    


Bell Mobility (Canada)



Pelephone (Israel)


China Telecom (China)



Sprint Nextel (USA)


Eurotel (Czech Republic)



Telefonica (Latin America)


Leap Wireless (USA)



Verizon Wireless (USA)  14




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OEM
    Customers and Strategic Relationships
    Nortel
    Networks
        Nokia
    Siemens Networks
   15




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Thomson
    Motorola
    Alcatel-Lucent
    Hitachi
    Pirelli
    Broadband Solutions
    Qualcomm
      Sales and
    Marketing
   16




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Service
    and Support
    on-site
      Research
    and Development
      Manufacturing
    and Operations
      Competition
   17




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Intellectual
    Property
             18




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Wi-LAN Wi-LANs Wi-LAN. Wi-LAN. Wi-LAN Wi-LAN, and/or Wi-LAN
  Employees
    Facilities
    Legal
    Proceedings
    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 Annual Report on
    Form 10-K
    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 would significantly harm our business and
    operating results.
   19




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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.
   20




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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.
  4G-based 4G-based
  4G-compatible
 21




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In
    2008, Qualcomm indicated to us that we may owe royalties on
    EV-DO products that we sold beginning in 2007. If we are
    required to pay these royalties, our business and operating
    results would be harmed.
    The
    variable sales and deployment cycles for our EV-DO products are
    likely to cause our quarterly billings to fluctuate
    materially.
      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.
   22




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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.
   23




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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.      We may
    not be able to achieve profitability for any period in the
    future or sustain cash flow from operating
    activities.
   24




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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.  Wi-LAN Wi-LANs Wi-LAN Wi-LAN Wi-LANs Wi-LAN Wi-LAN. Wi-LAN Wi-LAN, and/or Wi-LAN
   25




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If we
    are not successful in obtaining from third parties licenses to
    intellectual property that are required for GSM/UMTS 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.
   26




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We
    depend on sole sources for certain components of our products
    and our business would be harmed if the supply 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.
        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.
   27




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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.
    The
    success of our business could be jeopardized if we are unable to
    protect our intellectual property adequately.
   28




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




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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.
       30




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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.
   31




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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;
    changes in market valuations of similar companies;
    success of competitive products;
    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.
   34




---



##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      Fiscal Year Ended December 30, 2007

High


LowThird Quarter (from July 19, 2007)

$
8.35


$
5.03Fourth Quarter

$
7.40


$
5.53   Fiscal Year Ended December 28, 2008

High


LowFirst Quarter

$
6.19


$
4.00Second Quarter

$
6.95


$
4.82Third Quarter

$
6.70


$
4.85Fourth Quarter

$
6.00


$
3.36       Dividends
   35




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##### Table of Contents



Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Recent
    Sales of Unregistered Securities
  Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
  Share
    Repurchase Program
  Rule 10b5-1
    ApproximateTotal Number of


Dollar Value ofShares Purchased


Shares That Mayas Part of


Yet Be PurchasedTotal Number of


Average Price


Publicly


Under theShares


Paid per


Announced


AnnouncedPeriod

Purchased


Share


Program


ProgramSeptember 29, 2008  October 26, 2008


755,182


$
4.68



755,182


$
12,917October 27, 2008  November 23, 2008


683,027


$
4.77



683,027


$
9,657November 24, 2008  December 28, 2008


599,043


$
4.98



599,043


$
6,673Total


2,037,252
(1)

$
4.80



2,037,252


$
6,673     (1)
    
    We repurchased 2,037,252 shares of our common stock under a
    Rule 10b5-1
    plan pursuant to a 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 share repurchase program, which expires on
    July 29, 2009.   36




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##### Table of Contents



Stock
    Performance Graph
  The following performance graph and related information shall
    not be deemed soliciting material or to be
    filed with the Securities and Exchange Commission,
    nor shall such information be incorporated by reference into any
    future filing under the Securities Act of 1933 or Securities
    Exchange Act of 1934, each as amended, except to the extent that
    we specifically incorporate it by reference into such filing.
    COMPARISON
    OF 17 MONTH CUMULATIVE TOTAL RETURN* Among
    Airvana, Inc., The NASDAQ Composite Index
    and the DJ Wilshire Telecommunications Index
  
  7/07


9/07


12/07


3/08


6/08


9/08


12/08Airvana Inc



100.00




84.38




75.73




72.94




74.76




82.15




85.36NASDAQ Composite



100.00




104.21




101.53




87.25




88.15




78.22




59.15DJ Wilshire Telecommunications



100.00




101.98




94.99




80.78




78.26




66.59




63.26   *
    
    $100 invested on 7/20/07 in stock or 6/30/2007 in
    index-including reinvestment of dividends. For comparative
    purposes, the chart above reflects pricing as of
    December 30, 2008 as pricing for the indexes is not
    available for our year end, December 28, 2008. 37




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K. Business Combinations 1-for-1.333
    Fiscal Year2004


2005


2006


2007


2008(In thousands, except per share amounts)Consolidated Statement of Operations Data:Revenue

$
3,617


$
2,347


$
170,270


$
305,785


$
138,173Cost of revenue


4,453



6,533



45,295



41,904



11,462Gross (loss) profit


(836
)


(4,186
)


124,975



263,881



126,711Operating expenses:Research and development


22,040



42,922



55,073



76,638



74,826Sales and marketing


4,665



5,237



7,729



12,055



14,933General and administrative


2,068



3,253



5,068



7,453



8,976In-process research and development














2,340



Total operating expenses


28,773



51,412



67,870



98,486



98,735Operating (loss) income


(29,609
)


(55,598
)


57,105



165,395



27,976Interest income, net


485



3,459



6,602



9,846



7,240(Loss) income before tax expense (benefit) and cumulative effect
    of change in accounting principle


(29,124
)


(52,139
)


63,707



175,241



35,216Income tax expense (benefit)


5



10,875



(10,742
)


21,898



13,923(Loss) income before cumulative effect of change in accounting
    principle


(29,129
)


(63,014
)


74,449



153,343



21,293Cumulative effect of change in accounting principle










(330
)






Net (loss) income

$
(29,129
)

$
(63,014
)

$
74,119


$
153,343


$
21,293Net (loss) income per common share:Basic

$
(3.20
)

$
(5.42
)

$
1.21


$
2.63


$
0.33Diluted

$
(3.20
)

$
(5.42
)

$
1.12


$
2.19


$
0.30Shares used in computing net (loss) income per common share:Basic


11,409



12,959



13,542



36,238



64,278Diluted


11,409



12,959



18,947



43,496



70,091   38




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##### Table of Contents



Fiscal Year2004


2005


2006


2007


2008(In thousands)Other GAAP and Non-GAAP Financial Data:Product and service billings (Billings)(1)

$
106,149


$
157,420


$
140,564


$
142,174


$
125,055Cost related to Billings(2)


28,700



45,303



12,543



8,740



13,625Gross profit on Billings(3)


77,449



112,117



128,021



133,434



111,430Operating income on Billings(4)


48,676



60,705



60,151



34,948



12,695Deferred revenue, at end of period


118,051



273,124



243,418



79,978



66,860Deferred product and service costs, at end of period


28,196



66,966



34,214



1,050



3,213Cash flow from operating activities


43,028



67,390



25,138



91,771



12,569   As ofJanuary 2,


January 1,


December 31,


December 30,


December 28,2005


2006


2006


2007


2008(In thousands)Consolidated Balance Sheet Data:Cash, cash equivalents and investments

$
72,321


$
135,470


$
160,123


$
221,963


$
228,366Working capital


69,689



11,225



3,253



131,886



156,532Total assets


117,436



219,547



264,207



261,566



257,336Indebtedness


















Redeemable convertible preferred stock


114,458



121,714



130,042







Total stockholders (deficit) equity


(120,796
)


(190,657
)


(122,790
)


145,175



162,882     (1)
    
    Billings represents amounts invoiced for products and services
    delivered and services to be delivered to our customers for
    which payment is expected to be made in accordance with normal
    payment terms. For software-only products sold to OEM customers,
    we invoice only upon notification of sale by our OEM customers.
    We use Billings to assess our business performance and as a
    critical metric for our incentive compensation program. We
    believe Billings is a consistent measure of our sales activity
    from period to period. Billings is not a GAAP measure and does
    not purport to be an alternative to revenue or any other
    performance measure derived in accordance with GAAP. In fiscal
    2008, Billings excludes $21.8 million of outstanding invoices to
    Nortel Networks that are subject to Nortel Networks
    bankruptcy proceedings. The following table reconciles revenue
    to Billings:  Fiscal Year2004


2005


2006


2007


2008(In thousands)Revenue

$
3,617


$
2,347


$
170,270


$
305,785


$
138,173Deferred revenue, at end of period


118,051



273,124



243,418



79,978



66,860Less: Deferred revenue acquired














(171
)


Less: Deferred revenue, at beginning of period


(15,519
)


(118,051
)


(273,124
)


(243,418
)


(79,978
)Billings

$
106,149


$
157,420


$
140,564


$
142,174


$
125,055   (2)
    
    Cost related to Billings represents the cost directly
    attributable to products and services delivered and invoiced to
    our customers in the period. We record product and service costs
    related to Billings as deferred product and service costs until
    such time as the related deferred revenue is recognized upon the
    delivery of specified software upgrades. When we recognize
    revenue, the related deferred product and service costs are
    expensed as cost of revenue. We believe that cost related to
    Billings is an important measure of our operating performance.
    Cost related to Billings is not a GAAP measure and does not
    purport to be an alternative to cost of revenue or 39




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##### Table of Contents



any other performance measure derived in accordance with GAAP.
    The following table reconciles cost of revenue to cost related
    to Billings:  Fiscal Year2004


2005


2006


2007


2008(In thousands)Cost of revenue

$
4,453


$
6,533


$
45,295


$
41,904


$
11,462Deferred product and service costs, at end of period


28,196



66,966



34,214



1,050



3,213Less: Deferred product cost, at beginning of period


(3,949
)


(28,196
)


(66,966
)


(34,214
)


(1,050
)Cost related to Billings

$
28,700


$
45,303


$
12,543


$
8,740


$
13,625   (3)
    
    Gross profit on Billings represents Billings less cost related
    to Billings. We believe that gross profit on Billings is an
    important measure of our operating performance. Gross profit on
    Billings is not a GAAP measure and does not purport to be an
    alternative to gross profit or any other performance measure
    derived in accordance with GAAP. In fiscal 2008, gross profit on
    Billings excludes $21.8 million of outstanding invoices to
    Nortel Networks that are subject to Nortel Networks
    bankruptcy proceedings. The following table reconciles gross
    profit to gross profit on Billings.  Fiscal Year2004


2005


2006


2007


2008(In thousands)Gross (loss) profit

$
(836
)

$
(4,186
)

$
124,975


$
263,881


$
126,711Deferred revenue, at end of period


118,051



273,124



243,418



79,978



66,860Less: Deferred revenue acquired














(171
)


Less: Deferred revenue, at beginning of period


(15,519
)


(118,051
)


(273,124
)


(243,418
)


(79,978
)Deferred product and service costs, at beginning of period


3,949



28,196



66,966



34,214



1,050Less: Deferred product cost, at end of period


(28,196
)


(66,966
)


(34,214
)


(1,050
)


(3,213
)Gross profit on Billings

$
77,449


$
112,117


$
128,021


$
133,434


$
111,430   (4)
    
    Operating profit on Billings represents gross profit on Billings
    less operating expenses. We believe that operating profit on
    Billings is an important measure of our operating performance.
    Operating profit on Billings is not a GAAP measure and does not
    purport to be an alternative to operating income or any other
    performance measure derived in accordance with GAAP. In fiscal
    2008, operating profit on Billings excludes $21.8 million of
    outstanding invoices to Nortel Networks that are subject to
    Nortel Networks bankruptcy proceedings. The following
    table reconciles operating profit to operating profit on
    billings.  Fiscal Year2004


2005


2006


2007


2007(In thousands)Operating (loss) profit

$
(29,609
)

$
(55,598
)

$
57,105


$
165,395


$
27,976Deferred revenue, at end of period


118,051



273,124



243,418



79,978



66,860Less: Deferred revenue acquired














(171
)


Less: Deferred revenue, at beginning of period


(15,519
)


(118,051
)


(273,124
)


(243,418
)


(79,978
)Deferred product and service costs, at beginning of period


3,949



28,196



66,966



34,214



1,050Less: Deferred product and service costs, at end of period


(28,196
)


(66,966
)


(34,214
)


(1,050
)


(3,213
)Operating profit on billings

$
48,676


$
60,705


$
60,151


$
34,948


$
12,695  40




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Annual Report on
    Form 10-K
    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
    Annual Report on
    Form 10-K
    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; 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
    Annual Report on
    Form 10-K
    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
    1xEV-DO, EV-DO
  next-generation
 41




---



##### Table of Contents



42




---



##### Table of Contents



Our
    OEM Business Model
        No. 97-2, Software Revenue Recognition.
  Impact of
    SOP No. 97-2,
    Software Revenue Recognition
   43




---



##### Table of Contents



44




---



##### 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 45




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##### Table of Contents



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.
       46




---



##### Table of Contents



Service Revenue.
  SOP No. 97-2
     47




---



##### Table of Contents



Product
    and Service Billings
            Fiscal Year2006


2007


2008Revenue

$
170,270


$
305,785


$
138,173Deferred revenue, at end of period


243,418



79,978



66,860Less: Deferred revenue acquired






(171
)


Less: Deferred revenue, at beginning of period


(273,124
)


(243,418
)


(79,978
)Product and service billings

$
140,564


$
142,174


$
125,055   Deferred
    Revenue
   48




---



##### 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
    Gross
    Profit on Billings
   49




---



##### Table of Contents



pre-bankruptcy
  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.   50




---



##### Table of Contents



Stock-Based
    Compensation Expense
      Operating
    Income on Billings
    Interest
    Income, Net
    Cash Flow
    from Operating Activities
      Cash
    and Investments
   51




---



##### Table of Contents



Fiscal
    Year
    Critical
    Accounting Policies and Estimates
      Revenue
    Recognition
  No. 97-2, Software Revenue Recognition.
       52




---



##### Table of Contents



53




---



##### Table of Contents



SOP No. 97-2
        No. 00-10, Accounting for Shipping and Handling Fees, No. 01-14, Income Statement Characterization of Reimbursements Received
    for Out-of-Pocket Expenses Incurred (EITF 01-14).
     54




---



##### Table of Contents



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. No. 96-18, Accounting for Equity Instruments that are Issued to Other
    than Employees for Acquiring, or in Conjunction with Selling,
    Goods and Services,
  Share-Based Payment
  Share-Based Payments and SFAS 123(R). 7-year
 55




---



##### Table of Contents



Income
    Taxes
  Accounting for
    Income Taxes
  Accounting for Uncertainty in Income Taxes
 56




---



##### Table of Contents



Results
    of Operations
    AIRVANA,
    INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
  Years EndedDecember 31,


December 30,


December 28,2006


2007


2008(In thousands)Revenue:Product

$
145,835


$
279,133


$
123,295Service


24,435



26,652



14,878Total revenue


170,270



305,785



138,173Cost of revenue:Product


39,241



34,794



3,267Service


6,054



7,110



8,195Total cost of revenue


45,295



41,904



11,462Gross profit


124,975



263,881



126,711Operating expenses:Research and development


55,073



76,638



74,826Selling and marketing


7,729



12,055



14,933General and administrative


5,068



7,453



8,976In-process research and development






2,340



Total operating expenses


67,870



98,486



98,735Operating income


57,105



165,395



27,976Interest income (expense)Interest income


6,642



9,881



7,241Interest expense


(40
)


(35
)


(1
)Total interest income (expense)


6,602



9,846



7,240Income before income tax expense (benefit) and cumulative effect
    of change in accounting principle


63,707



175,241



35,216Income tax (benefit) expense


(10,742
)


21,898



13,923Income before cumulative effect of change in accounting principle


74,449



153,343



21,293Cumulative effect of change in accounting principle


(330
)






Net income

$
74,119


$
153,343


$
21,293Other GAAP and Non-GAAP Financial
    Data(1):Product and service billings

$
140,564


$
142,174


$
125,055Cost related to product and service billings


12,543



8,740



13,625Gross profit on Billings


128,021



133,434



111,430Operating income on Billings


60,151



34,948



12,695Deferred revenue, at end of period


243,418



79,978



66,860Deferred product and service costs, at end of period


34,214



1,050



3,213Cash flow from operating activities


25,138



91,771



12,569     (1)
    
    For a reconciliation of non-GAAP financial data to GAAP data,
    please see the tables on the following pages of
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations. 57




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##### Table of Contents



Comparison
    of Fiscal 2007 and Fiscal 2008
  Revenue
    and Product and Service Billings
  Fiscal Year


Period-to-Period2007


2008


Change(In thousands)Revenue

$
305,785


$
138,173


$
(167,612
)Deferred revenue, at end of period


79,978



66,860Less: Deferred revenue acquired


(171
)


Less: Deferred revenue, at beginning of period


(243,418
)


(79,978
)Product and service billings

$
142,174


$
125,055


$
(17,119
)       Cost of
    Revenue and Cost Related to Product and Service
    Billings
  Fiscal Year


Period-to-Period2007


2008


Change(In thousands)Cost of revenue

$
41,904


$
11,462


$
(30,442
)Deferred product and service costs, at end of period


1,050



3,213Less: Deferred product cost, at beginning of period


(34,214
)


(1,050
)Cost related to product and service billings

$
8,740


$
13,625


$
4,885      58




---



##### Table of Contents



Gross
    Profit and Gross Profit on Billings
  Fiscal Year


Period-to-Period2007


2008


Change(In thousands)Gross profit

$
263,881


$
126,711


$
(137,170
)Deferred revenue, at end of period


79,978



66,860Less: Deferred revenue acquired


(171
)


Less: Deferred revenue, at beginning of period


(243,418
)


(79,978
)Deferred product cost, at beginning of period


34,214



1,050Less: Deferred product and service costs, at end of period


(1,050
)


(3,213
)Gross profit on Billings

$
133,434


$
111,430


$
(22,004
)       Operating
    Expenses
  Fiscal Year


Period-to-Period Change2007


2008


Amount


Percentage(In thousands)Research and development

$
76,638


$
74,826


$
(1,812
)


2.3
%Sales and marketing


12,055



14,933



2,878



23.9
%General and administrative


7,453



8,976



1,523



20.4
%In-process research and development


2,340







(2,340
)Total operating expenses

$
98,486


$
98,735


$
249



0.3
%   Research and Development.
  Sales and Marketing.
  General and Administrative.
 59




---



##### Table of Contents



In-Process Research and Development. United Kingdom-based Business
    Combinations
  Operating
    Profit and Operating Profit on Billings
  Fiscal Year


Period-to-Period2007


2008


Change(In thousands)Operating profit

$
165,395


$
27,976


$
(137,419
)Deferred revenue, at end of period


79,978



66,860Less: Deferred revenue acquired


(171
)


Less: Deferred revenue, at beginning of period


(243,418
)


(79,978
)Deferred product cost, at beginning of period


34,214



1,050Less: Deferred product and service costs, at end of period


(1,050
)


(3,213
)Operating profit on billings

$
34,948


$
12,695


$
(22,253
)     Interest Income, Net.
  Income Tax Expense.
   60




---



##### Table of Contents



Comparison
    of Fiscal 2006 and Fiscal 2007
  Revenue
    and Product and Service Billings
  Fiscal Year


Period-to-Period2006


2007


Change(In thousands)Revenue

$
170,270


$
305,785


$
135,515Deferred revenue, at end of period


243,418



79,978Less: Deferred revenue acquired






(171
)Less: Deferred revenue, at beginning of period


(273,124
)


(243,418
)Product and service billings

$
140,564


$
142,174


$
1,610       Cost of
    Revenue and Cost Related to Product and Service
    Billings
  Fiscal Year


Period-to-Period2006


2007


Change(In thousands)Cost of revenue

$
45,295


$
41,904


$
(3,391
)Deferred product cost, at end of period


34,214



1,050Less: Deferred product cost, at beginning of period


(66,966
)


(34,214
)Cost related to product and service billings

$
12,543


$
8,740


$
(3,803
)      61




---



##### Table of Contents



Gross
    Profit (Loss) and Gross Profit (Loss) on Billings
  Fiscal Year


Period-to-Period2006


2007


Change(In thousands)Gross profit

$
124,975


$
263,881


$
138,906Deferred revenue, at end of period


243,418



79,978Less: Deferred revenue acquired






(171
)Less: Deferred revenue, at beginning of period


(273,124
)


(243,418
)Deferred product cost, at beginning of period


66,966



34,214Less: Deferred product cost, at end of period


(34,214
)


(1,050
)Gross profit on Billings

$
128,021


$
133,434


$
5,413         Operating
    Expenses
  Fiscal Year


Period-to-Period Change2006


2007


Amount


Percentage(In thousands)Research and development

$
55,073


$
76,638


$
21,565



39.2
%Sales and marketing


7,729



12,055



4,326



56.0
%General and administrative


5,068



7,453



2,385



47.1
%In-process research and development






2,340



2,340Total operating expenses

$
67,870


$
98,486


$
30,616



45.1
%   Research and Development.
  Sales and Marketing.
  General and Administrative.
 62




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##### Table of Contents



In-Process Research and Development. Business Combinations
  Operating
    Profit and Operating Profit on Billings
  Fiscal Year


Period-to-Period2006


2007


Change(In thousands)Operating profit

$
57,105


$
165,395


$
108,290Deferred revenue, at end of period


243,418



79,978Less: Deferred revenue acquired






(171
)Less: Deferred revenue, at beginning of period


(273,124
)


(243,418
)Deferred product cost, at beginning of period


66,966



34,214Less: Deferred product cost, at end of period


(34,214
)


(1,050
)Operating profit on billings

$
60,151


$
34,948


$
(25,203
)       Interest Income, Net.
  Income Tax Expense.
  Liquidity
    and Capital Resources
   63




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##### Table of Contents



Fiscal Year2006


2007


2008(In thousands)Cash and cash equivalents

$
86,815


$
43,547


$
30,425Investments, short-term


73,308



178,416



197,941Accounts receivable


46,072



14,171



3,354Working capital


3,253



131,886



156,532Cash flow from operating activities


25,138



91,771



12,569Cash flow from investing activities


40,180



(113,670
)


(17,173
)Cash flow from financing activities


1,624



(21,391
)


(8,643
)        64




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##### Table of Contents



65




---



##### Table of Contents



Contractual
    Obligations and Commitments
    Payments Due by PeriodLess Than


1-3


3-5


More ThanTotal


1 Year


Years


Years


5 Years(In thousands)Operating leases(1)

$
4,900


$
1,514


$
2,896


$
490


$
Purchase commitments(2)

$
4,042



3,114



928







Total

$
8,942


$
4,628


$
3,824


$
490


$
     (1)
    
    Consists of contractual obligations for non-cancelable office
    space under operating leases.(2)
    
    Represents amounts associated with agreements that are
    enforceable, legally binding and specify terms, including: fixed
    or minimum quantities to be purchased; fixed, minimum or
    variable price provisions; and the approximate timing of
    payment. Obligations under contracts that we can cancel without
    a significant penalty are not included in the table above.    Off-Balance
    Sheet Arrangements
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Foreign
    Currency Exchange Risk
    Interest
    Rate Sensitivity
   66




---



##### Table of Contents



67




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
     
 PageReport of Independent Registered Public
    Accounting Firm


69Consolidated Balance Sheets as of
    December 30, 2007, and December 28, 2008


70Consolidated Statements of Income for the years
    ended December 31, 2006, December 30, 2007 and
    December 28, 2008


71Consolidated Statements of Cash Flows for the
    years ended December 31, 2006, December 30, 2007 and
    December 28, 2008


72Consolidated Statements of Redeemable Convertible
    Preferred Stock and Stockholders (Deficit) Equity for the
    years ended December 31, 2006, December 30, 2007 and
    December 28, 2008


73Notes to Consolidated Financial Statements


74   68




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM          Accounting for Uncertainty in Income Taxes
        69




---



##### Table of Contents



AIRVANA,
    INC.



CONSOLIDATED
    BALANCE SHEETS  December 30,


December 28,2007


2008(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
43,547


$
30,425Investments


178,416



197,941Accounts receivable


14,171



3,354Deferred product cost


1,050



1,913Deferred tax assets, current


1,422



2,168Prepaid taxes


115



Prepaid expenses and other current assets


3,064



2,758Total current assets


241,785



238,559Property and equipment


17,831



14,425Less: accumulated depreciation and amortization


11,434



9,6036,397



4,822Restricted investments


193



193Deferred service cost






1,300Deferred tax assets, long-term, net


612



956Goodwill and intangible assets, net


12,165



11,096Other assets


414



410Total assets

$
261,566


$
257,336LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,806


$
4,455Accrued expenses and other current liabilities


11,162



14,365Accrued income taxes


15,016



1,897Deferred revenue, current


79,915



61,310Total current liabilities


109,899



82,027Deferred revenue, long-term


63



5,550Accrued income taxes


4,675



5,703Other liabilities


1,754



1,174Total long-term liabilities


6,492



12,427Commitments and contingencies (Note 9)






Stockholders equity:Preferred stock, $0.001 par value: 10,000,000 shares
    authorized, no shares issued or outstanding at December 30,
    2007 and December 28, 2008






Common stock, $0.001 par value: 350,000,000 shares
    authorized, 63,559,983 and 62,931,171 shares issued and
    outstanding at December 30, 2007 and December 28,
    2008, respectively (Note 10)


64



63Additional paid-in capital


190,409



186,824Accumulated deficit


(45,298
)


(24,005
)Total stockholders equity


145,175



162,882Total liabilities and stockholders equity

$
261,566


$
257,336    70




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##### Table of Contents



AIRVANA,
    INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
  Years EndedDecember 31,


December 30,


December 28,2006


2007


2008(In thousands, except per share amounts)Revenue:Product

$
145,835


$
279,133


$
123,295Service


24,435



26,652



14,878Total revenue


170,270



305,785



138,173Cost of revenue:Product


39,241



34,794



3,267Service


6,054



7,110



8,195Total cost of revenue


45,295



41,904



11,462Gross profit


124,975



263,881



126,711Operating expenses:Research and development


55,073



76,638



74,826Selling and marketing


7,729



12,055



14,933General and administrative


5,068



7,453



8,976In-process research and development






2,340



Total operating expenses


67,870



98,486



98,735Operating income


57,105



165,395



27,976Interest income (expense), netInterest income


6,642



9,881



7,241Interest expense


(40
)


(35
)


(1
)Total interest income (expense), net


6,602



9,846



7,240Income before income tax expense (benefit) and cumulative effect
    of change in accounting principle


63,707



175,241



35,216Income tax (benefit) expense


(10,742
)


21,898



13,923Income before cumulative effect of change in accounting principle


74,449



153,343



21,293Cumulative effect of change in accounting principle


(330
)






Net income

$
74,119


$
153,343


$
21,293Net income per common share applicable to common stockholders:Basic

$
1.21


$
2.63


$
0.33Diluted

$
1.12


$
2.19


$
0.30Weighted average common shares outstanding:Basic


13,542



36,238



64,278Diluted


18,947



43,496



70,091    71




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##### Table of Contents



AIRVANA,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years EndedDecember 31,


December 30,


December 28,2006


2007


2008(In thousands)Operating activitiesNet income

$
74,119


$
153,343


$
21,293Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


2,408



3,078



3,215Amortization of intangible assets






713



1,069In-process research and development






2,340



Stock-based compensation


800



2,996



4,844Loss on disposal of property and equipment


36







Deferred tax benefit






(2,989
)


(951
)Cumulative effect of change in accounting principle


330







Excess tax benefit related to exercise of stock options










(2,266
)Amortization of investments


(581
)


(5,661
)


(4,113
)Amortization of leasehold incentive


(542
)


(522
)


(522
)Non-cash interest income


40



(103
)


Changes in operating assets and liabilities:Accounts receivable


(38,482
)


31,901



10,817Deferred product and service costs


32,752



33,164



(2,163
)Prepaid taxes


(13,619
)


14,512



115Prepaid expenses and other current assets


149



(542
)


306Accounts payable


(1,707
)


512



649Accrued expenses and other current liabilities


(859
)


2,948



3,358Accrued income taxes






19,691



(9,964
)Deferred revenue


(29,706
)


(163,610
)


(13,118
)Net cash provided by operating activities


25,138



91,771



12,569Investing activitiesPurchases of property and equipment


(2,614
)


(3,190
)


(1,765
)Restricted investments


100







Purchase of 3-Way Networks, net of cash acquired






(10,907
)


Purchases of investments


(136,930
)


(367,851
)


(341,622
)Maturities of investments


179,800



268,404



309,579Proceeds from sale of investments










16,631Other assets


(176
)


(126
)


4Net cash provided (used in) by investing activities


40,180



(113,670
)


(17,173
)Financing activitiesPayments on long-term debt






(583
)


(121
)Proceeds from initial public offering, net of offering costs


(560
)


51,353



Proceeds from leasehold incentive


789







Proceeds from sale of Series D redeemable convertible
    preferred stock


1,000







Payments of cash dividend






(72,674
)


(92
)Purchase of treasury stock






(96
)


(13,328
)Excess tax benefit related to exercise of stock options










2,266Proceeds from exercise of stock options


395



609



2,632Net cash provided by (used in) financing activities


1,624



(21,391
)


(8,643
)Effect of exchange rate changes on cash and cash equivalents






22



125Net increase (decrease) in cash and cash equivalents


66,942



(43,268
)


(13,122
)Cash and cash equivalents at beginning of period


19,873



86,815



43,547Cash and cash equivalents at end of period

$
86,815


$
43,547


$
30,425Supplemental Disclosure of Cash Flow InformationCash paid for income taxes

$
6,204


$
100


$
24,723Supplemental Disclosure of Noncash ActivitiesAccretion of dividends on redeemable convertible preferred stock

$
7,328


$
4,032


$
Retirement of property and equipment

$
244


$
867


$
4,985    72




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##### Table of Contents



AIRVANA,
    INC.
  CONSOLIDATED
    STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
 STOCKHOLDERS
    (DEFICIT) EQUITY
  Redeemable ConvertiblePreferred StockSeries A


Series B1


Series B2


Series C


Series D



Common Stock


AdditionalLiquidation





Liquidation





Liquidation





Liquidation





Liquidation






Par


Paid-in


Accumulated


StockholdersShares


Value


Shares


Value


Shares


Value


Shares


Value


Shares


Value



Shares


Value


Capital


Deficit


(Deficit) Equity(In thousands, except share amounts)Balance at January 1, 2006


10,937,500



15,877



3,994,328



34,308



900,414



6,963



25,031,017



52,931



2,989,537



11,635




13,520,543



13



2,176



(192,846
)


(190,657
)Sale of Series D redeemable convertible preferred stock


































298,953



1,000




















Exercise of stock options











































293,992



1



394







395Stock based compensation



















































800







800Cumulative dividends on redeemable convertible preferred stock






872







1,966







399







3,219







872
















(7,328
)


(7,328
)Reclassification of preferred stock warrants to liability



















































(119
)






(119
)Net income























































74,119



74,119Balance at December 31, 2006


10,937,500



16,749



3,994,328



36,274



900,414



7,362



25,031,017



56,150



3,288,490



13,507




13,814,535



14



3,251



(126,055
)


(122,790
)Exercise of stock options











































416,328







609







609Repurchase and retirement of treasury stock











































(45,010
)






(96
)






(96
)Stock based compensation



















































2,996







2,996Conversion of convertible preferred stock warrants into common
    stock warrants



















































70







70Exercise of common stock warrants











































7,528















Cumulative dividends on redeemable convertible preferred stock






480







1,080







219







1,771







482
















(4,032
)


(4,032
)Exercise of convertible preferred stock warrants


























43,166



69




















248







248Issuance of common stock in connection with the Companys
    acquisition of 3Way Networks Limited











































441,845



1



2,661







2,662Conversion of redeemable convertible preferred stock in
    connection with the Companys initial public offering


(10,937,500
)


(17,229
)


(3,994,328
)


(37,354
)


(900,414
)


(7,581
)


(25,074,183
)


(57,990
)


(3,288,490
)


(13,989
)



40,624,757



41



134,102







134,143Issuance of common stock in connection with the Companys
    initial public offering, net of offering costs of $7,267











































8,300,000



8



50,785







50,793Cash dividend



















































(4,217
)


(68,554
)


(72,771
)Net income























































153,343



153,343Balance at December 30, 2007











































63,559,983



64



190,409



(45,298
)


145,175Exercise of stock options











































2,076,625



2



2,630







2,632Repurchase and retirement of treasury stock











































(2,708,200
)


(3
)


(13,325
)






(13,328
)Stock based compensation



















































4,844







4,844Exercise of common stock warrants











































2,763















Excess tax benefit related to exercise of stock options



















































2,266







2,266Net income























































21,293



21,293Balance at December 28, 2008











































62,931,171



63



186,824



(24,005
)


162,882    73




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share amounts)
  1.
    Operations  Business
    Description
  e-mail, IP-TV, push-to-talk voice-over-IP.
    2.
    Summary
    of Significant Accounting Policies      Principles
    of Consolidation
  Consolidation of Variable Interest Entities Consolidation
    of Financial Statements,
  Use of
    Estimates
   74




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      Reclassification
  Accounting for Income Taxes
  Fiscal
    Year
    Cash
    and Cash Equivalents
    Investments
    and Restricted Investments
  held-to-maturity
    Prepaid
    and Other Current Assets
  first-in,
 75




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  Deferred
    Product and Service Cost
  No. 97-2, Software Revenue Recognition (SOP 97-2), Restatement and Revision of Accounting
    Research Bulletins Inventory Cost
  Accounting for Nonrefundable Fees and Costs Associated With
    Originating or Acquiring Loans and Initial Direct Costs of
    Leases
  Property
    and Equipment
    As ofDecember 30,


December 28,Estimated Useful Life


2007


2008Computer equipment and purchased software


1.5 - 3 years


$
5,343


$
2,513Test and lab equipment


3 years



5,100



4,510Leasehold improvements


Shorter of original contractual life of
    the lease or 5 years



6,497



6,546Office furniture and equipment


3 - 5 years



891



856Total property and equipment






17,831



14,425Less: Accumulated depreciation and amortization






(11,434
)


(9,603
)$
6,397


$
4,822     Capitalized
    Internal-Use Software
  SOP No. 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use (SOP 98-1).
 76




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  SOP 98-1
  Software
    Development Costs
  Accounting for the Costs of Computer
    Software to Be Sold, Leased or Otherwise Marketed,
  Revenue
    Recognition
  SOP No. 97-2, Software Revenue Recognition.
       77




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
           78




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    around-the-clock SOP No. 97-2
        No. 00-10, Accounting for Shipping and Handling Fees out-of-pocket No. 01-14, Income Statement Characterization of Reimbursements Received
    for
    Out-of-Pocket
    Expenses Incurred out-of-pocket
 79




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      Concentrations
    of Credit Risk and Significant Customers
          Segment
    and Geographic Information
  Disclosures About Segments of an
    Enterprise and Related Information
   80




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      December 30,


December 28,2007


2008United States

$
5,454


$
5,501United Kingdom


12,917



12,178Other foreign locations


1,410



1,099$
19,781


$
18,778   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 No. 96-18, Accounting for Equity Instruments that are Issued to Other
    than Employees for Acquiring, or in Conjunction with Selling,
    Goods and Services,
  Share-Based Payment,
  Comprehensive
    Income
  Reporting Comprehensive Income,
 81




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  Net
    Income Per Share
  Earnings Per Share No. 03-6, No. 03-6
   82




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Years EndedDecember 31,


December 30,


December 28,2006


2007


2008(Amounts in thousands, except per share amounts)Numerator:Income before cumulative effect of change in accounting principle

$
74,449


$
153,343


$
21,293Cumulative effect of change in accounting principle


(330
)






Net income

$
74,119


$
153,343


$
21,293Allocation of net income:Basic:Accretion of redeemable preferred stock

$
7,328


$
4,032


$
Dividend allocated to preferred stockholders






54,153



Undistributed net income allocated to preferred stockholders


50,354







Net income applicable to preferred stockholders


57,682



58,185



Net income applicable to common stockholders before cumulative
    effect of change in accounting principle


16,767



95,158



21,293Cumulative effect of change in accounting principle


(330
)






Net income applicable to common stockholders


16,437



95,158



21,293Net income

$
74,119


$
153,343


$
21,293Diluted:Accretion of redeemable preferred stock

$
7,328


$
4,032


$
Dividend allocated to preferred stockholders






54,153



Undistributed net income allocated to preferred stockholders


45,642







Net income applicable to preferred stockholders


52,970



58,185



21,293Net income applicable to common stockholders before cumulative
    effect of change in accounting principle


21,479



95,158



21,293Cumulative effect of change in accounting principle


(330
)






Net income applicable to common stockholders


21,149



95,158



21,293Net income

$
74,119


$
153,343


$
21,293Denominator:Basic weighted average shares


13,542



36,238



64,278Dilutive effect of common stock equivalents


5,405



7,258



5,813Diluted weighted average shares


18,947



43,496



70,091Calculation of net income per share:Basic:Net income applicable to common stockholders

$
16,437


$
95,158


$
21,293Weighted average shares of common stock outstanding


13,542



36,238



64,278Net income per share

$
1.21


$
2.63


$
0.33Diluted:Net income applicable to common stockholders

$
21,149


$
95,158


$
21,293Weighted average shares of common stock outstanding


18,947



43,496



70,091Net income per share

$
1.12


$
2.19


$
0.30Cumulative effect of change in accounting principleBasic

$
(0.02
)Diluted

$
(0.02
)    83




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  Impairment
    of Long-Lived Assets
  Accounting for the Impairment or
    Disposal of Long-Lived Assets
  Goodwill
    and Other Intangibles
  Goodwill and Other Intangible Assets
  Foreign
    Currency Translation
  Foreign Currency Translation
  Income
    Taxes
  Accounting for Income Taxes
  Accounting for
    Uncertainty in Income Taxes
 84




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  Fair
    Value of Financial Instruments
    Single
    or Limited Source Suppliers and Contract
    Manufacturers
    Advertising
    Costs
    Recently
    Issued Accounting Pronouncements
  Business Combinations
          Fair Value Measurements FAS 157-2 
 85




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  FAS 157-2),
  Noncontrolling Interests in Consolidated Financial Statements
  142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3), Goodwill and Other
    Intangible Assets FSP 142-3
  FSP 142-3
  
    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.  FSP 142-3 FSP 142-3 FSP 142-3. FSP 142-3
  3.
    Change in
    Accounting Principle  Warrants  150-5, Issuers Accounting under FASB Statement No. 150
    for Freestanding Warrants and Other Similar Instruments on
    Shares that are Redeemable (FSP 150-5). FSP 150-5
 86




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  Accounting for
    Certain Financial Instruments with Characteristics of Both
    Liabilities and Equity,
  FSP 150-5
    4.
    Investments  Accounting for
    Certain Investments in Debt and Equity Securities,
    December 30, 2007


December 28, 2008Amortized


Fair Market


Amortized


Fair MarketCost


Value


Cost


ValueCorporate debt securities

$
124,385


$
124,856


$
86,140


$
86,674Asset-backed securities


54,031



54,092







Debt securities of U.S. government agencies










111,801



112,709$
178,416


$
178,948


$
197,941


$
199,383          87




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      5.
    Goodwill
    and Intangible Assets        December 30, 2007Gross


Accumulated


NetIntangible


Amortization


IntangibleDeveloped technology

$
3,340


$
446


$
2,894Customer relationships


1,350



225



1,125Non-compete agreements


190



42



148Total intangible assets

$
4,880


$
713


$
4,167   December 28, 2008Gross


Accumulated


NetIntangible


Amortization


IntangibleDeveloped technology

$
3,340


$
1,113


$
2,227Customer relationships


1,350



563



787Non-compete agreements


190



106



84Total intangible assets

$
4,880


$
1,782


$
3,098    88




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Fiscal year:2009

$
1,0692010


1,0262011


7802012


223$
3,098   Accounting for the
    Impairment or Disposal of Long-Lived Assets
       89




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  6.
    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 28,2008Corporate debt securities

$
86,674Government sponsored entities


112,709$
199,383     Level 2 Inputs


Level 1 Inputs


TotalsCorporate debt securities

$
3,099


$



$
3,099Government sponsored entities


1,500







1,500Money market mutual funds






20,665



20,665$
4,599


$
20,665


$
25,264    90




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  7.
    Income
    Taxes    December 31,


December 30,


December 28,2006


2007


2008Domestic

$
63,284


$
183,068


$
44,531Foreign


423



(7,827
)


(9,315
)Total

$
63,707


$
175,241


$
35,216     December 31,


December 30,


December 28,2006


2007


2008Current:Federal

$
(10,832
)

$
24,618


$
14,572State


86



117



89Foreign


4



119



213(10,742
)


24,854



14,874Deferred:Federal


30,861



40,879



(796
)State


(1,266
)


(1,216
)


(1,322
)Foreign






(2,213
)


(2,405
)29,595



37,450



(4,523
)Change in valuation allowanceFederal


(30,861
)


(42,646
)


State


1,266



1,197



1,316Foreign






1,043



2,256(29,595
)


(40,406
)


3,572Total tax (benefit) expense

$
(10,742
)

$
21,898


$
13,923  91




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    December 31,


December 30,


December 28,2006


2007


2008Expected provision at federal statutory rate, 35%

$
22,297


$
61,345


$
12,326State taxes, net of federal benefit


56



76



151Foreign taxes


4



141



1,078Federal research and development credit


(2,436
)


(2,524
)


(3,090
)State research and investment credits


(1,233
)


(1,216
)


(1,333
)Domestic manufacturing deduction






(1,930
)


(817
)Change in valuation allowance


(29,597
)


(40,406
)


3,572Change in unrecognized tax benefits






4,675



1,142In process research and development






702



Stock compensation


239



890



895Other items


(71
)


145



(1
)(Benefit from) provision for income taxes

$
(10,742
)

$
21,898


$
13,923     December 30,


December 28,2007


2008Foreign net operating loss carryforwards

$
2,216


$
4,166State research and investment credit carryforwards


5,056



6,372Depreciation and amortization


(408
)


140Stock compensation


168



877Accrued expenses and other temporary differences


1,101



1,2408,133



12,795Less valuation allowance


(6,099
)


(9,671
)Net deferred tax assets

$
2,034


$
3,124        92




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      December 30,


December 28,2007


2008Balance at beginning of year

$



$
4,675Increases for prior years


3,977



96Increases for the current year


698



861Reductions related to settlements with tax authorities






(114
)Reductions related to expiration of statute of limitations






Balance at end of year

$
4,675


$
5,518                93




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
       8.
    Stock
    Warrants      9.
    Commitments
    and Contingencies         94




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Accounting
    for Leases
    Fiscal year:2009

$
1,5142010


1,4412011


1,4552012


4802013


10$
4,900       Fiscal year:2009

$
3,1142010


928$
4,042   Indemnification
    10.
    Common
    Stock   95




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    December 30,


December 28,2007


20082000 Stock Incentive Plan


12,786,353



9,836,5082007 Stock Incentive Plan


12,609,800



25,542,512Series B1 Warrants


24,059



Total number of common shares reserved


25,420,212



35,379,020     11.
    Stock
    Incentive Plans  Restricted
    Common Stock
        Stock
    Options
     96




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Share-Based Payments and SFAS 123(R). 5-year 7-year
 97




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##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Weighted





WeightedWeighted


Average





AverageAverage


Remaining





FairNumber of


Range of


Exercise Price


Contractual


Aggregate


ValueShares


Exercise Prices


per Share


Term in Years


Intrinsic Value


Per ShareOutstanding at January 1, 2006


8,161,851


$
0.009-2.67


$
1.56



8.06


$
27,309Granted


2,380,486



2.67-7.61



3.65










$
3.96Exercised


(293,992
)


0.009-2.67



1.35






$
671Cancelled


(240,533
)


1.07-3.00



2.00Outstanding at December 31, 2006


10,007,812


$
0.09-7.61


$
2.05



7.67


$
55,641Granted


4,307,829


$
0.001-7.89


$
6.23










$
3.71Exercised


(416,328
)


0.11-3.00



1.47






$
2,160Cancelled


(563,860
)


1.07-7.89



2.88Outstanding at December 30, 2007


13,335,453


$
0.001-7.89


$
2.24



7.05


$
44,728Granted


2,665,206


$
4.79-6.44


$
5.32










$
5.32Exercised


(2,076,625
)


0.11-5.71



1.27






$
8,472Cancelled


(1,193,579
)

$
0.001-7.89



3.35Outstanding at December 28, 2008


12,729,531


$
0.001-7.89


$
2.94



6.68


$
37,866Exercisable at December 31, 2006


4,169,331


$
0.09-2.67


$
1.34



6.47


$
26,163Exercisable at December 30, 2007


6,985,359


$
0.07-6.72


$
1.33



6.01


$
29,784Exercisable at December 28, 2008


7,093,242


$
0.001-7.89


$
1.78



5.41


$
28,925Options vested or expected to vest at December 30, 2007


12,935,389


$
0.001-7.89


$
2.24



7.05


$
43,386Options vested or expected to vest at December 28, 2008(1)


12,275,518


$
0.001-7.89


$
2.87



6.61


$
37,271Available for grant at December 28, 2008


22,645,739     1.
    
    This represents the number of vested stock options as of
    December 28, 2008 plus the unvested outstanding options at
    December 28, 2008 expected to vest in the future, adjusted
    for estimated forfeitures. 98




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
     WeightedAverage


Weighted





Weighted AverageRemaining


Average


Number of


Exercise PriceNumber of


Contractual


Exercise Price


Options


Per Share forRange of Exercise Prices

Shares Outstanding


Term in Years


per Share


Exercisable


Options Exercisable$0.001 - $0.649


379,344



3.83


$
0.418



309,327


$
0.512$0.865 - $0.865


1,619,464



3.68



0.865



1,618,076



0.865$1.081 - $1.081


2,187,449



5.02



1.081



2,005,465



1.081$1.190 - $1.893


1,820,610



6.04



1.653



1,335,026



1.623$2.163 - $2.163


770,061



6.74



2.163



462,911



2.163$2.433 - $2.433


1,608,004



7.53



2.433



715,213



2.433$2.974 - $4.890


550,815



9.32



4.362



60,076



3.201$5.210 - $5.210


1,526,180



9.10



5.210



1,250



5.210$5.710 - $6.440


1,285,046



8.52



5.984



318,177



5.912$6.460 - $7.890


982,558



8.50



6.941



267,721



7.028$0.001 - $7.890


12,729,531



6.68


$
2.936



7,093,242


$
1.776         Years EndedDecember 30,


December 28,2007


2008Cost of service revenue

$
174


$
250Research and development


1,827



2,893Selling and marketing


669



1,038General and administrative


326



663Total stock-based compensation

$
2,996


$
4,844   Common
    Stock Repurchase Plan
  Rule 10b5-1
 99




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    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$
20,000July 28, 2008  August 24, 2008


205,100


$
5.30



205,100


$
18,913August 25, 2008  September 28, 2008


465,848


$
5.28



465,848


$
16,451September 29, 2008  October 26, 2008


755,182


$
4.68



755,182


$
12,917October 27, 2008  November 23, 2008


683,027


$
4.77



683,027


$
9,657November 24, 2008  December 28, 2008


599,043


$
4.98



599,043


$
6,673Total


2,708,200


$
4.92



2,708,200


$
6,673   12.
    Deferred
    Revenue and Deferred Product and Service Costs       100




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
    Current


Long-Term


TotalDeferred revenue related to April 2005 specified upgrade

$
44


$



$
44Deferred revenue related to September 2006 specified upgrade


6,191







6,191Deferred revenue related to June 2007 specified upgrade


61,316







61,316Deferred revenue related to December 2007 specified upgrade


11,273







11,273Other deferred revenue


1,091



63



1,154Total deferred revenue

$
79,915


$
63


$
79,978Deferred product cost related to September 2006 specified upgrade

$
73


$



$
73Deferred product cost related to June 2007 specified upgrade


853







853Deferred product cost related to December 2007 specified upgrade


124







124Total deferred product cost

$
1,050


$



$
1,050     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   13.
    Accrued
    Expenses and Other Current Liabilities    December 30,


December 28,2007


2008Payroll and payroll-related accruals

$
7,668


$
9,497Accrued rent expense


601



603Accrued legal fees


173



161Accrued audit and tax


504



722Accrued royalties


771



1,644Other accruals


1,445



1,738$
11,162


$
14,365  101




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  14.
    Acquisition      EstimatedUseful Life


Fair ValueDeveloped Technology


60 months


$
3,340Customer Relationships


48 months



1,350Non-Compete Agreements


36 months



190Total Intangible Assets





$
4,880      102




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
      Fair ValueApril 30, 2007Assets Acquired:Current assets

$
462Fixed assets


504Deferred tax asset


509In-process research and development


2,340Intangible assets


4,880Goodwill


7,99816,693Liabilities Assumed:Current liabilities


689Deferred tax liability


1,464Non-current liabilities


7042,857Net assets acquired

$
13,836     Pro
    Forma Results of Operations
    Years EndedDecember 31,


December 30,2006


2007Pro forma revenues

$
171,807


$
306,247Pro forma net income

$
72,081


$
152,809Pro forma earnings per share

$
1.22


$
2.61   15.
    Employee
    Benefit Plan   103




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  16.
    Related
    Party Transactions        EV-DO
  17.
    Special
    Cash Dividend    18.
    Reverse
    Stock Split  1-for-1.333
 104




---



##### Table of Contents



AIRVANA,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
    in thousands, except per share
    amounts)  (Continued)
  19.
    Quarterly
    Financial Data (unaudited)    April 1,


July 1,


September 30,


December 30,


March 30,


June 29,


September 28,


December 28,2007


2007


2007


2007


2008


2008


2008


2008Revenue

$
269


$
156,256


$
3,645


$
145,616


$
7,638


$
59,019


$
8,247


$
63,269Cost of revenue


1,683



35,770



1,689



2,762



1,913



3,327



2,652



3,570Gross (loss) profit


(1,414
)


120,486



1,956



142,854



5,725



55,692



5,595



59,699Total operating expenses


20,079



25,841



25,167



27,399



24,910



24,237



24,949



24,639(Loss) income from operations


(21,493
)


94,645



(23,211
)


115,455



(19,185
)


31,455



(19,354
)


35,060Net (loss) income


(18,785
)


86,102



(18,219
)


104,245



(11,674
)


20,563



(12,445
)


24,849Basic net (loss) income per share

$
(1.49
)

$
1.56


$
(0.35
)

$
1.64


$
(0.18
)

$
0.32


$
(0.19
)

$
0.39Diluted net (loss) income per share

$
(1.49
)

$
1.37


$
(10.35
)

$
1.46


$
(0.18
)

$
0.29


$
(0.19
)

$
0.36   20.
    Nortel
    Bankruptcy           105




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Rules 13a-15(e) 15d-15(e)
  Report of
    Management on Internal Control over Financial
    Reporting
  Rule 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and disposition
    of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorization of our management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.         106




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                
    107




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    www.airvana.com.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   108




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##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules      PageReport of Independent Registered Public Accounting Firm


69Consolidated Balance Sheets as of December 30, 2007 and
    December 28, 2008


70Consolidated Statements of Income for the years ended
    December 31, 2006, December 30, 2007 and
    December 28, 2008


71Consolidated Statements of Cash Flows for the years ended
    December 31, 2006, December 30, 2007 and
    December 28, 2008


72Consolidated Statements of Redeemable Convertible Preferred
    Stock and Stockholders (Deficit) Equity for the for the
    years ended December 31, 2006, December 30, 2007 and
    December 28, 2008


73Notes to Consolidated Financial Statements


74          109




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##### Table of Contents



SIGNATURES      By:
    /s/  Randall
    S. Battat       Name

Title/s/  Randall
    S. BattatRandall
    S. Battat

President, Chief Executive Officer and Director
    (Principal Executive Officer)/s/  Jeffrey
    D. GliddenJeffrey
    D. Glidden

Vice President, Chief Financial Officer
    (Principal Financial and Accounting Officer)/s/  Hassan
    AhmedHassan
    Ahmed

DirectorRobert
    P. Badavas

Director/s/  Gururaj
    DeshpandeGururaj
    Deshpande

Director/s/  Paul
    J. FerriPaul
    J.
    Ferri

DirectorAnthony
    S. Thornley

Director/s/  Sanjeev
    VermaSanjeev
    Verma

Director  110




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Exhibit3
.1

Restated Certificate of Incorporation of the Registrant (filed
    as Exhibit 3.1 to the Registrants Report on
    Form 8-K
    filed on July 25, 2007 (File
    No. 001-33576)
    and incorporated herein by reference)3
.2

Amended and Restated Bylaws of the Registrant (filed as
    Exhibit 3.4 to the Registrants Registration Statement
    on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)4
.1

Specimen certificate evidencing shares of common stock (filed as
    Exhibit 4.1 to the Registrants Registration Statement
    on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)4
.2

Third Amended and Restated Investor Rights Agreement dated as of
    June 6, 2007 between the Registrant and the Preferred
    Investors, Other Investors, Founders and Warrant Holders (filed
    as Exhibit 10.5 to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.1*

2000 Stock Incentive Plan, as amended (filed as
    Exhibit 10.1 to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.2*

2007 Stock Incentive Plan (filed as Exhibit 10.2 to the
    Registrants Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.3*

Forms of Incentive Stock Option Agreements under 2007 Stock
    Incentive Plan (filed as Exhibit 10.3 to the
    Registrants Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.4*

Forms of Nonstatutory Stock Option Agreements under 2007 Stock
    Incentive Plan (filed as Exhibit 10.4 to the
    Registrants Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.5

Development and Purchase and Sale Agreement for CDMA High Data
    Rate (1xEV-DO) Products dated October 1, 2001 between the
    Registrant and Nortel Networks, Inc., as amended (filed as
    Exhibit 10.6 to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.6

HDR Infrastructure Equipment License Agreement, entered into on
    September 18, 2000, by and between Qualcomm Incorporated
    and the Registrant, as amended (filed as Exhibit 10.7 to
    the Registrants Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.7

CSM 6800 Software Agreement, entered into as of April 28,
    2004, by and between Qualcomm Incorporated and the Registrant
    (filed as Exhibit 10.8 to the Registrants
    Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.8

Lease Agreement, dated as of October 4, 2004, between the
    Registrant and W9/TIB Realty, L.L.C. (filed as Exhibit 10.9
    to the Registrants Registration Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.9

Lease Agreement, dated as of August 4, 2005, between the
    Registrant and W9/TIB III Realty, L.L.C. (filed as
    Exhibit 10.10 to the Registrants Registration
    Statement on
    Form S-1
    (File
    No. 333-142210)
    and incorporated herein by reference)10
.10

Amendment No. 10 to Development and Purchase And Sale
    Agreement For CDMA High Data Rate (1xEV-DO) Products between the
    Registrant and Nortel Networks, Inc., entered into as of
    September 28, 2007 (filed as Exhibit 10.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    filed on November 8, 2007 (File
    No. 001-33576)
    for the quarterly period ended September 30, 2007 and
    incorporated herein by reference)10
.11#

Amendment No. 11 to Development and Purchase And Sale
    Agreement For CDMA High Data Rate (1xEV-DO) Products between the
    Registrant and Nortes Networks, Inc., entered into as of
    November 6, 200821
.1#

Subsidiaries of the Registrant23
.1#

Consent of Ernst & Young LLP, Independent Registered
    Public Accounting Firm




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##### Table of Contents



Exhibit No.

Exhibit31
.1#

Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002,
    Rule 13(a)-
    14(a)/15d-14(a), by President and Chief Executive Officer31
.2#

Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002,
    Rule 13(a)-
    14(a)/15d-14(a), by Vice President, Chief Financial Officer32#


Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, by President and Chief Executive Officer and Vice
    President, Chief Financial Officer     *
    
    Management contracts or compensatory plans or arrangements
    required to be filed as an exhibit hereto pursuant to
    Item 15(a) of
    Form 10-K.
    
    Indicates confidential treatment requested as to certain
    portions, which portions were omitted and filed separately with
    the Securities and Exchange Commission pursuant to a
    Confidential Treatment Request.#
    
    Filed herewith.