UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31,2004

OR

[    ] TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number: 000-22839

Globecomm Systems Inc.(Exact nameof Registrant as specified in its charter)

|                                                                     |  |                                             |  |  |  |  |
|---------------------------------------------------------------------|--|---------------------------------------------|--|--|--|--|
| Delaware(Stateor other jurisdiction ofincorporation ororganization) |  | 11-3225567(I.R.S.EmployerIdentificationNo.) |
|                                                                |  |
| 45 OserAvenue,Hauppauge, NY(Address of principal executiveoffices)  |  | 11788(ZipCode)                              |
|                                                                     |

Registrant's telephonenumber, including area code: (631) 231-9800

Indicate by checkmark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes [X]   No  [    ]

Indicate by check mark whether the Registrant is an acceleratedfiler (as defined in Rule 12b-2 of the Act). Yes [    ] No[X]

As of February 9, 2005, there were 14,551,245shares of the Registrant's common stock, $0.001 par value,outstanding.

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GLOBECOMM SYSTEMSINC.

Index to the December 31, 2004 Form 10-Q

|                                     |  |                                                                                                                                              |  |        |    |        |  |  |  |  |
|-------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
|                                |  |                                                                                                                                         |  | Page   |
| Part I — FinancialInformation |  |
| Item1.                              |  | FinancialStatements                                                                                                                          |  |   | 3  |   |
|                                |  | Consolidated BalanceSheets — As of December 31, 2004 (unaudited) and    June  30, 2004                             |  |   | 3  |   |
|                                |  | ConsolidatedStatements of Operations (unaudited) — For the threeand    six months ended December 31, 2004 and2003  |  |   | 4  |   |
|                                |  | ConsolidatedStatement of Changes in Stockholders' Equity (unaudited)—    For the six months ended December 31,2004 |  |   | 5  |   |
|                                |  | ConsolidatedStatements of Cash Flows (unaudited) — For the six months    ended December 31, 2004 and 2003          |  |   | 6  |   |
|                                |  | Notes to Consolidated Financial Statements(unaudited)                                                                                        |  |   | 7  |   |
| Item2.                              |  | Management'sDiscussion and Analysis of Financial Condition and    Results ofOperations                                   |  |   | 13 |   |
| Item 3.                             |  | Quantitativeand Qualitative Disclosures about Market Risk                                                                                    |  |   | 27 |   |
| Item 4.                             |  | Controls and Procedures                                                                                                                      |  |   | 27 |   |
| Part II— Other Information    |  |
| Item 1.                             |  | LegalProceedings                                                                                                                             |  |   | 28 |   |
| Item 2.                             |  | UnregisteredSales of Equity Securities and Use of Proceeds                                                                                   |  |   | 28 |   |
| Item 3.                             |  | Defaults Upon SeniorSecurities                                                                                                               |  |   | 28 |   |
| Item 4.                             |  | Submission ofMatters to a Vote of Security Holders                                                                                           |  |   | 28 |   |
| Item 5.                             |  | Other Information                                                                                                                            |  |   | 28 |   |
| Item 6.                             |  | Exhibits                                                                                                                                     |  |   | 29 |   |
|                                |  | Signatures                                                                                                                                   |  |   | 30 |   |
|                                     |

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PART I —FINANCIAL INFORMATION

Item 1.     Financial Statements

GLOBECOMM SYSTEMS INC.CONSOLIDATED BALANCE SHEETS(Inthousands, except sharedata)

|                                                                                                                                                                                               |  |                 |         |             |  |        |         |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------|---------|-------------|--|--------|---------|---------|--|--|
|                                                                                                                                                                                          |  | December31,2004 |         | June30,2004 |
|                                                                                                                                                                                          |  | (Unaudited)     |         |
| **Assets**                                                                                                                                                                                    |  |
| Currentassets:                                                                                                                                                                                |  |
| Cash and cashequivalents                                                                                                                                                                      |  | $               | 27,040  |        |  | $      | 28,252  |    |
| Restrictedcash                                                                                                                                                                                |  |            | 2,484   |        |  |   | 1,903   |    |
| Accountsreceivable,net                                                                                                                                                                        |  |            | 20,642  |        |  |   | 14,318  |    |
| Inventories                                                                                                                                                                                   |  |            | 11,014  |        |  |   | 3,904   |    |
| Prepaidexpenses and other currentassets                                                                                                                                                       |  |            | 1,025   |        |  |   | 1,274   |    |
| Deferredincometaxes                                                                                                                                                                           |  |            | 83      |        |  |   | 83      |    |
| Totalcurrent assets                                                                                                                                                                           |  |            | 62,288  |        |  |   | 49,734  |    |
| Fixedassets,net                                                                                                                                                                               |  |            | 15,475  |        |  |   | 15,441  |    |
| Goodwill                                                                                                                                                                                      |  |            | 7,204   |        |  |   | 7,204   |    |
| Otherassets                                                                                                                                                                                   |  |            | 1,097   |        |  |   | 1,096   |    |
| Totalassets                                                                                                                                                                                   |  | $               | 86,064  |        |  | $      | 73,475  |    |
| **Liabilitiesand Stockholders' Equity**                                                                                                                                                       |  |
| Currentliabilities:                                                                                                                                                                           |  |
| Accountspayable                                                                                                                                                                               |  | $               | 21,194  |        |  | $      | 15,453  |    |
| Deferredrevenues                                                                                                                                                                              |  |            | 2,763   |        |  |   | 1,083   |    |
| Accruedpayroll and related fringebenefits                                                                                                                                                     |  |            | 1,436   |        |  |   | 1,154   |    |
| Otheraccruedexpenses                                                                                                                                                                          |  |            | 2,042   |        |  |   | 1,676   |    |
| Deferredliabilities                                                                                                                                                                           |  |            | 316     |        |  |   | 316     |    |
| Totalcurrentliabilities                                                                                                                                                                       |  |            | 27,751  |        |  |   | 19,682  |    |
| Deferredliabilities, less currentportion                                                                                                                                                      |  |            | 828     |        |  |   | 987     |    |
| Commitmentsandcontingencies                                                                                                                                                                   |  |
| Stockholders'equity:                                                                                                                                                                          |  |
| Series A Junior Participating, sharesauthorized, issued and outstanding: none at December 31, 2004 and June30,2004                                                                            |  |            | — |        |  |   | — |    |
| Commonstock, $.001 par value, shares authorized: 50,000,000 at December 31,2004 and 22,000,000 at June 30, 2004; shares issued: 14,904,430 atDecember 31, 2004 and 14,628,574 at June 30,2004 |  |            | 15      |        |  |   | 15      |    |
| Additional paid-incapital                                                                                                                                                                     |  |            | 131,918 |        |  |   | 130,503 |    |
| Accumulateddeficit                                                                                                                                                                            |  |            | (72,015 | )      |  |   | (75,198 | )  |
| Accumulatedother comprehensiveincome                                                                                                                                                          |  |            | 348     |        |  |   | 267     |    |
| Treasurystock, at cost, 465,351 shares at December 31, 2004 and June 30,2004                                                                                                                  |  |            | (2,781  | )      |  |   | (2,781  | )  |
| Totalstockholders'equity                                                                                                                                                                      |  |            | 57,485  |        |  |   | 52,806  |    |
| Totalliabilities and stockholders'equity                                                                                                                                                      |  | $               | 86,064  |        |  | $      | 73,475  |    |
|                                                                                                                                                                                               |

Seeaccompanying notes.

3

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GLOBECOMM SYSTEMS INC.CONSOLIDATEDSTATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)

|                                                                                             |  |                   |         |                  |  |                 |         |                  |  |        |         |        |  |        |         |         |  |  |
|---------------------------------------------------------------------------------------------|--|-------------------|---------|------------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                                                                        |  | ThreeMonths Ended |         | Six MonthsEnded  |
|                                                                                        |  | December31,2004   |         | December 31,2003 |  | December31,2004 |         | December 31,2003 |
| Revenuesfrom ground segment systems, networks and enterprisesolutions                       |  | $                 | 24,693  |             |  | $               | 19,891  |             |  | $      | 46,279  |   |  | $      | 36,922  |    |
| Revenuesfrom data communicationsservices                                                    |  |              | 4,535   |             |  |            | 3,809   |             |  |   | 8,408   |   |  |   | 7,239   |    |
| Totalrevenues                                                                               |  |              | 29,228  |             |  |            | 23,700  |             |  |   | 54,687  |   |  |   | 44,161  |    |
| Costsand operating expenses:                                                                |  |
| Costs from groundsegment systems, networks and enterprisesolutions                          |  |              | 21,013  |             |  |            | 17,798  |             |  |   | 39,075  |   |  |   | 33,102  |    |
| Costsfrom data communicationsservices                                                       |  |              | 3,714   |             |  |            | 3,255   |             |  |   | 6,908   |   |  |   | 6,473   |    |
| Sellingandmarketing                                                                         |  |              | 1,383   |             |  |            | 1,126   |             |  |   | 2,552   |   |  |   | 2,242   |    |
| Researchanddevelopment                                                                      |  |              | 174     |             |  |            | 236     |             |  |   | 472     |   |  |   | 711     |    |
| Generalandadministrative                                                                    |  |              | 2,074   |             |  |            | 2,103   |             |  |   | 2,702   |   |  |   | 2,997   |    |
| Totalcosts and operatingexpenses                                                            |  |              | 28,358  |             |  |            | 24,518  |             |  |   | 51,709  |   |  |   | 45,525  |    |
| Income(loss) fromoperations                                                                 |  |              | 870     |             |  |            | (818    | )           |  |   | 2,978   |   |  |   | (1,364  | )  |
| Otherincome:                                                                                |  |
| Interestincome                                                                              |  |              | 92      |             |  |            | 66      |             |  |   | 165     |   |  |   | 128     |    |
| Gainon sale ofinvestment                                                                    |  |              | 40      |             |  |            | — |             |  |   | 40      |   |  |   | — |    |
| Gainon sale of available-for-salesecurities                                                 |  |              | — |             |  |            | 91      |             |  |   | — |   |  |   | 91      |    |
| Netincome(loss)                                                                             |  | $                 | 1,002   |             |  | $               | (661    | )           |  | $      | 3,183   |   |  | $      | (1,145  | )  |
| Basicnet income (loss) per commonshare                                                      |  | $                 | 0.07    |             |  | $               | (0.05   | )           |  | $      | 0.22    |   |  | $      | (0.09   | )  |
| Diluted net income (loss) percommon share                                                   |  | $                 | 0.07    |             |  | $               | (0.05   | )           |  | $      | 0.21    |   |  | $      | (0.09   | )  |
| Weighted-average shares used in thecalculation of basic net income (loss) per commonshare   |  |              | 14,396  |             |  |            | 12,575  |             |  |   | 14,289  |   |  |   | 12,576  |    |
| Weighted-averageshares used in the calculation of diluted net income (loss) per commonshare |  |              | 14,975  |             |  |            | 12,575  |             |  |   | 14,842  |   |  |   | 12,576  |    |
|                                                                                             |

Seeaccompanying notes.

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GLOBECOMM SYSTEMS INC. CONSOLIDATEDSTATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIXMONTHS ENDED DECEMBER 31, 2004 (In thousands)(Unaudited)

|                                                                        |  |                                                                                     |        |                          |  |                    |        |                                           |  |                                       |         |                         |  |        |         |         |  |        |        |         |  |        |        |        |  |        |        |         |  |        |        |         |  |        |
|------------------------------------------------------------------------|--|-------------------------------------------------------------------------------------|--------|--------------------------|--|--------------------|--------|-------------------------------------------|--|---------------------------------------|---------|-------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--------|
|                                                                   |  |             CommonStock |        | AdditionalPaid-inCapital |  | AccumulatedDeficit |        | AccumulatedOtherComprehensiveIncome(Loss) |  |     TreasuryStock |         | TotaStockholders'Equity |
|                                                                   |  | Shares                                                                              |        | Amount                   |  | Shares             |        | Amount                                    |  |
| Balanceat June 30,2004                                                 |  |                                                                                | 14,629 |                     |  | $                  | 15     |                                      |  | $                                     | 130,503 |                    |  | $      | (75,198 | )  |  | $      | 267    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 52,806 |    |
| Proceedsfrom exercise of stockoptions                                  |  |                                                                                | 82     |                     |  |               |   |                                      |  |                                  | 369     |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 369    |    |
| Proceedsfrom exercise ofwarrants                                       |  |                                                                                | 175    |                     |  |               |   |                                      |  |                                  | 962     |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 962    |    |
| Issuanceof common stock in connection with employee stock purchaseplan |  |                                                                                | 18     |                     |  |               |   |                                      |  |                                  | 78      |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 78     |    |
| Issuanceof stock options forservices                                   |  |                                                                                |   |                     |  |               |   |                                      |  |                                  | 6       |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 6      |    |
| Comprehensiveincome:                                                   |  |
| Netincome                                                              |  |                                                                                |   |                     |  |               |   |                                      |  |                                  |    |                    |  |   | 3,183   |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 3,183  |    |
| Gainfrom foreign currencytranslation                                   |  |                                                                                |   |                     |  |               |   |                                      |  |                                  |    |                    |  |   |    |    |  |   | 84     |    |  |   |   |   |  |   |   |    |  |   | 84     |    |
| Unrealizedloss on available-for-salesecurities                         |  |                                                                                |   |                     |  |               |   |                                      |  |                                  |    |                    |  |   |    |    |  |   | (3     | )  |  |   |   |   |  |   |   |    |  |   | (3     | )  |
| Totalcomprehensiveincome                                               |  |                                                                                |   |                     |  |               |   |                                      |  |                                  |    |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   | 3,264  |    |
|                                                                   |  |                                                                                |   |                     |  |               |   |                                      |  |                                  |    |                    |  |   |    |    |  |   |   |    |  |   |   |   |  |   |   |    |  |   |   |    |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Balanceat December 31,2004                                             |  |                                                                                | 14,904 |                     |  | $                  | 15     |                                      |  | $                                     | 131,918 |                    |  | $      | (72,015 | )  |  | $      | 348    |    |  |   | 465    |   |  | $      | (2,781 | )  |  | $      | 57,485 |    |
|                                                                        |

Seeaccompanying notes.

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GLOBECOMM SYSTEMS INC. CONSOLIDATEDSTATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

|                                                                                                 |  |                  |         |                  |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|---------|--|--|
|                                                                                            |  | SixMonths Ended  |
|                                                                                            |  | December31, 2004 |         | December 31,2003 |
| **OPERATINGACTIVITIES:**                                                                        |  |
| Net income(loss)                                                                                |  | $                | 3,183   |             |  | $      | (1,145  | )  |
| Adjustmentsto reconcile net income (loss) to net cash (used in) provided byoperatingactivities: |  |             |    |             |  |   |    |    |
| Depreciationandamortization                                                                     |  |             | 1,488   |             |  |   | 1,606   |    |
| Allowancefor doubtful accountsrecovery                                                          |  |             | (1,510  | )           |  |   | (899    | )  |
| Changesin deferredliabilities                                                                   |  |             | (159    | )           |  |   | (256    | )  |
| Stockcompensation expense                                                                       |  |             | 6       |             |  |   | 3       |    |
| Gainon sale of available-for-salesecurities                                                     |  |             | — |             |  |   | (91     | )  |
| Unrealizedloss on available-for-salesecurities                                                  |  |             | (3      | )           |  |   | — |    |
| Changesin operating assets and liabilities:                                                     |  |
| Accountsreceivable                                                                              |  |             | (4,737  | )           |  |   | (2,893  | )  |
| Inventories                                                                                     |  |             | (7,097  | )           |  |   | 4,268   |    |
| Prepaidexpenses and other currentassets                                                         |  |             | 251     |             |  |   | (132    | )  |
| Otherassets                                                                                     |  |             | (1      | )           |  |   | 91      |    |
| Accountspayable                                                                                 |  |             | 5,699   |             |  |   | 4,043   |    |
| Deferredrevenue                                                                                 |  |             | 1,679   |             |  |   | (5,027  | )  |
| Accruedpayroll and related fringebenefits                                                       |  |             | 281     |             |  |   | 39      |    |
| Other accruedexpenses                                                                           |  |             | 364     |             |  |   | 555     |    |
| Netcash (used in) provided by operatingactivities                                               |  |             | (556    | )           |  |   | 162     |    |
| **INVESTINGACTIVITIES:**                                                                        |  |
| Purchases of fixedassets                                                                        |  |             | (1,517  | )           |  |   | (507    | )  |
| Repayment ofpromissory note from a relatedparty                                                 |  |             | — |             |  |   | 300     |    |
| Proceeds from saleof available-for-salesecurities                                               |  |             | — |             |  |   | 391     |    |
| Restrictedcash                                                                                  |  |             | (581    | )           |  |   | (523    | )  |
| Netcash used in investingactivities                                                             |  |             | (2,098  | )           |  |   | (339    | )  |
| **FINANCINGACTIVITIES:**                                                                        |  |
| Proceeds from sale of common stockin connection with employee stock purchaseplan                |  |             | 78      |             |  |   | 54      |    |
| Purchase of treasurystock                                                                       |  |             | — |             |  |   | (333    | )  |
| Proceeds fromexercise of stockoptions                                                           |  |             | 369     |             |  |   | 176     |    |
| Proceeds fromexercise ofwarrants                                                                |  |             | 962     |             |  |   | — |    |
| Netcash provided by (used in) financingactivities                                               |  |             | 1,409   |             |  |   | (103    | )  |
| Effectof foreign currency translation oncash                                                    |  |             | 33      |             |  |   | 40      |    |
| Netdecrease in cash and cashequivalents                                                         |  |             | (1,212  | )           |  |   | (240    | )  |
| Cash andcash equivalents at beginning ofperiod                                                  |  |             | 28,252  |             |  |   | 22,016  |    |
| Cashand cash equivalents at end ofperiod                                                        |  | $                | 27,040  |             |  | $      | 21,776  |    |
|                                                                                                 |

Seeaccompanying notes.

6

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GLOBECOMMSYSTEMS INC.NOTES TO CONSOLIDATED FINANCIALSTATEMENTSDECEMBER 31, 2004(Unaudited)

1.    Basisof Presentation

The accompanying unaudited consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interimfinancial information and in accordance with the instructions to Form10-Q and Article 10 of Regulation S-X. Accordingly, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financialstatements. In the opinion of management, all material adjustments(consisting of normal recurring adjustments) considered necessary for afair presentation of the results for such periods have been included.The consolidated balance sheet at June 30, 2004 has been derived fromthe audited consolidated financial statements at that date but does notinclude all of the information and footnotes required by accountingprinciples generally accepted in the United States for completefinancial statements. The results of operations for the three and sixmonths ended December 31, 2004, are not necessarily indicative of theresults that may be expected for the full fiscal year ending June 30,2005, or for any future period.

The accompanying consolidatedfinancial statements should be read in conjunction with the auditedconsolidated financial statements of the Company for the fiscal yearended June 30, 2004 and the accompanying notes thereto contained in theCompany's Annual Report on Form 10-K, filed with the Securitiesand Exchange Commission on September 28, 2004.

Principles ofConsolidation

The consolidated financial statements include theaccounts of the Company and its wholly-owned subsidiaries, GlobecommNetwork Services Corporation, (formerly named NetSat Express, Inc.),and Globecomm Systems Europe Limited (collectively, the"Company"). All significant intercompanybalances and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financialstatements in conformity with accounting principles generally acceptedin the United States requires management to make estimates andassumptions that affect the amounts reported in the consolidatedfinancial statements and accompanying notes. Actual results coulddiffer from those estimates.

Revenue Recognition

TheCompany recognizes revenue in accordance with Staff Accounting BulletinNo. 104 ("SAB 104"), Revenue Recognition, forits production-type contracts that are sold separately as standardsatellite ground segment systems when persuasive evidence of anarrangement exists, the selling price is fixed or determinable,collectibility is reasonably assured, delivery has occurred and thecontractual performance specifications have been met. TheCompany's standard satellite ground segment systems produced inconnection with these contracts are typically short-term (less thantwelve months in term) and manufactured using a standard modularproduction process. Such systems require less engineering, drafting anddesign efforts than the Company's long-term complexproduction-type projects. Revenue is recognized on the Company'sstandard satellite ground segment systems upon shipment and acceptanceof factory performance testing which is when title transfers to thecustomer. The amount of revenues recorded on each standardproduction-type contract is reduced by the customers' contractualholdback amount, which typically requires 10% to 30% ofthe contract value to be retained by the customer until installationand final acceptance is complete. The customer generally becomesobligated to pay 70% to 90% of the contract value uponshipment and acceptance of factory performance testing. Installation isnot deemed to be essential to the functionality of the system since

7

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installation does not require significantchanges to the features or capabilities of the system, does not requirecomplex software integration and interfacing and the Company has notexperienced any difficulties installing such equipment. In addition,the customer or other third party vendors can install the system. Theestimated relative fair value of the installation services isdetermined by management, which is typically less than thecustomer's contractual holdback percentage. If the holdback isless than the fair value of installation, the Company will deferrecognition of revenues, determined on a contract-by-contract basisequal to the fair value of the installation services. Payments receivedin advance by customers are deferred until shipment and are presentedas deferred revenues in the accompanying consolidated balancesheets.

The Company recognizes revenue using thepercentage-of-completion method of accounting upon the achievement ofcertain contractual milestones in accordance with Statement of Position81-1 ("SOP 81-1"), Accounting for Performanceof Construction-Type and Certain Production-Type Contracts, for itsnon-standard, complex production-type contracts for the production ofsatellite ground segment systems and equipment that are generallyintegrated into the customers' satellite ground segment network.The equipment and systems produced in connection with these contractsare typically long-term (in excess of twelve months in term) andrequire significant customer-specific engineering, drafting and designeffort in order to effectively integrate all of the customizable earthstation equipment into the customers' ground segment network.These contracts generally have larger contract values, greater economicrisks and substantive specific contractual performance requirements dueto the engineering and design complexity of such systems and relatedequipment. Progress payments received in advance by customers arenetted against the inventory balances in the accompanying consolidatedbalance sheets.

Contract costs generally include purchasedmaterial, direct labor, overhead and other indirect costs. Anticipatedcontract losses are recognized, as they become known.

Revenuesfrom data communications services are derived primarily from Internetaccess service fees. Service revenues from Internet access arerecognized ratably over the period in which services are provided.Payments received in advance of providing Internet access services aredeferred until the period such services are provided and are presentedas deferred revenues in the accompanying consolidated balancesheets.

Costs from Ground Segment Systems, Networks andEnterprise Solutions

Costs related to our production-typecontracts and our non-standard, complex production-type contracts relyon estimates based on total expected contract costs. These costsconsist primarily of the costs of purchased materials (includingshipping and handling costs), direct labor and related overheadexpenses, project-related travel and living costs and subcontractorsalaries. We use estimates of the costs applicable to various elements,which we believe are reasonable. Since these contract costs depend onestimates, which are assessed continually during the term of thesecontracts, costs are subject to revisions as the contract progresses tocompletion. Revision in cost estimates are reflected in the period inwhich they become known. In the event an estimate indicates that a losswill be incurred at completion, we record the costs in the periodidentified.

Costs from Data Communications Services

Costs from data communications services relating to Internet accessservice fees consist primarily of satellite space segment charges,Internet connectivity fees and network operations expenses. Satellitespace segment charges consist of the costs associated with obtainingsatellite bandwidth (the measure of capacity) used in the transmissionof services to and from the satellite leased from operators. Networkoperations expenses consist primarily of costs associated with theoperation of the network operation center, on a twenty-four hour a day,seven-day a week basis, including personnel and related costs anddepreciation.

Research and Development

Research anddevelopment expenditures are expensed as incurred.

8

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Stock-Based Compensation

TheCompany accounts for stock option grants using the intrinsic valuemethod prescribed in Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees ("APB No.25"), and complies with the disclosure provisions ofStatement of Financial Accounting Standards("SFAS") No. 123, Accounting for Stock-BasedCompensation ("SFAS No. 123"), as amended bySFAS No. 148, Accounting for Stock-Based Compensation-Transition andDisclosure ("SFAS No.  148").

Interim pro-forma information regarding net income and net loss percommon share is required by SFAS No. 148, if the Company accounts forits stock options granted under the intrinsic value method. The fairvalue of options granted under the Company's Amended and Restated1997 Stock Incentive Plan was estimated at the date of grant using aBlack-Scholes option pricing model.

The Black-Scholes optionvaluation model was developed for use in estimating the fair value oftraded options, which have no vesting restrictions and are fullytransferable. In addition, option valuation models require the input ofhighly subjective assumptions, including the expected stock pricevolatility. The Company's stock options have characteristicssignificantly different from those of traded options, and becausechanges in the subjective input assumptions can materially affect thefair value estimate, in management's opinion, the existing modelsdo not necessarily provide a reliable single measure of the fair valueof the Company's stock options under the Black-Scholes optionvaluation model.

For purposes of pro-forma disclosures, theestimated fair value of the options is amortized to expense over theoptions' vesting period. The Company's pro-formainformation is as follows:

|                                                     |  |                                      |       |                   |  |                 |        |                   |  |        |       |         |  |        |        |         |  |  |
|-----------------------------------------------------|--|--------------------------------------|-------|-------------------|--|-----------------|--------|-------------------|--|--------|-------|---------|--|--------|--------|---------|--|--|
|                                                |  | ThreeMonths Ended                    |       | Six MonthsEnded   |
|                                                |  | December31,2004                      |       | December 31, 2003 |  | December31,2004 |        | December 31, 2003 |
|                                                |  | (Unaudited)                          |
|                                                |  | (In thousands, except per sharedata) |
| Reported net income (loss)                          |  | $                                    | 1,002 |              |  | $               | (661   | )            |  | $      | 3,183 |    |  | $      | (1,145 | )  |
| Pro-forma stock compensation expense                |  |                                 | (353  | )            |  |            | (621   | )            |  |   | (781  | )  |  |   | (1,281 | )  |
| Pro-forma net income (loss)                         |  | $                                    | 649   |              |  | $               | (1,282 | )            |  | $      | 2,402 |    |  | $      | (2,426 | )  |
| Reportedbasic net income (loss) per common share    |  | $                                    | 0.07  |              |  | $               | (0.05  | )            |  | $      | 0.22  |    |  | $      | (0.09  | )  |
| Reported diluted net income(loss) per common share  |  | $                                    | 0.07  |              |  | $               | (0.05  | )            |  | $      | 0.21  |    |  | $      | (0.09  | )  |
| Pro-forma basic net income(loss) per common share   |  | $                                    | 0.05  |              |  | $               | (0.10  | )            |  | $      | 0.17  |    |  | $      | (0.19  | )  |
| Pro-forma diluted net income(loss) per common share |  | $                                    | 0.04  |              |  | $               | (0.10  | )            |  | $      | 0.16  |    |  | $      | (0.19  | )  |
|                                                     |

During the three and sixmonths ended December 31, 2004, compensation expense related to stockoptions of $1,000 and $6,000 was included in the reported net income,respectively. During the three and six months ended December 31, 2003,compensation expense related to stock options of $3,000 was included inthe reported net loss.

In December 2004, the FinancialAccounting Standards Board (FASB) issued SFAS No. 123 (revised 2004),Share-Based Payment, which is a revision of SFAS 123("SFAS 123R"). SFAS 123R eliminates theability to account for share-based compensation under the intrinsicvalue method permitted by APB 25. This will require the Company toadopt the fair value model for recognizing compensation expense foremployee stock options, and would have the effect of reducing theCompany's reported net income and net income per share. SFAS 123Ris effective July 1, 2005. The Company is currently evaluating theimpact of adopting this pronouncement on the consolidated financialstatements.

9

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In light of these new requirements, theCompany is considering modifying the equity element of the compensationstructure used for employees, which has frequently included an annualgrant of options which vested over multiple years. In the interim,until a final compensation structure is determined, the Company made anoption grant to employees in January 2005 of options to purchase132,000 shares of Common Stock, which was significantly smaller thanthe usual annual grant and will fully vest in June 2005.

Goodwill

Goodwill represents the excess of the purchaseprice of businesses over the fair value of the identifiable net assetsacquired. In accordance with SFAS No. 142, Goodwill and OtherIntangible Assets, goodwill and other indefinite life intangible assetsare no longer amortized, but instead tested for impairment at leastannually. The impairment test for goodwill uses a two-step approach,which is performed at the reporting unit level. Step one compares thefair value of the reporting unit (calculated using a discounted cashflow method) to its carrying value. If the carrying value exceeds thefair value, there is a potential impairment and step two must beperformed. Step two compares the carrying value of the reportingunit's goodwill to its implied fair value (i.e., fair value ofthe reporting unit less the fair value of the unit's assets andliabilities, including identifiable intangible assets). If the carryingvalue of goodwill exceeds its implied fair value, the excess isrequired to be recorded as an impairment. There have been no eventsduring the six months ended December 31, 2004 that would result in anygoodwill impairment.

Inventories

Inventories consistprimarily of work-in-progress from costs incurred in connection withspecific customer contracts, which are stated at the lower of cost ormarket value. In assessing the realizability of inventories, we arerequired to make estimates of the total contract costs based on thevarious elements of the work-in-progress. It is possible that changesto these estimates could cause a reduction in the net realizable valueof our inventories.

Restricted Cash

Restricted cashincludes certificates of deposit used as cash collateral for bidproposals and contract performance guarantees.

ComprehensiveIncome

Comprehensive income for the three and six months endedDecember 31, 2004 of approximately $1,104,000 and $3,264,000,respectively, includes a foreign currency translation gain ofapproximately $105,000 and $84,000 and an unrealized loss onavailable-for-sale securities of approximately $3,000. Comprehensiveloss for the three and six months ended December 31, 2003 ofapproximately $543,000 and $893,000, respectively, includes a foreigncurrency translation gain of approximately $23,000 and $57,000 and anunrealized gain on available-for-sale securities of approximately$95,000 and $195,000, respectively.

Accounting for DerivativeInstruments and Hedging Activities

SFAS No. 133, Accounting forDerivative Instruments and Hedging Activities, as amended by SFAS No.138, Accounting for Certain Derivative Instruments and Certain HedgingActivities – an Amendment to SFAS No. 133, requires that allderivative instruments be recognized on the balance sheet at fairvalue. In addition, the standard specifies criteria for designation andeffectiveness of hedging relationships and establishes accounting rulesfor reporting changes in the fair value of a derivative instrumentdepending on the designated type of hedge.

The Company, attimes, enters into foreign currency exchange contracts (forwardcontracts) to manage its exposure to currency rate fluctuations onanticipated sales and purchases. These types of exchange contractsgenerally qualify for accounting as designated hedges. The realized andunrealized 

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gains and losses on qualified contracts aredeferred and included as components of the related transactions. Anycontracts that do not qualify as hedges for accounting purposes aremarked to market with the resulting gains and losses recognized inother income or expense. At December 31, 2004 and June 30, 2004, theCompany had outstanding one foreign exchange contracts with notionalamounts of $1,300,000 and $0, respectively. As of December 31, 2004there was approximately $60,000 outstanding under this foreign exchangecontract. The foreign currency forward contract held by the Company atDecember 31, 2004 was not a designated hedge under SFAS No. 133.

Income Taxes

In assessing the realizability of deferred taxassets, management considers whether it is more likely than not thatsome portion or all of the deferred tax assets will be realized. Theultimate realization of the net deferred tax assets is dependent uponthe generation of future taxable income prior to the expiration of anynet operating loss carryforwards. For the six months ended December 31,2004 and the year ended June 30, 2004, due to the uncertainty regardingthe Company's ability to utilize its net operating losses in thefuture, the Company provided a valuation allowance against itspreviously recorded deferred tax assets except for approximately$83,000, representing state investment tax credit carryforwards thatwill be utilized to offset state capital taxes on the Company'scombined state tax return. The Company has used net operating losscarryforwards to offset the net income for the three and six monthsended December 31, 2004.

Product Warranties

The Companyoffers warranties on its contracts, the specific terms and conditionsof which vary depending upon the contract and work performed.Generally, a basic limited warranty, including parts and labor, isprovided to customers for one year. The Company can recoup certain ofthese costs through product warranties it holds with its originalequipment manufacturers, which typically are one year in term.Historically, warranty expense has been minimal, however, managementperiodically assesses the need for any additional warranty reserve.

2.    Basic and Diluted Net Income (Loss) Per Common Share

The Company computes net income (loss) per common share inaccordance with the provisions of SFAS No. 128, Earnings Per Share.Basic and diluted net income (loss) per common share is computed bydividing the net income (loss) for the period by the weighted-averagenumber of common equivalent shares outstanding for the period. Commonequivalent shares consist of the incremental common shares issuableupon the conversion of preferred stock (using an if-converted method)and incremental common shares issuable upon the exercise of stockoptions and warrants (using the treasury stock method). Incrementalcommon equivalent shares were excluded from the calculation of dilutednet loss per common share for the three and six months ended December31, 2003, as their effect was anti-dilutive. Diluted net loss percommon share for the three and six months ended December 31, 2003excludes the effect of approximately 361,000 and 161,000 stock options,respectively, as their effect would have been anti-dilutive.

3.    Inventories

Inventories consist of thefollowing:

|                                   |  |                 |        |             |  |        |        |         |  |  |
|-----------------------------------|--|-----------------|--------|-------------|--|--------|--------|---------|--|--|
|                              |  | December31,2004 |        | June30,2004 |
|                              |  | (Unaudited)     |        |
|                              |  | (Inthousands)   |
| Raw materials and component parts |  | $               | 161    |        |  | $      | 163    |    |
| Work-in-progress                  |  |            | 11,608 |        |  |   | 7,362  |    |
|                              |  |            | 11,769 |        |  |   | 7,525  |    |
| Lessprogress payments             |  |            | (755   | )      |  |   | (3,621 | )  |
|                              |  | $               | 11,014 |        |  | $      | 3,904  |    |
|                                   |

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4.    Segment Information

TheCompany operates through two business segments. Its ground segmentsystems, networks and enterprise solutions segment, through GlobecommSystems Inc. and Globecomm Systems Europe Limited, is engaged in thedesign, assembly and installation of ground segment systems andnetworks. Its data communications services segment, through GlobecommNetwork Services Corporation, provides satellite communication servicescapabilities.

The Company's reportable segments arebusiness units that offer different products and services. Thereportable segments are each managed separately because they providedistinct products and services.

The following is theCompany's business segment information for the three and sixmonths ended December 31, 2004 and 2003 and as of December 31, 2004 andJune 30, 2004:

|                                                          |  |                   |         |                  |  |                 |         |                  |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------|--|-------------------|---------|------------------|--|-----------------|---------|------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                     |  | ThreeMonths Ended |         | Six MonthsEnded  |
|                                                     |  | December31, 2004  |         | December 31,2003 |  | December31,2004 |         | December 31,2003 |
|                                                     |  | (Unaudited)       |
|                                                     |  | (Inthousands)     |
| Revenues:                                                |  |              |    |             |  |
| Groundsegment systems, networks and enterprise solutions |  | $                 | 24,693  |             |  | $               | 19,891  |             |  | $      | 46,279  |    |  | $      | 36,922  |    |
| Datacommunications services                              |  |              | 4,535   |             |  |            | 3,809   |             |  |   | 8,408   |    |  |   | 7,239   |    |
| Totalrevenues                                            |  | $                 | 29,228  |             |  | $               | 23,700  |             |  | $      | 54,687  |    |  | $      | 44,161  |    |
| Income(loss) fromoperations:                             |  |              |    |             |  |            |    |             |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprise solutions |  | $                 | 781     |             |  | $               | (676    | )           |  | $      | 3,002   |    |  | $      | (1,737  | )  |
| Datacommunications services                              |  |              | 85      |             |  |            | (146    | )           |  |   | (32     | )  |  |   | 365     |    |
| Interestincome                                           |  |              | 92      |             |  |            | 66      |             |  |   | 165     |    |  |   | 128     |    |
| Gainon sale of investment                                |  |              | 40      |             |  |            | — |             |  |   | 40      |    |  |   | — |    |
| Gainon sale of available-for-sale securities             |  |              | — |             |  |            | 91      |             |  |   | — |    |  |   | 91      |    |
| Intercompanyeliminations                                 |  |              | 4       |             |  |            | 4       |             |  |   | 8       |    |  |   | 8       |    |
| Netincome (loss)                                         |  | $                 | 1,002   |             |  | $               | (661    | )           |  | $      | 3,183   |    |  | $      | (1,145  | )  |
| Depreciationandamortization:                             |  |              |    |             |  |            |    |             |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprise solutions |  | $                 | 304     |             |  | $               | 377     |             |  | $      | 607     |    |  | $      | 754     |    |
| Datacommunications services                              |  |              | 444     |             |  |            | 434     |             |  |   | 889     |    |  |   | 860     |    |
| Intercompanyeliminations                                 |  |              | (4      | )           |  |            | (4      | )           |  |   | (8      | )  |  |   | (8      | )  |
| Totaldepreciation and amortization                       |  | $                 | 744     |             |  | $               | 807     |             |  | $      | 1,488   |    |  | $      | 1,606   |    |
| Expendituresfor long-livedassets:                        |  |              |    |             |  |            |    |             |  |   |    |    |  |   |    |    |
| Groundsegment systems, networks and enterprise solutions |  | $                 | 160     |             |  | $               | 90      |             |  | $      | 193     |    |  | $      | 132     |    |
| Datacommunications services                              |  |              | 730     |             |  |            | 370     |             |  |   | 1,324   |    |  |   | 400     |    |
| Intercompanyeliminations                                 |  |              | — |             |  |            | (25     | )           |  |   | — |    |  |   | (25     | )  |
| Totalexpenditures for long-lived assets                  |  | $                 | 890     |             |  | $               | 435     |             |  | $      | 1,517   |    |  | $      | 507     |    |
|                                                          |

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|                                                          |  |                 |         |              |  |        |         |         |  |  |
|----------------------------------------------------------|--|-----------------|---------|--------------|--|--------|---------|---------|--|--|
|                                                     |  | December31,2004 |         | June 30,2004 |
|                                                     |  | (Unaudited)     |         |         |
|                                                     |  | (Inthousands)   |
| Assets:                                                  |  |            |    |         |  |   |    |    |
| Groundsegment systems, networks and enterprise solutions |  | $               | 139,180 |         |  | $      | 125,534 |    |
| Datacommunications services                              |  |            | 14,192  |         |  |   | 11,501  |    |
| Intercompanyeliminations                                 |  |            | (67,308 | )       |  |   | (63,560 | )  |
| Totalassets                                              |  | $               | 86,064  |         |  | $      | 73,475  |    |
|                                                          |

5.    SettlementAgreement

The Company reached a $4.0 million settlement in July2004 relating to amounts due under a contract with a major customer.The Company had recorded a $4.5 million charge in the fourth quarter offiscal 2003 of which $1.5 million and $3.0 million was included ingeneral and administrative expenses and costs from ground segmentsystems, networks, and enterprise solutions, respectively. Thissettlement resulted in a $0.9 million cost recovery to costs fromground segment systems, networks and enterprise solutions and a $1.5million bad debt recovery included in general and administrativeexpenses, both of which reversed a portion of the previous charge. Thebalance of $1.6  million related to a $1.2 million accountreceivable due to the Company, which was not subject to the charge, andcovered $0.4 million in costs to complete the program.

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations.

You should read thefollowing discussion of our financial condition and results ofoperations with the consolidated financial statements and related notesincluded elsewhere in this Quarterly Report on Form 10-Q. Thisdiscussion contains, in addition to historical information,forward-looking statements, within the meaning of the PrivateSecurities Litigation Reform Act of 1995, based on our currentexpectations, assumptions, estimates and projections. Theseforward-looking statements involve risks and uncertainties. Our actualresults could differ materially from those anticipated in theseforward-looking statements as a result of certain factors, such as,among others, uncertain demand for our services and products due toeconomic and industry-specific conditions, the risks associated withoperating in international markets and our dependence on a limitednumber of contracts for a high percentage of our revenues. These risksand others are more fully described in the "RiskFactors" section of this Quarterly Report and in our otherfilings with the Securities and Exchange Commission, including ourAnnual Report on Form 10-K and Quarterly Reports on Form 10-Q. Weundertake no obligation to update publicly any forward-lookingstatements for any reason, even if new information becomes available orother events occur in the future.

Overview

Since ourinception, a majority of our revenues have been generated by our groundsegment systems, networks and enterprise solutions business. Contractsfor the ground segment systems, networks and enterprise solutions anddata communications services have been fixed-price contracts in amajority of cases. Profitability of such contracts is subject toinherent uncertainties as to the cost of performance. In addition topossible errors or omissions in making initial estimates, cost overrunsmay be incurred as a result of unforeseen obstacles, including bothphysical conditions and unexpected problems encountered in engineeringdesign and testing. Since our business is frequently concentrated in alimited number of large contracts, a significant cost overrun on anycontract could have a material adverse effect on our business,financial condition and results of operations.

Contract costsgenerally include purchased material, direct labor, overhead and otherdirect costs. Anticipated contract losses are recognized in the periodidentified. Costs from ground segment systems, networks and enterprisesolutions consist primarily of the costs of purchased materials(including shipping and handling costs), direct labor and relatedoverhead expenses, project-related travel and living costs andsubcontractor salaries. Costs from data communications services consist

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primarily of satellite space segment charges,Internet connectivity fees and network operations expenses. Satellitespace segment charges consist of the costs associated with obtainingsatellite bandwidth (the measure of capacity) used in the transmissionof services to and from the satellite leased from operators. Networkoperations expenses consist primarily of costs associated with theoperation of the network operations center on a twenty-four hour a day,seven-day a week basis, including personnel and related costs anddepreciation. Selling and marketing expenses consist primarily ofsalaries, travel and living costs for sales and marketing personnel.Research and development expenses consist primarily of salaries andrelated overhead expenses. General and administrative expenses consistof expenses associated with our management, finance, contract andadministrative functions.

Our business had been adverselyaffected by the global economic slowdown and, in particular, thesignificant challenges facing the telecommunications industryworldwide. Recently, we have seen improvement in the segments we serve,in particular within the U.S. Government and government relatedentities marketplace. However, some of the adverse consequences of thedownturn continue to impact our business based upon the inability ofsome of our customers and prospects to raise capital to fund projects,particularly, in developing countries.

We currently have twosignificant contracts with the Ministry of Communication of the IslamicTransitional State of Afghanistan. Further hostilities in Afghanistan,or in connection with any armed conflict affecting areas where ourcustomers are located may impact our performance on these contracts,which may impact our results of operations.

Critical AccountingPolicies

Certain of our accounting policies require judgment bymanagement in selecting the appropriate assumptions for calculatingfinancial estimates. By their nature, these judgments are subject to aninherent degree of uncertainty. These judgments are based on ourhistorical experience, terms of existing contracts, our observance oftrends in the industry, information provided by our customers andinformation available from other outside sources, as appropriate.Actual results may differ from these judgments under differentassumptions or conditions. Our accounting policies that requiremanagement to apply significant judgment include:

Revenue Recognition

We recognizerevenue in accordance with SAB 104, Revenue Recognition, for ourproduction-type contracts that are sold separately as standardsatellite ground segment systems when persuasive evidence of anarrangement exists, the selling price is fixed or determinable,collectibility is reasonably assured, delivery has occurred and thecontractual performance specifications have been met. Our standardsatellite ground segment systems produced in connection with thesecontracts are typically short-term (less than twelve months in term)and manufactured using a standard modular production process. Suchsystems require less engineering, drafting and design efforts than ourlong-term complex production-type projects. Revenue is recognized onour standard satellite ground segment systems upon shipment andacceptance of factory performance testing which is when title transfersto the customer. The amount of revenues recorded on each standardproduction-type contract is reduced by the customer's contractualholdback amount, which typically requires 10% to 30% ofthe contract value to be retained by the customer until installationand final acceptance is complete. The customer generally becomesobligated to pay 70% to 90% of the contract value uponshipment and acceptance of factory performance testing. Installation isnot deemed to be essential to the functionality of the system sinceinstallation does not require significant changes to the features orcapabilities of the equipment, does not require complex softwareintegration and interfacing and we have not experienced anydifficulties installing such equipment. In addition, the customer orother third party vendors can install the equipment. The estimatedrelative fair value of the installation services is determined bymanagement, which is typically less than the customer'scontractual holdback percentage. If the holdback is less than the fairvalue of installation, we will defer recognition of revenues,determined on a contract-by-contract basis equal to the fair value ofthe installation services. Payments received in advance by customersare deferred until shipment and are presented as deferred revenues.

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We recognize revenue using thepercentage-of-completion method of accounting upon the achievement ofcertain contractual milestones in accordance with SOP 81-1, Accountingfor Performance of Construction-Type and Certain Production-TypeContracts, for our non-standard, complex production-type contracts forthe production of satellite ground segment systems and equipment thatare generally integrated into the customers' satellite groundsegment network. The equipment and systems produced in connection withthese contracts are typically long-term (in excess of twelve months interm) and require significant customer-specific engineering, draftingand design effort in order to effectively integrate all of thecustomizable earth station equipment into the customers' groundsegment network. These contracts generally have larger contract values,greater economic risks and substantive specific contractual performancerequirements due to the engineering and design complexity of suchsystems and related equipment. Progress payments received in advance bycustomers are netted against the inventories balance.

Costs from Ground Segment Systems, Networksand Enterprise Solutions

Costs related to our production-typecontracts and our non-standard, complex production-type contracts relyon estimates based on total expected contract costs. We use estimatesof the costs applicable to various elements which we believe arereasonable. Since these contract costs depend on estimates, which areassessed continually during the term of these contracts, costs aresubject to revisions as the contract progresses to completion. Revisionin cost estimates are reflected in the period in which they becomeknown. In the event an estimate indicates that a loss will be incurredat completion, we record the costs in the period identified.

Goodwill

Goodwill represents theexcess of the purchase price of businesses over the fair value of theidentifiable net assets acquired. In accordance with SFAS No. 142,Goodwill and Other Intangible Assets, goodwill and other indefinitelife intangible assets are no longer amortized, but instead tested forimpairment at least annually. The impairment test for goodwill uses atwo-step approach, which is performed at the reporting unit level. Stepone compares the fair value of the reporting unit (calculated using adiscounted cash flow method) to its carrying value. If the carryingvalue exceeds the fair value, there is a potential impairment and steptwo must be performed. Step two compares the carrying value of thereporting unit's goodwill to its implied fair value (i.e., fairvalue of the reporting unit less the fair value of the unit'sassets and liabilities, including identifiable intangible assets). Ifthe carrying value of goodwill exceeds its implied fair value, theexcess is required to be recorded as an impairment. There have been noevents during the six months ended December 31, 2004 that would resultin any goodwill impairment.

Allowancesfor Doubtful Accounts

We maintain allowances for doubtfulaccounts for estimated losses resulting from the inability of ourcustomers to make required payments. We assess the customer'sability to pay based on a number of factors, including our pasttransaction history with the customer and the creditworthiness of thecustomer. An assessment of the inherent risks in conducting ourbusiness with foreign customers is also made since a significantportion of our revenues is international. Management specificallyanalyzes accounts receivable, historical bad debts, customerconcentrations, customer creditworthiness and current economic trends.If the financial condition of our customers were to deteriorate in thefuture, resulting in an impairment of their ability to make payments,additional allowances may be required.

The allowance fordoubtful accounts at December 31, 2004 and June 30, 2004 was $1.1million and $2.6 million, respectively. The decrease in the allowanceof approximately $1.5 million primarily related to a bad debt recoveryunder a settlement reached with a major customer in July 2004.

Inventories

Inventories consistprimarily of work-in-progress from costs incurred in connection withspecific customer contracts, which are stated at the lower of cost ormarket value. In assessing the realizability 

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of inventories, we are required to makeestimates of the total contract costs based on the various elements ofthe work-in-progress. It is possible that changes to these estimatescould cause a reduction in the net realizable value of ourinventories.

Results of Operations

Three and SixMonths Ended December 31, 2004 and 2003

Revenues from GroundSegment Systems, Networks and Enterprise Solutions.    Revenuesincreased by $4.8 million, or 24.1%, to $24.7 million for thethree months ended December 31, 2004 and increased by $9.4 million, or25.3%, to $46.3 million for the six months ended December 31,2004, compared to $19.9 million and $36.9 million for the three and sixmonths ended December 31, 2003, respectively. The increase in revenueswas primarily the result of increased infrastructure sales in the U.S.Government and government related entities marketplace, coupled withincreased sales due to a general overall improvement in thetelecommunications industry segments we serve and the achievement ofshipment milestones associated with projects currently in progress.

Revenues from Data Communication Services.    Revenuesincreased by $0.7 million, or 19.1%, to $4.5 million for thethree months ended December 31, 2004 and increased by $1.2 million, or16.1%, to $8.4 million for the six months ended December 31,2004, compared to $3.8 million and $7.2 million for the three and sixmonths ended December 31, 2003, respectively. The increase was due tothe increase in Video Broadcast service offerings and the Voice OverInternet Protocol (VOIP) minutes offset by a significant contract whichexpired in the three months ended September 30, 2003 for teleportservices and Internet access to South America.

Costs fromGround Segment Systems, Networks and EnterpriseSolutions.    Costs from ground segment systems, networks andenterprise solutions increased by $3.2 million, or 18.1%, to$21.0 million for the three months ended December 31, 2004 andincreased by $6.0 million, or 18.0% to $39.1 million for the sixmonths ended December 31, 2004, compared to $17.8 million and $33.1million for the three and six months ended December 31, 2003,respectively. Costs as a percentage of related revenues decreased to85.1% and 84.4% for the three and six months endedDecember 31, 2004, respectively, compared to 89.5% and89.7% for the three and six months ended December 31, 2003,respectively. The decrease was mainly attributable to a non-recurringcost recovery related to a settlement with a large customer of $0.5million and $0.9 million for the three months and six months endedDecember 31, 2004, respectively, and increased margin on revenuesrelated to the U.S. Government and government related entities projectsin the three and six months ended December  31, 2004.

Costs from Data Communications Services.    Costs from datacommunications services increased by $0.5 million, or 14.1%, to$3.7 million for the three months ended December 31, 2004 and increasedby $0.4 million, or 6.7%, to $6.9 million for the six monthsended December 31, 2004, compared to $3.3 million and $6.5 million forthe three and six months ended December 31, 2003, respectively. Theincrease is a result of additional space segment costs required for theVideo Broadcast service offerings.

Selling andMarketing.    Selling and marketing expenses increased by $0.3million, or 22.8%, to $1.4 million for the three months endedDecember 31, 2004 and increased by $0.3 million, or 13.8%, to$2.6 million for the six months ended December 31, 2004, compared to$1.1 million and $2.2 million for the three and six months endedDecember 31, 2003, respectively. The increase in selling and marketingcosts is a result of increased salary and salary related expenses foradditional marketing personnel.

Research andDevelopment.    Research and development expenses decreased by$0.1 million, or 26.3%, to $0.2 million for the three monthsended December 31, 2004 and decreased by $0.2 million, or 33.6%,to $0.5 million for the six months ended December 31, 2004, compared to$0.2 million and $0.7 million for the three and six months endedDecember 31, 2003, respectively. The decrease was principally due tonon-recurrence of costs associated with product research anddevelopment associated with projects in process in the three and sixmonths ended December 31, 2003.

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General andAdministrative.    General and administrative expenses remainedconstant at $2.1 for the three months ended December 31, 2004 andDecember 31, 2003 and decreased by $0.3 million, or 9.8% to $2.7million for the six months ended December 31, 2004, compared to $3.0million for the six months ended December 31, 2003. The decrease ingeneral and administrative expenses was primarily due to a bad debtrecovery of $1.5 million as a result a settlement reached with acustomer in the three months ended September 30, 2004 as compared tothe $1.0 million recovery in the three months ended September 30,2003.

Interest Income.    Interest income increased forthe three and six months ended December 31, 2004 as compared toDecember 31, 2003 due to the increase in the balance of cash and cashequivalents.

Liquidity and Capital Resources

AtDecember 31, 2004, we had working capital of $34.5 million, includingcash and cash equivalents of $27.0 million, restricted cash of $2.5million, net accounts receivable of $20.6 million, inventories of $11.0million, prepaid expenses and other current assets of $1.0 million,offset by $21.2  million in accounts payable, $2.7 million indeferred revenues and $3.8 million in accrued expenses and othercurrent liabilities.

Net cash used in operating activitiesduring the six months ended December 31, 2004 was $0.6  million,which primarily related to an increase in inventory of $7.1 million dueto timing of shipments of certain jobs and a reduction in progresspayments on long term contracts, an increase in accounts receivable of$4.7 million relating to the increase in revenues, a decrease in theprovision for doubtful accounts due to a bad debt recovery of $1.5million, offset by an increase in accounts payable of $5.7million relating to the increase in revenues and the timing of vendorpayments, net income of $3.2 million, an increase in deferred revenueof $1.7 million due to timing differences between project billings andrevenue recognition milestones resulting from specific customercontracts, and a non-cash item representing depreciation andamortization expense of $1.5 million primarily related to the networkoperations center and satellite earth station equipment.

Netcash used in investing activities during the six months ended December31, 2004 was $2.1  million, related to the purchase of $1.5million of fixed assets for our network operations center, specificallyrelated to the Video Broadcast and VOIP platforms, and an increase inrestricted cash of $0.6 million based on certificates of deposit issuedas collateral for performance and payment guarantees.

Net cashprovided by financing activities during the six months ended December31, 2004 was $1.4 million which primarily related to $1.0 million ofproceeds from the exercise of warrants issued in connection with ourprivate placement in December 2003 and $0.4 million of proceeds fromthe exercise of stock options.

We have a credit agreement inplace which provides for a working capital credit facility of up to$16.5 million, which expires in October 2005. We may be advanced up to80% of eligible accounts receivable and 100% ofunrestricted cash and cash equivalents at the bank. The line of creditbears interest at the greater of 6.0% or the prime rate plus1.5% per annum, and is collateralized by a first securityinterest on all of our personal property. The credit agreement allowsus to borrow and apply letters of credit against the availability undereach line of credit. In addition, the credit agreement contains certainfinancial and other covenants, deposit requirements, monthly reportingprovisions and other requirements, as defined in the credit agreement,with which we were in compliance at December 31, 2004. As of December31, 2004, no borrowings were outstanding under this credit facility,however, there were standby letters of credit of approximately $13.6million, which were applied against and reduced the amounts availableunder this credit facility.

We lease satellite space segmentservices and other equipment under various operating lease agreements,which expire in various years through 2009. Future minimum leasepayments due on these leases through December 31, 2005 areapproximately $8.0 million.

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At December 31, 2004 we had contractualobligations and commercial commitments as follows (in thousands):

|                                 |  |                      |        |                |  |           |       |           |  |              |        |        |  |   |       |        |  |   |                                 |        |  |  |
|---------------------------------|--|----------------------|--------|----------------|--|-----------|-------|-----------|--|--------------|--------|--------|--|---|-------|--------|--|---|---------------------------------|--------|--|--|
|                            |  | PaymentsDue byPeriod |
|                            |  | Total                |        | Lessthan1 year |  | 1-3 years |       | 4-5 years |  | After 5years |
| **ContractualObligations**      |  |                 |   |           |  |
| Operating leases                |  | $                    | 19,432 |           |  | $         | 8,045 |      |  | $            | 10,069 |   |  | $ | 1,318 |   |  | $ |     — |   |
| Totalcontractual obligations    |  | $                    | 19,432 |           |  | $         | 8,045 |      |  | $            | 10,069 |   |  | $ | 1,318 |   |  | $ | —                         |   |
| **Other CommercialCommitments** |  |                 |   |           |  |
| Standby letters ofcredit        |  | $                    | 13,613 |           |  | $         | 8,213 |      |  | $            | 3,934  |   |  | $ | 1,466 |   |  | $ | —                         |   |
| Total commercial commitments    |  | $                    | 13,613 |           |  | $         | 8,213 |      |  | $            | 3,934  |   |  | $ | 1,466 |   |  | $ | —                         |   |
|                                 |

On November 7, 2001, the Board ofDirectors authorized a stock repurchase program whereby we canrepurchase up to $2.0 million of our outstanding stock, representingapproximately 3.7% of the total shares outstanding on that date.Since November 2001, we have repurchased an aggregate of 317,606 sharesfor approximately $1.7 million. The timing, price, quantity and mannerof future purchases will be at the discretion of management, dependingon market conditions and other factors, subject to compliance with theapplicable securities laws.

We expect that our cash and workingcapital requirements for operating activities will continue to increaseas we continue to implement our business strategy. Managementanticipates additional working capital requirements for work inprogress for orders as obtained and that we may experience negativecash flows due to quarter-to-quarter operating performance.

Globecomm Network Services Corporation has had, and we expect itwill continue to have, working capital and additional capitalexpenditure requirements, which have, and may continue to put increasedpressure on our capital resources.

Our future capitalrequirements will depend upon many factors, including the success ofour marketing efforts in the ground segment systems, networks and datacommunications services business, the nature and timing of customerorders and the level of capital requirements related to the expansionof our service offerings. Based on current plans, we believe that ourexisting capital resources will be sufficient to meet working capitalrequirements at least through December 31, 2005. However, we cannotassure you that there will be no unforeseen events or circumstancesthat would consume available resources significantly before that time.For example, future events occurring in response to the hostilities inIraq and Afghanistan, or in connection with any armed conflict,including, without limitation, future terrorist attacks against theUnited States or its allies or military or trade or travel disruptionsimpacting our ability to sell and market our products and services inthe United States and internationally may impact our results ofoperations. In particular, we currently have two significant contractswith the Ministry of Communication of the Islamic Transitional State ofAfghanistan. Unexpected events negatively impacting internationalcommerce, including additional conflicts in the Middle East, coulddefer our ability to close contracts with international customers.Additional funds may not be available when needed and, even ifavailable, additional funds may be raised through financingarrangements and/or the issuance of preferred or common stock orconvertible securities on terms and prices significantly more favorablethan those of the currently outstanding common stock, which could havethe effect of diluting or adversely affecting the holdings or rights ofour existing stockholders. If adequate funds are unavailable, we may berequired to delay, scale back or eliminate some of our operatingactivities, including, without limitation, the timing and extent of ourmarketing programs, capital expenditures, research and developmentactivities and we may be required to reduce headcount. We cannot assureyou that additional financing will be available to us on acceptableterms, or at all.

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Risk Factors

We have a historyof operating losses and negative cash flow and our losses maycontinue.

Although, recently we have had profitable quarters,we have incurred significant net losses since we began operating inAugust 1994. We incurred net losses of $1.3 million during the fiscalyear ended June 30, 2004, $19.6 million during the fiscal year endedJune 30, 2003, and $17.3 million during the fiscal year ended June 30,2002. As of December 31, 2004 our accumulated deficit was $72.0million. We may incur net losses, in any particular quarter, due to thetiming of significant projects even if we achieve profitability in thefiscal year ending June 30, 2005. Our ability to achieve and maintainprofitability will depend upon our ability to generate significantrevenues through new profitable customer contracts and the expansion ofour existing products and services, including our data communicationsservices. We cannot assure you that we will be able to obtain newprofitable customer contracts or generate significant additionalrevenues from those contracts or any new products or services that weintroduce. Even if we become profitable, we may not sustain or increaseour profits on a quarterly or annual basis in the future.

Sincesales of satellite communications equipment are dependent on the growthof communications networks, if market demand for these networksdeclines, our revenue and profitability are likely to decline.

We derive, and expect to continue to derive, a significant amount ofrevenues from the sale of satellite ground segment systems andnetworks. If the long-term growth in demand for communications networksdoes not continue to return from recent depressed levels, the demandfor our satellite ground segment systems and networks may decline orgrow more slowly than we expect. As a result, we may not be able togrow our business, our revenues may decline from current levels and ourresults of operations may be harmed. The demand for communicationsnetworks and the products used in these networks is affected by variousfactors, many of which are beyond our control. For example, theuncertain general economic conditions have affected the overall rate ofcapital spending by many of our customers. Also, many companies havefound it difficult to raise capital to finish building theircommunications networks and, therefore, have placed fewer orders. Theeconomic slowdown resulted in a softening of demand from our customers.We cannot predict the extent to which demand will increase. Further,increased competition among satellite ground segment systems andnetworks manufacturers has increased pricing pressures. Recently, wehave seen improvement in the segments we serve, in particular withinthe U.S. Government and government related entities marketplace. Afuture reduction in opportunities from U.S. Government and governmentrelated agencies will negatively impact our results of operations.

Risks associated with operating in international markets couldrestrict our ability to expand globally and harm our business andprospects.

We market and sell our products and services in theUnited States and internationally. We anticipate that internationalsales will continue to account for a significant portion of our totalrevenues for the foreseeable future with a significant portion of theinternational revenue coming from developing countries. There are anumber of risks inherent in conducting our business internationally,including:

|  |              |                                                                                                                                                                                                                                    |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | general political andeconomic instability in international markets, including thehostilities in Iraq and Afghanistan, could impede our ability todeliver our products and services to customers and harm our results ofoperations; |

|  |              |                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------|
|  | •  | changes in regulatoryrequirements could restrict our ability to deliver services to ourinternational customers; |

|  |              |                                                                                                                                  |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------|
|  | •  | exportrestrictions, tariffs, licenses and other trade barriers could preventus from adequately equipping our network facilities; |

|  |              |                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | differing technology standards acrosscountries may impede our ability to integrate our products and servicesacross international borders; |

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|  |              |                                                                                                                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | protectionistlaws and business practices favoring local competition may give unequalbargaining leverage to key vendors in countries where competition isscarce, significantly increasing our operating costs; |

|  |              |                                                                                                               |
|--|--------------|---------------------------------------------------------------------------------------------------------------|
|  | •  | increased expenses associated withmarketing services in foreign countries could affect our ability tocompete; |

|  |              |                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | relying on localsubcontractors for installation of our products and services couldadversely impact the quality of our products and services; |

|  |              |                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------|
|  | •  | difficulties in staffing and managingforeign operations could affect our ability to compete; |

|  |              |                                                                  |
|--|--------------|------------------------------------------------------------------|
|  | •  | potentially adverse taxes could affectour results of operations; |

|  |              |                                                                           |
|--|--------------|---------------------------------------------------------------------------|
|  | •  | complexforeign laws and treaties could affect our ability to compete; and |

|  |              |                                                                                                 |
|--|--------------|-------------------------------------------------------------------------------------------------|
|  | •  | difficulties in collecting accountsreceivable could adversely affect our results of operations. |

These and other risks could impede our ability to manage ourinternational operations effectively, limit the future growth of ourbusiness, increase our costs and require significant managementattention.

If Globecomm Network Services Corporation does notexecute its business strategy or if the market for its services failsto develop or develops more slowly than it expects, our results ofoperations will be harmed.

Globecomm Network ServicesCorporation's future revenues and results of operations aredependent on its execution of its business strategy and development ofthe market for its current and future services. Despite the settlementagreements which modified and reduced our satellite bandwidthobligations, we cannot assure you that the transponder space will beefficiently and substantially utilized or that an increase in orderswill be realized. Globecomm Network Services Corporation has had, andwe expect will continue to have, cash requirements, which have and willdecrease our cash resources. If Globecomm Network Services Corporationdoes not efficiently and substantially utilize its transponder spacecapacity and increase its level of orders, its cash requirements mayincrease and our results of operations will be harmed.

Youshould not rely on our quarterly operating results as an indication ofour future results because they are subject to significantfluctuations, and if we fail to meet the expectations of public marketanalysts or investors, our stock price could declinesignificantly.

Our future revenues and results of operationsmay significantly fluctuate due to a combination of factors,including:

|  |              |                                                          |
|--|--------------|----------------------------------------------------------|
|  | •  | delays and/or adecrease in the booking of new contracts; |

|  |              |                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------|
|  | •  | general political and economicconditions in the United States and abroad, including hostilities inIraq and Afghanistan; |

|  |              |                                                                       |
|--|--------------|-----------------------------------------------------------------------|
|  | •  | the lengthof time needed to initiate and complete customer contracts; |

|  |              |                                                                     |
|--|--------------|---------------------------------------------------------------------|
|  | •  | the demand for and acceptance of ourexisting products and services; |

|  |              |                                                                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the cost of providing our products andservices, including the ability to ship and install our products andservices in hostile areas; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | thecost of performance on fixed price contracts; |

|  |              |                                                |
|--|--------------|------------------------------------------------|
|  | •  | market acceptance of new products andservices; |

|  |              |                                                                                                        |
|--|--------------|--------------------------------------------------------------------------------------------------------|
|  | •  | the mix of revenuebetween our standard products, custom-built products and ourcommunications services; |

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | thetiming of significant marketing programs; |

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|  |              |                                                     |
|--|--------------|-----------------------------------------------------|
|  | •  | our abilityto hire and retain additional personnel; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | the competition in our markets;and |

|  |              |                                                                                                                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | difficult global economicconditions and the currency devaluations in international markets,which have adversely impacted and may continue to adversely impact ourquarterly results. |

Accordingly, you should not rely onquarter-to-quarter comparisons of our results of operations as anindication of our future performance. It is possible that in futureperiods our results of operations may be below expectations, whichcould cause the trading price of our common stock to decline.

Our markets are highly competitive and we have manyestablished competitors, and we may lose market share as a result.

The markets in which we operate are highly competitive and thiscompetition could harm our ability to sell our products and services onprices and terms favorable to us. Our primary competitors in thesatellite ground segment systems and networks market generally fallinto two groups: (1) system integrators, like ITT, Data Path, andGlobal Communication Services, and (2) equipment manufacturers who alsoprovide integrated systems, like Andrew Corporation, General Dynamics,Alcatel and ND Satcom AG.

In the end-to-end satellite-basedcommunication solutions and communications services markets, we competewith other satellite communication companies who provide similarservices, like SES Global and Convergent Media Systems. In addition, wemay compete with other communications service providers like Echostarand AT&T, and satellite owners like Panamsat, Loral Skynet, NewSkies Satellites N.V. and Intelsat. We anticipate that our competitorsmay develop or acquire services that provide functionality that issimilar to that provided by our services and that those services may beoffered at significantly lower prices or bundled with other services.These competitors may have the financial resources to withstandsubstantial price competition, may be in a better position to enduredifficult economic conditions in international markets and may be ableto respond more quickly than we can to new or emerging technologies andchanges in customer requirements. Moreover, many of our competitorshave more extensive customer bases, broader customer relationships andbroader industry alliances than we do that they could use to theiradvantage in competitive situations.

The markets in which weoperate have limited barriers to entry, and we expect that we will faceadditional competition from existing competitors and new marketentrants in the future. Moreover, our current and potential competitorshave established or may establish strategic relationships amongthemselves or with third parties to increase the ability of theirproducts and services to address the needs of our current andprospective customers. The potential strategic relationships ofexisting and new competitors may rapidly acquire significant marketshare, which would harm our business and financial condition.

If the satellite communications industry fails to continueto develop or new technology makes it obsolete, our business andfinancial condition will be harmed.

Our business is dependenton the continued success and development of satellite communicationstechnology, which competes with terrestrial communications transporttechnologies like terrestrial microwave, coaxial cable and fiber opticcommunications systems. Fiber optic communications systems havepenetrated areas in which we have traditionally provided services. Ifthe satellite communications industry fails to continue to develop, orif any technological development significantly improves the cost orefficiency of competing terrestrial systems relative to satellitesystems, then our business and financial condition would be materiallyharmed.

We may be unable to raise additional funds to meet ourcapital requirements in the future.

We believe that ouravailable cash resources will be sufficient to meet our working capitaland capital expenditure requirements through at least December 31,2005. However, our future liquidity and capital requirements aredifficult to predict, as they depend on numerous factors, including the

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success of our existing product and serviceofferings, as well as competing technological and market developments.We may need to raise additional funds in order to meet additionalworking capital requirements and to support additional capitalexpenditures. Should this need arise, additional funds may not beavailable when needed and, even if additional funds are available, wemay not find the terms favorable or commercially reasonable. Ifadequate funds are unavailable, we may be required to delay, reduce oreliminate some of our operating activities, including marketingprograms and research and development programs. If we raise additionalfunds by issuing equity securities, our existing stockholders will owna smaller percentage of our capital stock and new investors may payless on average for their securities than, and could have rightssuperior to, existing stockholders.

A limited number ofcustomer contracts account for a significant portion of our revenues,and the inability to replace a key customer contract would adverselyaffect our results of operations, business and financialcondition.

We rely on a small number of customer contracts fora large portion of our revenue. Specifically, we have agreements withfour customers to provide equipment and services, from which we expectto generate a significant portion of our revenues. If any of thesecustomers is unable to implement its business plan, the market forthese customers' services declines, or if all or any of thecustomers modifies or terminates its agreement with us, and we areunable to replace these contracts, our results of operations, businessand financial condition would be materially harmed.

Ifour products and services are not accepted in developing countries withemerging markets, our revenues will be impaired.

We anticipatethat a substantial portion of the growth in the demand for our productsand services will come from customers in developing countries due to alack of basic communications infrastructure in these countries.However, we cannot guarantee an increase in the demand for our productsand services in developing countries or that customers in thesecountries will accept our products and services at all. Our ability topenetrate emerging markets in developing countries is dependent uponvarious factors including:

|  |              |                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | thespeed at which communications infrastructure, including terrestrialmicrowave, coaxial cable and fiber optic communications systems, whichcompete with satellite-based services, is built; |

|  |              |                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------|
|  | •  | the effectiveness of our localresellers and sales representatives in marketing and selling ourproducts and services; and |

|  |              |                                                          |
|--|--------------|----------------------------------------------------------|
|  | •  | theacceptance of our products and services by customers. |

If ourproducts and services are not accepted, or the market potential weanticipate does not develop, our revenues will be impaired.

Wedepend upon certain key personnel and may not be able to retain theseemployees.

Our future performance depends on the continuedservice of our key technical, managerial and marketing personnel; inparticular, David Hershberg, Kenneth Miller, Stephen Yablonski andDonald Woodring. The employment of any of our key personnel could ceaseat any time.

Unauthorized use of our intellectual property bythird parties may damage our business.

We regard ourtrademarks, trade secrets and other intellectual property as beneficialto our success. Unauthorized use of our intellectual property by thirdparties may damage our business. We rely on trademark, trade secret andpatent protection and contracts, including confidentiality and licenseagreements with our employees, customers, strategic collaborators,consultants and others, to protect our intellectual property rights.Despite our precautions, it may be possible for third parties to obtainand use our intellectual property without our authorization.

Wecurrently have been granted three patents in the United States, one forremote access to the Internet using satellites, one for satellitecommunication with automatic frequency control, and one for

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a monitor and control system for satellitecommunications networks and the like. We have two other patents pendingin the United States, one for implementing facsimile and datacommunications using Internet Protocols and another for a distributedsatellite-based cellular network. We currently have one PatentCooperation Treaty patent application pending for implementingfacsimile and data communications using Internet Protocols. We alsointend to seek further patents on our technology, if appropriate. Wecannot assure you that patents will be issued for any of our pending orfuture patent applications or that any claims allowed from suchapplications will be of sufficient scope, or be issued in all countrieswhere our products and services can be sold, to provide meaningfulprotection or any commercial advantage to us. Also, our competitors maybe able to design around our patents. The laws of some foreigncountries in which our products and services are or may be developed,manufactured or sold may not protect our products and services orintellectual property rights to the same extent as do the laws of theUnited States and thus make the possibility of piracy of our technologyand products and services more likely.

We have filedapplications for trademark registration of Globecomm Systems Inc.,Globecomm and GSI in the United States and various other countries, andhave been granted registrations for some of these terms in the UnitedStates, Europe and Russia. We have received trademark registrations forNetSat Express, Inc. in the United States, the European Community,Russia, Singapore and Brazil. We have various other trademarks andservice marks registered or pending for registration in the UnitedStates and in other countries and may seek registration of othertrademarks and service marks in the future. We cannot assure you thatregistrations will be granted from any of our pending or futureapplications, or that any registrations that are granted will preventothers from using similar trademarks in connection with related goodsand services.

Defending against intellectual propertyinfringement claims could be time consuming and expensive, and if weare not successful, could cause substantial expenses and disrupt ourbusiness.

We cannot be sure that the products, services,technologies and advertising we employ in our business do not or willnot infringe valid patents, trademarks, copyrights or otherintellectual property rights held by third parties. We may be subjectto legal proceedings and claims from time to time relating to theintellectual property of others in the ordinary course of our business.Prosecuting infringers and defending against intellectual propertyinfringement claims could be time consuming and expensive, andregardless of whether we are or are not successful, could causesubstantial expenses and disrupt our business. We may incur substantialexpenses in defending against these third party claims, regardless oftheir merit. Successful infringement claims against us may result insubstantial monetary liability and/or may materially disrupt theconduct of, or necessitate the cessation of, our business.

Wemay not be able to keep pace with technological changes, which wouldmake our products and services become non-competitive andobsolete.

The telecommunications industry, includingsatellite-based communications services, is characterized by rapidlychanging technologies, frequent new product and service introductionsand evolving industry standards. If we are unable, for technological orother reasons, to develop and introduce new products and services orenhancements to existing products and services in a timely manner or inresponse to changing market conditions or customer requirements, ourproducts and services would become non-competitive and obsolete, whichwould harm our business, results of operations and financialcondition.

We depend on our suppliers, some of which areour sole or a limited source of supply, and the loss of these supplierswould materially adversely affect our business, results of operationsand financial condition.

We currently obtain most of ourcritical components and services from single or limited sources andgenerally do not maintain significant inventories or have long-term orexclusive supply contracts with our vendors. We have from time to timeexperienced delays in receiving products from vendors 

23

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due to lack of availability, quality controlor manufacturing problems, shortages of materials or components orproduct design difficulties. We may experience delays in the future andreplacement services or products may not be available when needed, orat all, or at commercially reasonable rates or prices. If we were tochange some of our vendors, we would have to perform additional testingprocedures on the service or product supplied by the new vendors, whichwould prevent or delay the availability of our products and services.Furthermore, our costs could increase significantly if we need tochange vendors. If we do not receive timely deliveries of qualityproducts and services, or if there are significant increases in theprices of these products or services, it could have a material adverseeffect on our business, results of operations and financialcondition.

Our network may experience security breaches, whichcould disrupt our services.

Our network infrastructure may bevulnerable to computer viruses, break-ins, denial of service attacksand similar disruptive problems caused by our customers or otherInternet users. Computer viruses, break-ins, denial of service attacksor other problems caused by third parties could lead to interruptions,delays or cessation in service to our customers. There currently is noexisting technology that provides absolute security, and the cost ofminimizing these security breaches could be prohibitively expensive. Wemay face liability to customers for such security breaches.Furthermore, these incidents could deter potential customers andadversely affect existing customer relationships.

Satellitesupon which we rely may malfunction or be damaged or lost.

Thedamage or loss of any of the satellites used by us, or the temporary orpermanent malfunction of any of the satellites upon which we rely,would likely result in the interruption of our satellite-basedcommunications services. This interruption could have a materialadverse effect on our business, results of operations and financialcondition.

Risks Related to the Securities Markets andOwnership of Our Common Stock

Our stock price isvolatile.

From January 1, 2004 through December 31, 2004, ourclosing stock price ranged from a low of $4.36 per share to a high of$7.58 per share. The market price of our common stock, like that of thesecurities of many telecommunications and high technology industrycompanies, could be subject to significant fluctuations and is likelyto remain volatile based on many factors, including thefollowing:

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | quarterly variations inoperating results; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | announcements ofnew technology, products or services by us or any of ourcompetitors; |

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | acceptance ofsatellite-based communication services and Internet access services indeveloping countries and emerging markets; |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | changes in financial estimates orrecommendations by securities analysts; |

|  |              |                              |
|--|--------------|------------------------------|
|  | •  | general market conditions;or |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | domestic and internationaleconomic factors unrelated to our performance. |

Additionally,numerous factors relating to our business may cause fluctuations ordeclines in our stock price.

The stock markets in general andthe markets for telecommunications stocks in particular haveexperienced extreme volatility that has often been unrelated to theoperating performance of particular companies. These broad marketfluctuations may adversely affect the trading price of our commonstock.

A third party could be prevented from acquiring sharesof our stock at a premium to the market price because of ouranti-takeover provisions.

Various provisions with respect tovotes in the election of directors, special meetings of stockholders,and advance notice requirements for stockholder proposals and directornominations of 

24

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our amended and restated certificate ofincorporation, bylaws and Section 203 of the General Corporation Law ofthe State of Delaware could make it more difficult for a third party toacquire us, even if doing so might be beneficial to our stockholders.In addition, we have a poison pill in place and employment provisionswith our senior executives that have change of control provisions thatcould make an acquisition of us by a third party more difficult.

Risks Related to Government Approvals

We aresubject to many government regulations, and failure to comply with themwill harm our business.

Operations andUse of Satellites

We are subject to various federal laws andregulations, which may have negative effects on our business. Weoperate FCC licensed earth stations in Hauppauge, New York, subject tothe Communications Act of 1934, as amended (the "FCCAct"), and the rules and regulations of FCC. Pursuant tothe FCC Act and rules, we have obtained and are required to maintainradio transmission licenses from the FCC for both domestic and foreignoperations of our earth stations. We have also obtained and arerequired to maintain authorization issued under Section 214 of the FCCAct to act as a telecommunications carrier, which authorization alsoextends to Globecomm Network Services Corporation. These licensesshould be renewed by the FCC in the normal course as long as we remainin compliance with FCC rules and regulations. However, we cannotguarantee that the FCC will grant additional licenses when our existinglicenses expire, nor are we assured that the FCC will not adopt new ormodified technical requirements that will require us to incurexpenditures to modify or upgrade our equipment as a condition ofretaining our licenses. We are also required to comply with FCCregulations regarding the exposure of humans to radio frequencyradiation from our earth stations. These regulations, as well as localland use regulations, restrict our freedom to choose where to locateour earth stations. In addition, prior to a third party acquisition ofus, we would need to seek approval from the FCC to transfer the radiotransmission licenses we have obtained to the third party upon theconsummation of the acquisition. However, we cannot assure you that theFCC will permit the transfer of these licenses. These approvals maymake it more difficult for a third party to acquire us.

Foreign Ownership

We may, in thefuture, be required to seek FCC approval if foreign ownership of ourstock exceeds the specified criteria. Failure to comply with thesepolicies could result in an order to divest the offending foreignownership, fines, denial of license renewal and/or license revocationproceedings against the licensee by the FCC.

Foreign Regulations

Regulatoryschemes in countries in which we may seek to provide oursatellite-delivered data communications services may impose impedimentson our operations. Some countries in which we intend to operate havetelecommunications laws and regulations that do not currentlycontemplate technical advances in telecommunications technology likeInternet/intranet transmission by satellite. We cannot assure you thatthe present regulatory environment in any of those countries will notbe changed in a manner, which may have a material adverse impact on ourbusiness. Either we or our local partners typically must obtainauthorization from each country in which we provide oursatellite-delivered data communications services. The regulatoryschemes in each country are different, and thus there may be instancesof noncompliance of which we are not aware. We cannot assure you thatour licenses and approvals are or will remain sufficient in the view offoreign regulatory authorities, or that necessary licenses andapprovals will be granted on a timely basis in all jurisdictions inwhich we wish to offer our products and services or that restrictionsapplicable thereto will not be unduly burdensome.

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Regulation of theInternet

Due to the increasing popularity and use of theInternet, it is possible that a number of laws and regulations may beadopted at the local, national or international levels with respect tothe Internet, covering issues including user privacy and expression,pricing of products and services, taxation, advertising, intellectualproperty rights, information security or the convergence of traditionalcommunication services with Internet communications. It is anticipatedthat a substantial portion of our Internet operations will be carriedout in countries that may impose greater regulation of the content ofinformation coming into the country than that which is generallyapplicable in the United States, including but not limited to privacyregulations in numerous European countries and content restrictions incountries such as the People's Republic of China. To the extentthat we provide content as a part of our Internet services, it will besubject to laws regulating content. Moreover, the adoption of laws orregulations may decrease the growth of the Internet, which could inturn decrease the demand for our Internet services or increase our costof doing business or in some other manner have a material adverseeffect on our business, operating results and financial condition. Inaddition, the applicability of existing laws governing issues includingproperty ownership, copyrights and other intellectual property issues,taxation, libel, court jurisdiction and personal privacy to theInternet is uncertain. The vast majority of these laws were adoptedprior to the advent of the Internet and related technologies and, as aresult, do not contemplate or address the unique issues of the Internetand related technologies. Changes to these laws intended to addressthese issues, including some recently proposed changes, could createuncertainty in the marketplace which could reduce demand for ourproducts and services, could increase our cost of doing business as aresult of costs of litigation or increased product development costs,or could in some other manner have a material adverse effect on ourbusiness, financial condition and results of operations.

Telecommunications Taxation, SupportRequirements, and Access Charges

All telecommunicationscarriers providing domestic services in the United States are requiredto contribute a portion of their gross revenues for the support ofuniversal telecommunications services. Also, some telecommunicationsservices are subject to special taxation and to contributionrequirements to support services to special groups, like persons withdisabilities. Our services may be subject to new or increased taxes andcontribution requirements that could affect our profitability,particularly if we are not able to pass them through to customers foreither competitive or regulatory reasons.

Internet services arecurrently exempt from charges that long distance telephone companiespay for access to the networks of local telephone companies in theUnited States. Efforts have been made from time to time, and may bemade again in the future, to eliminate this exemption. If these accesscharges are imposed on telephone lines used to reach Internet serviceproviders and/or if flat rate telephone services for Internet accessare eliminated or curtailed, the cost to customers who access oursatellite facilities using telephone company-provided facilities couldincrease to an extent that could discourage the demand for ourservices. Likewise, the demand for our services in other countries maybe affected by the availability and cost of local telephone or othertelecommunications facilities to reach our facilities.

Export of Telecommunications Equipment

The sale of our ground segment systems, networks, and communicationsservices outside the United States is subject to compliance with theregulations of the United States Export Administration and, in certaincircumstances, with International Traffic in Arms regulations. Theabsence of comparable restrictions on competitors in other countriesmay adversely affect our competitive position. In addition, in order toship our products into and implement our services in some countries,the products must satisfy the technical requirements of that particularcountry. If we were unable to comply with such requirements withrespect to a significant quantity of our products, our sales in thosecountries could be restricted, which could have a material adverseeffect on our business, results of operations and financialcondition.

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Item 3.    Quantitative andQualitative Disclosures About Market Risk

We are subject to avariety of risks, including foreign currency exchange rate fluctuationsrelating to certain purchases from foreign vendors and our wholly-ownedsubsidiary, Globecomm Systems Europe Limited, which primarily deals inBritish Pounds Sterling. In the normal course of business, we assessthese risks and have established policies and procedures to manage ourexposure to fluctuations in foreign currency values.

Ourobjective in managing our exposure to foreign currency exchange ratefluctuations is to reduce the impact of adverse fluctuations inearnings and cash flows associated with foreign currency exchangerates. Accordingly, we may utilize from time to time foreign currencyforward contracts to hedge our exposure on firm commitments denominatedin foreign currency. As of December 31, 2004, we had one futurecontract of approximately $1.3 million to purchase Euros. As ofDecember 31, 2004 there was approximately $60,000 outstanding underthis foreign exchange contract. The Company does not anticipate thiswill have a material impact on its result of operations.

Ourresults of operations and cash flows are subject to fluctuations due tochanges in interest rates primarily from our investment of availablecash balances in money market funds with portfolios of investment gradecorporate and government securities. Under our current positions, we donot use interest rate derivative instruments to manage exposure tointerest rate changes.

Item 4.    Controls andProcedures

Quarterly Evaluation of the Company'sDisclosure Controls and Internal Controls.

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | As of the end of the period covered bythis Quarterly Report on Form 10-Q, an evaluation was carried out underthe supervision and with the participation of senior management,including our Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e)under the Securities Exchange Act of 1934, as amended). Based upon thatevaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures are effective (i)for gathering, analyzing and disclosing the information that theCompany is required to disclose in reports filed under the SecuritiesExchange Act of 1934, as amended (the "ExchangeAct") and (ii) to ensure that information required to bedisclosed in the reports that the Company files or submits under theExchange Act is accumulated and communicated to the Company'smanagement, including our Chief Executive Officer and Chief FinancialOfficer, to allow timely decisions regarding required disclosure. |

|  |            |                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (b)   | There have been no significant changesin the Company's internal controls over financial reporting (asdefined in Exchange Act Rule 13a-15(f) of the Securities Exchange Actof 1934, as amended) or in other factors during the fiscal quarterended December 31, 2004 that materially affected, or are reasonablylikely to materially affect, the Company's internal controls overfinancial reporting. |

27

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Part II —Other Information

|               |                  |
|---------------|------------------|
| Item 1.  | LegalProceedings |

None

|              |                                                            |
|--------------|------------------------------------------------------------|
| Item2.  | Unregistered Sales of Equity Securities and Useof Proceeds |

None

|              |                                 |
|--------------|---------------------------------|
| Item3.  | Defaults Upon Senior Securities |

None

|               |                                                    |
|---------------|----------------------------------------------------|
| Item 4.  | Submissionof Matters to a Vote of Security Holders |

Matters voted upon atthe Annual Meeting of stockholders held on November 17, 2004 and theresults of the voting were asfollows:

|           |                                                                                 |
|-----------|---------------------------------------------------------------------------------|
| (i)  | The following individuals wereelected by the Stockholders to serve asDirectors: |

|                        |  |        |            |          |  |        |           |        |  |  |
|------------------------|--|--------|------------|----------|--|--------|-----------|--------|--|--|
| BoardMember            |  | For    |            | Withheld |
| Richard E.Caruso       |  |   | 11,897,610 |     |  |   | 1,180,666 |   |
| David E.Hershberg      |  |   | 11,980,019 |     |  |   | 1,098,257 |   |
| HarryL. Hutcherson,Jr. |  |   | 11,984,819 |     |  |   | 1,093,457 |   |
| Brian T.Maloney        |  |   | 11,900,410 |     |  |   | 1,177,866 |   |
| KennethA. Miller       |  |   | 11,983,119 |     |  |   | 1,095,157 |   |
| JackA. Shaw            |  |   | 11,982,219 |     |  |   | 1,096,057 |   |
| A.RobertTowbin         |  |   | 11,979,519 |     |  |   | 1,098,757 |   |
| C.J.Waylan             |  |   | 11,900,310 |     |  |   | 1,177,966 |   |
|                        |

|            |                                                                                                                                                                                                                                                                                               |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  | Aproposal to amend the Company's Amended and Restated Certificateof Incorporation to increase the number of authorized shares of commonstock, par value $.001 per share, of the Company was voted upon asfollows: 12,411,984 shares for; 646,958 shares against; and 19,334shares abstaining. |

|             |                                                                                                                                                                                                                                                                                                      |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (iii)  | A proposal to amendthe Company's Amended and Restated 1997 Stock Incentive Plan (the"1997 Plan") to increase to the number ofshares of common stock reserved for issuance under the 1997 Plan wasvoted upon as follows: 4,132,197 shares for; 2,862,196 shares against;and 18,757 shares abstaining. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (iv)  | Aproposal to amend the 1997 Plan's Automatic Option Grant Programto (a) provide for an automatic annual grant of options to purchase5,000 shares of common stock to each continuing non-employee member ofthe Company's board of directors and (b) revise the vesting datesof the options granted to newly elected or appointed non-employeedirectors was voted upon as follows: 4,510,921 shares for; 2,471,956shares against; and 30,273 sharesabstaining. |

|           |                                                                                                                                                                                                                                        |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (v)  | To ratify the appointment ofErnst & Young LLP as independent auditors of the Company for thefiscal year ending June 30, 2005 was voted upon as follows: 13,013,293shares for; 50,052 shares against; and 14,931 shares abstaining. |

|               |                   |
|---------------|-------------------|
| Item 5.  | Other Information |

None

28

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|              |          |
|--------------|----------|
| Item6.  | Exhibits |

Index to Exhibits:

Exhibit No.

|           |                                                                                                                                                                                          |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1  | Amendedand Restated Certificate of Incorporation, as amended through February2005, including Certificate of Designation of Series A JuniorParticipating Preferred Stock (filedherewith). |

|            |                                                                                                                                                |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1  | Chief ExecutiveOfficer Certification required by Rules 13a-14 and 15d-14 under theSecurities Exchange Act of 1934, as amended (filedherewith). |

|            |                                                                                                                                                   |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2  | Chief FinancialOfficer Certification required by Rules 13a- 14 and 15d- 14 under theSecurities Exchange Act of 1934, as amended (filed herewith). |

|          |                                                                                                                                        |
|----------|----------------------------------------------------------------------------------------------------------------------------------------|
| 32  | Certification Pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 (filed herewith). |

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

|  | GLOBECOMM SYSTEMS INC.(Registrant) |
|--|------------------------------------|

|                        |  |                                                                                                                  |  |  |  |  |
|------------------------|--|------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| Date: February 14,2005 |  | /s/ DAVID E.HERSHBERG                                                                                            |
|                   |  | David E. Hershberg Chairmanof the Board and Chief Executive Officer (Principal ExecutiveOfficer)                 |
|                   |  |
| Date: February 14,2005 |  | /s/ ANDREW C. MELFI                                                                                              |
|                   |  | Andrew C. Melfi Vice President, ChiefFinancial Officer and Treasurer (Principal Financial andAccounting Officer) |
|                        |

30

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Indexto Exhibits:

|             |  |                                                                                                                                                                                           |  |  |  |  |
|-------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| Exhibit No. |  |
| 3.1         |  | Amended andRestated Certificate of Incorporation, as amended through February2005, including Certificate of Designation of Series A JuniorParticipating Preferred Stock (filed herewith). |
| 31.1        |  | Chief Executive Officer Certification required byRules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, asamended (filed herewith).                                           |
| 31.2        |  | ChiefFinancial Officer Certification required by Rules 13a-14 and 15d-14under the Securities Exchange Act of 1934, as amended (filedherewith).                                            |
| 32          |  | Certification Pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (filedherewith).                                                     |
|             |

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