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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

|           |  |                                                                                                  
|---------- |  | -------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                  
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934.    
|          
|           |  | For the year ended March 31, 2003
    or                                                         
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934.
|          
|           |  | For the transition period
    from           to          .                                       

Commission file number 0-15895

Stratex Networks, Inc.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                                          |  |                                         
|----------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                  |  | 77-0016028                              
|(State of Incorporation)                                                                  |  | (I.R.S. Employer
    Identification No.)
|                                                                                         
|120 Rose Orchard Way
    San Jose, California(Address of Principal Executive
    Offices) |  | 95134(Zip Code)                         

408-943-0777

(Registrants Telephone Number, Including
Area Code)


Securities registered pursuant to
Section 12(b) of the Act:

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|                    |  |                                          
|None                |  |                                          

Securities registered pursuant to
Section 12(g) of the Act:

Common Stock, Par Value $0.01 Per
Share

(Title of Class)


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

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of the Form 10-K or any amendment to
this Form 10-K. þ

Indicate by a check mark whether the registrant
is an accelerated filer (as defined in Exchange Act
Rule 12b-2).     Yes þ          No o

State the aggregate market value of the voting
stock held by non-affiliates of the registrant (based on the
last reported sale price of $2.80 per share on the Nasdaq
National Market as of May 13, 2003): Approximately
$113,502,080.

As of May 13, 2003, there were 82,868,919
shares of Common Stock, par value $0.01 per share, outstanding.



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DOCUMENTS INCORPORATED BY REFERENCE



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Portions of the registrants Annual Report
    to Stockholders for the year ended March 31, 2003 are
    incorporated by reference into Parts I and II of this
    Annual Report on Form 10-K. With the exception of those
    portions which are incorporated by reference, the
    registrants Annual Report to Stockholders for the year
    ended March 31, 2003 is not deemed filed as part of this
    Annual Report on Form 10-K.
|  
|2. | Portions of the registrants Proxy Statement
    for the Annual Meeting of Stockholders to be held on
    July 15, 2003 are incorporated by reference into Part II,
    Item 5 and Part III of this Annual Report on
    Form 10-K.                                                                                                                                                                                                      

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TABLE OF CONTENTS



|              |                                                                                                                    |  |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|              | Item 1. Business                                                                                                  
|              | Item 2. Properties                                                                                                
|              | Item 3. Legal Proceedings                                                                                         
|              | Item 4. Submission of Matters to a Vote of Security Holders                                                       
|PART II      
|              | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters                                 
|              | Item 6. Selected Financial Data                                                                                   
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                     
|              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                               
|              | Item 8. Financial Statements and Supplementary Data                                                               
|              | Item 9. Changes in and Disagreements with Independent Auditor on Accounting and Financial Disclosure              
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                                       
|              | Item 11. Executive Compensation                                                                                   
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Management related Stockholder Matters
|              | Item 13. Certain Relationships and Related Transactions                                                           
|              | Item 14. Controls and Procedures                                                                                  
|PART IV      
|              | Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K                                          
|EXHIBIT INDEX
|EXHIBIT 4.5  
|EXHIBIT 10.7 
|EXHIBIT 10.10
|EXHIBIT 10.11
|EXHIBIT 10.15
|EXHIBIT 13.1 
|EXHIBIT 23.1 
|EXHIBIT 23.2 
|EXHIBIT 99.1 
|EXHIBIT 99.2 



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TABLE OF CONTENTS

STRATEX NETWORKS, INC.

2003 FORM 10-K ANNUAL REPORT

|         |  |                                                                                           |  |  |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  |  | -- | 
|PART I  
|Item 1   |  | Business                                                                                  |  |  | 1  | 
|Item 2   |  | Properties                                                                                |  |  | 17 | 
|Item 3   |  | Legal Proceedings                                                                         |  |  | 17 | 
|Item 4   |  | Submission of Matters to a Vote of Security
    Holders                                   |  |  | 17 | 
|PART II 
|Item 5   |  | Market for the Registrants Common Equity
    and Related Stockholder Matters             |  |  | 17 | 
|Item 6   |  | Selected Financial Data                                                                   |  |  | 17 | 
|Item 7   |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |  | 17 | 
|Item 7A  |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |  | 17 | 
|Item 8   |  | Financial Statements and Supplementary Data                                               |  |  | 18 | 
|Item 9   |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |  | 18 | 
|PART III
|Item 10  |  | Directors and Executive Officers of the Registrant                                        |  |  | 18 | 
|Item 11  |  | Executive Compensation                                                                    |  |  | 18 | 
|Item 12  |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |  | 18 | 
|Item 13  |  | Certain Relationships and Related Transactions                                            |  |  | 19 | 
|Item 14  |  | Controls and Procedures                                                                   |  |  | 19 | 
|PART IV 
|Item 15  |  | Exhibits, Financial Statement Schedules,
    Certifications and Reports on Form 8-K       |  |  | 19 | 

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|        |         
|------- | --------
|Item 1. | Business

The following Business Section contains
forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under
Factors That May Affect Future Financial Results and
elsewhere in, or incorporated by reference into, this
Form 10-K.

Web Site Access to Companys
Reports

Our Internet Web site address is
www.stratexnet.com. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act are available free of charge through our Web site
as soon as reasonably practicable after they are electronically
filed with, or furnished to, the Securities and Exchange
Commission. We will also provide the reports in electronic or
paper form free of charge upon request. Furthermore, all reports
we file with the Commission are available free of charge via
EDGAR through the Commissions Web site at
www.sec.gov. In addition, the public may read and copy
materials filed by us at the Commissions public reference
room located at 450 Fifth St., N.W.,
Washington, D.C., 20549.

Introduction

Stratex Networks, Inc., formerly known as Digital
Microwave Corporation, and DMC Stratex Networks, Inc. was
incorporated in California in 1984 and reorganized as a
corporation in 1987 under the laws of the State of Delaware. In
August 2002, we changed our name from DMC Stratex Networks,
Inc. to Stratex Networks, Inc. (the Company). We
design, manufacture and market advanced wireless solutions for
worldwide telephone network interconnection and broadband
wireless access. We provide our customers with a broad product
line, which contains products that operate using a variety of
transmission frequencies, ranging from 0.3 GigaHertz (GHz)
to 38 GHz, and a variety of transmission capacities,
typically ranging from 64 Kilobits to 2XOC-3 or
311 Megabits per second (Mbps). Our broad product line
allows us to market and sell our products to service providers
worldwide with varying interconnection and access requirements.
We design our products to meet the requirements of mobile
communications networks and fixed broadband access networks
worldwide. Our products typically enable our customers to deploy
and expand their wireless infrastructure and market their
services rapidly to subscribers, so that service providers can
realize a return on their investments in frequency allocation
licenses and network equipment.

We have sold over 256,000 microwave radios, which
have been installed in over 110 countries. We market our
products to service providers directly, as well as indirectly
through our relationships with original equipment manufacturer
(OEM) base station suppliers.

Industry Background

Worldwide demand for high performance and high
capacity broadband access, high-speed data communications and
fixed and mobile cellular communications continues to grow. This
growth results from (i) the rapid establishment of mobile
and fixed telecommunications infrastructures in developing
countries, (ii) the business and consumer need for internet
broadband access, (iii) changes in the regulatory
environment, (iv) technological advances, particularly in
the wireless telecommunications market, and (v) the
deployment of private communications networks. Given their
relatively low cost and ease of deployment, wireless solutions
are attractive to new service providers establishing competing
telecommunications services in developed countries, expansion of
existing telecommunications infrastructures to satisfy
increasing usage, and to telecommunications service providers in
developing countries seeking to rapidly increase the
availability and quality of telecommunications and internet
access services. The upgrade and expansion of existing networks
and the deployment of new networks are both expected to continue
to offer business opportunities for wireless infrastructure
suppliers. Wireless infrastructure suppliers address the
requirements of both mobile communications networks and fixed
access networks.

The use of cellular telephone and other wireless
services and devices continues to increase due to technological
advances and increasing consumer demand for connectivity to
telecommunications services. The

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demand for fixed broadband access networks has
also increased due to data transmission requirements resulting
from Internet access demand.


Wireless networks are constructed using microwave
radios and other equipment to connect cell sites, switching
systems, other wireline transmission systems and other fixed
access facilities. Wireless networks range in size from a single
transmission link connecting two buildings to complex networks
comprised of thousands of wireless connections. The architecture
of a network is influenced by several factors, including the
available radio frequency spectrum, coordination of frequencies
with existing infrastructure, application requirements,
environmental factors and local geography.

Regulatory authorities in different jurisdictions
allocate different portions of the radio frequency spectrum for
various telecommunications services. In addition, most
individual networks require radio links operating at several
frequencies and the transmission of voice and data, which
typically requires different transmission capacities. Moreover,
networks in different locations are constructed using different
combinations of frequencies and with different transmission
capacities. No single transmission frequency or transmission
capacity predominates in the global market.

Whether expanding existing networks or deploying
new networks, service providers must choose between constructing
networks using wireline and fiber infrastructure or wireless
infrastructure or a combination of these options. Wireline and
fiber connectivity solutions typically require significant
installation periods and may be relatively expensive to install.
For cellular telephony in developed countries where wireline and
fiber infrastructures are in place, new service providers may
have the option to lease networks from traditional service
providers, but may choose not to do so because leasing
arrangements must be entered into with their competitors, which
may be comparatively expensive and do not generally allow
control over the network. In developing countries, many service
providers install wireless networks because such networks are
generally faster to install and may be less expensive than
traditional wireline networks. As a result, many service
providers deploy wireless networks as an alternative to the
construction or leasing of traditional wireline networks. For
broadband access networks, the service providers can use fiber
or wireless connectivity. Similar to cellular telephone
networks, wireless broadband access is typically less expensive
to install and can be installed more rapidly than a wireline or
fiber alternative.

Digital microwave and millimeter-wave
transmission systems offer numerous advantages over competing
transmission technologies, including lower cost of
implementation and rapid deployment. Digital microwave systems
can be deployed in a matter of weeks and typically require lower
infrastructure investments and installation lead times than
alternative transmission technologies.

We believe that as broadband access and
telecommunications requirements grow, wireless systems will
continue to be used as transmission links to support a variety
of existing and expanding communications networks and
applications. In this regard, we believe that wireless systems
will be used to address the connection requirements of several
markets and applications, including the broadband access market,
cellular applications, private networks and wireless analog
replacement applications.

Our Solution

We believe that the use of standard design
platforms for both hardware and software components in the
development of our products enables us to more rapidly introduce
and commercially ship new products and product enhancements to
address changing market demands. The use of standard design
platforms, flexible architectures and components, and software
configurable features allows us to offer our customers
high-performance products with a high degree of flexibility and
functionality. Flexible architectures and components facilitate
system scalability, allow customers to acquire additional
features at a relatively low incremental cost, and, reduce the
development time of new features. The use of standard design
platforms also enables us to manufacture our products in a
cost-effective manner. The software features of many of our
products provide our customers with a greater degree of
flexibility in installing, operating and maintaining their
networks.

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Our Strategy

Our strategy is to build on the strength of our
current products, which offer point-to-point solutions, and our
strong customer sales, service and support organization to
improve our position as a leading provider of integrated
wireless solutions for mobile cellular broadband wireless access
and private networks. Key elements of our strategy include:

Maintain a Comprehensive Product Line.We anticipate that the requirements of
our customers will continue to evolve as the telecommunications
services markets change and expand. In this regard, since our
customers often do not know the exact frequency band and
capacity needs of their networks at the time they are awarded
franchises, our broad product line provides them with the
flexibility to respond to individual market needs and to
coordinate frequencies with existing infrastructure and other
significant variables. We intend to continue to expand our
product lines in response to the varying worldwide requirements
of wireless networks.

Address Worldwide Market Opportunities.We believe that we are well positioned
to address worldwide market opportunities for wireless
infrastructure suppliers. For example, in some African and Asian
countries there are mobile telecommunications infrastructures
being built for the first time; new competing mobile networks
are being built in many countries as customer demand increases;
telecommunications infrastructures are being expanded worldwide;
and broadband access networks are being constructed to meet data
access requirements. We believe that maintaining close proximity
to our customers provides us with a competitive advantage in
securing orders for our products and in servicing our customers.
Local offices enable us to better understand the local issues
and requirements of our customers and to address our
customers individual geographic, regulatory, and
infrastructure requirements. As a result, we have developed a
global sales, service and support organization with offices in
Europe, Africa, Asia, New Zealand, Australia, the Middle East
and the Americas. With our twenty-four sales or support offices
worldwide, we can normally respond quickly to our
customers needs and provide prompt on-site technical
support.

Leverage Distribution Channels.We market our products to service
providers directly, as well as indirectly through our
relationships with OEM base station suppliers, such as Motorola,
Inc., Lucent Technologies, Nortel Networks and Siemens AG, as
well as through our relationships with system integrators. We
also market our products through independent agents and
distributors in certain countries. We intend to leverage upon
such relationships and our direct worldwide presence with
service providers to expand our customer base and enhance our
global presence.

Focus on Business Expansion into Emerging
Applications.We believe that we can
leverage our core technical competencies and our global sales,
service and support organization to enter into growing business
applications for our products, including wireless local loop,
data access, wireless data transport, and alternative local
telephone facilities access.

For financial information by operating segment
and product category, see Note 6 to the Consolidated Financial
Statements of our 2003 Annual Report to Stockholders.

Existing Products

Our principal product families include the
AltiumMX, XP4TM, DARTTM,
DXR® 700, DXR® 200, DXR® 100,
ProVision® and VeloxLETM.

AltiumMX.The
AltiumMX digital microwave radio is the latest generation of the
Altium product, which originally began volume shipments in
January 1999, and provides high capacity solutions in
microwave and millimeter wave bands. The AltiumMX, a Synchronous
Optical Networks (SONET)/ Synchronous Digital Hierarchy (SDH)
capable digital microwave radio, can wirelessly extend or
complete SONET and SDH transport networks to complement, or be
an alternative to, fiber deployment. Altium additionally
features a fully integrated SDM add/drop multiplexer option. Key
attributes of size, performance, flexibility and rapid
deployment bring benefits to both interconnect and access
applications. Altium/ AltiumMX digital microwave radios operate
at frequencies of 7, 8, 11, 13, 15, 18, 23, 26 and 38 GHz
and at OC-3/ STSM-1 capacity of 155 Mbps or 2XOC-3 capacity
of 311 Mbps. Initial shipments of the Altium began in
mid 2002.

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Altium incorporates the VantexTM
chipset, which we introduced in February 2001, utilizing
features such as high-order Quadrature Amplitude Modulation
(QAM) (up to 256 QAM), forward error correction, and
adaptive equalization. These are all essential components in
high-performance wireless radio products. With products enabled
by the Vantex chipset, we can achieve required capacities in a
single chip with significant cost savings. We are developing
additional products based on Altium to meet customer
requirements.


XP4 Plus.The XP4
Plus Series of digital microwave radios provides low-to-medium
capacity microwave radio systems for cellular base station
connections and fixed wireless access. The XP4 Plus digital
microwave radio is deployed worldwide and has comprehensive
regulatory approvals for a wide variety of applications and
conditions. The XP4 Plus digital microwave radio is simple to
install and commission through the front panel controls. Options
include protection (redundancy), high power, Simple Network
Management Protocol (SNMP), Automatic Transmit Power Control
(ATPC), and a 100BT Ethernet interface. With broad platform
coverage from 7 to 38 GHz, international deployment
capacities of 2/4/8/16xE1 and 1xE3, and U.S. deployment
frequencies of 15-38 GHz, and capacities of 4/ 8xDS-1 and
1xDS-3, the XP4 Plus digital microwave radio meets
operators requirements in a single platform.

DART.The DART
microwave radio offers a low cost single E1 or DS-1 data stream
transmission and is designed for a smaller cell site in a
wireless network, typically referred to as microcell/ picocell,
and last-mile access requirements. DART radios compact,
all-outdoor design connects directly to base station equipment
via a single twisted-pair cable, making it very easy to install
and a viable, cost effective alternative to leased line
facilities. The DART radio can also be used in the build out of
wireless Internet access networks. Features of the DART
microwave radio include its compact, integrated outdoor unit,
low power consumption, programmability from laptop computers,
and Simple Network Management Protocol (SNMP) compatibility.
Available frequencies range from 15 GHz to 38 GHz.

DXR 700.The DXR 700
product family is a high performance radio platform that
operates across a range of capacities from 2x2 Mbps to
45 Mbps, using efficient 16 and 64 QAM modulation. A
set of advanced features (including forward error correction and
an adaptive equalizer) target medium- and long-distance link
requirements. Optional errorless diversity protection switching
delivers optimal performance under the most difficult radio
transmission conditions. The DXR 700 platform covers multiple
frequencies from 2 GHz to 11 GHz.

DXR 200.The DXR 200
product line provides an integrated, modular, linking solution
for a wide variety of communications systems in markets with low
to medium capacity transmission requirements. The DXR 200s
integrated modular design allows it to support a variety of
configurations, which can incorporate multiple features in the
unit to accommodate the differing communications needs of our
customers, overcome difficult radio frequency environments,
accommodate multiple data speeds and support multiple
communication protocols. The DXR 200 can operate in frequency
bands from 300 MHz to 2.7 GHz.

DXR 100.The DXR 100
product line is designed to address medium and long distances,
trunking applications and capacities higher than those addressed
by the DXR 200. The DXR 100 microwave radio supports these
higher capacity environments using spectrum efficient
transmission techniques, including Quadrature Phase Shift Keying
(QPSK) or QAM modulation and low error rate technologies,
including forward error correction and adaptive equalization. It
provides low to medium capacity links for cellular applications,
basic telephony transmission and customer access applications,
particularly in urban areas. The DXR 100 microwave radio
supports a variety of data rates with high spectrum efficiencies
and maintains signal reception in harsh or difficult radio
frequency environments.

ProVision.The
ProVision element manager is a centralized network monitoring
and control system for all of our products. Based on a
UNIX® system platform, the ProVision element manager can
expand to manage small systems as well as large networks. The
ProVision management system is built on open standards, and it
seamlessly integrates into higher-level managers through
available interfaces. The ProVision element manager is
compatible with all our management-enabled radios, including the
Altium, Altium MX, XP4, DXR and DART radio families, as
well as our prior radio products.

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VeloxLETM.
is a license-exempt radio platform that has been integrated into
Stratex Networks product portfolio to provide the
flexibility of both licensed and license-exempt products in a
single network solution. It is available in 2.4 and
5.8 GHz, and 1, 2, or 4 T1/ E1 configurations. All
versions include a bridged Ethernet port supporting up to
8 Mbps. This bandwidth is shared with the E1/ T1 traffic.

New Product Development

We intend to continue to focus significant
resources on product development to maintain our competitiveness
and to support our entry into new wireless opportunities,
including wireless data transport and alternative local
telephone facilities access. Programs currently in progress, if
successfully completed, could result in new products and
additions to current product families that will have the
capability to handle greater amounts of voice and data traffic
at increased cost-effectiveness with increased flexibility for
our customers.

There can be no assurance that we will be
successful in developing and marketing any of the products
currently being developed, that we will not experience
difficulties that could further delay or prevent the successful
development, introduction and sale of future products, or that
these products will adequately meet the requirements of the
marketplace and achieve market acceptance. For a more detailed
discussion regarding development of future products, see also
Research and Development.

Customers

We market our products to customers in the
telecommunications industry worldwide. Our customers include
service providers, which incorporate our products into their
telecommunications networks to deliver services directly to
consumers, and OEMs, who provide and install integrated systems
to service providers.

Although we have a large customer base, during
any given quarter, a small number of customers may account for a
significant portion of our net sales. In certain circumstances,
we sell our products to service providers through OEMs, which
provide the service providers with access to financing and in
some instances, protection from fluctuations in foreign currency
exchange rates. Our top two customers in net sales for fiscal
2003 were MTN Nigeria Communications Ltd (11%) and Motorola
(Thailand) Ltd. (10%). Our top customer in net sales for fiscal
2002 was Beijing Telecom Equipment Factory (15%). No customers
accounted for more than 10% of net sales for fiscal year 2001.
At March 31, 2003, two of our customers accounted for
approximately 25% and 11% of our $50.1 million backlog.
Between April 1, 2002 and March 31, 2003, we sold our
products to a number of service providers, in Asia and the
Pacific, (including Motorola (Thailand) Ltd, and Tata
Teleservices Limited) in Europe, the Middle East and Africa
(including General Data Communications, Jordan Mobile Telephone
Services, MTN Networks (Pvt) Limited and PTK Centertel SP); and
in the Americas (including Telcel Radiomovil DIPSA S.A. de C.V.
and Telefonica). While management considers our relationships
with each of our major customers to be good, there can be no
assurance that our current customers will continue to place
orders with us, that orders by existing customers will continue
to be at levels of previous periods, or that we will be able to
obtain orders from new customers. Our customers typically are
not contractually obligated to purchase any quantity of products
in a particular period, and product sales to major customers
have varied widely from period to period. The loss of any
existing customer, a significant reduction in the level of sales
to any existing customer, or our failure to gain additional
customers could have a material adverse effect on our business,
financial condition and results of operations.

Sales, Marketing and Service

We believe that a direct and continuing
relationship with service providers is a competitive advantage
in attracting new customers and satisfying existing ones. As a
result, we offer our products and services principally through
our own sales, service and support organization, which allows us
to closely monitor the needs of our customers. We have offices
in the United States, Mexico, Colombia, Argentina, Brazil, the
United Kingdom, Croatia, Portugal, France, Poland, Germany,
Greece, South Africa, the United Arab Emirates, India,
Singapore, the Peoples Republic of China, Malaysia,
Thailand, the Philippines, New Zealand and Australia. Our local
offices provide us with a better understanding of our
customers needs and enable us to respond to local issues
and unique local requirements.

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We have informal, and in some cases formal,
relationships with OEM base station suppliers. Such
relationships increase our ability to pursue the limited number
of major contract awards each year. In addition, such
relationships provide our customers with easier access to
financing and to integrated system providers with a variety of
equipment and service capabilities. There can be no assurance
that we will continue to be able to maintain and develop such
relationships or, that if such relationships are developed, they
will be successful. In selected countries, we also market our
products through independent agents and distributors, as well as
system integrators.

As of March 31, 2003, we employed
approximately 270 employees in our sales marketing, service
and support organization. Sales personnel are highly trained to
provide the customer with assistance in selecting and
configuring a digital microwave system suitable for the
customers particular needs. Our customer service and
support personnel provide customers with training, installation,
service and maintenance of our systems under contract. We
generally offer a conditional warranty for all customers on all
of our products. We provide warranty and post-warranty services
from our manufacturing locations in the United States and New
Zealand and our service centers in the United Kingdom and the
Philippines.

Research and Development

We believe that our ability to enhance our
current products, develop and introduce new products on a timely
basis, maintain technological competitiveness and meet customer
requirements is essential to our success. Accordingly, we
allocate, and intend to continue to allocate, a significant
portion of our resources to research and development efforts.
During fiscal 2003, we invested $14.4 million or 7.3% of
net sales on research and development, compared to
$18.5 million or 8.1% of net sales in fiscal 2002 and
$24.0 million or 5.7% of net sales in fiscal 2001. We
expect our research and development spending to be slightly
higher in fiscal 2004 as we design and deliver our new product
family called EclipseTM near the end of calendar
2003. As of March 31, 2003, we employed a total of
approximately 112 people in our research and development
organizations in San Jose, California and Wellington, New
Zealand.

The market for our products is characterized by
rapidly changing technologies and evolving industry standards.
Accordingly, our future performance depends on a number of
factors, including our ability to identify emerging
technological trends in our target markets, to develop and
maintain competitive products, to enhance our products by adding
innovative features that differentiate our products from those
of our competitors, and to manufacture and bring products to
market quickly at cost-effective prices. We believe that the use
of flexible architectures and components assists in the rapid
deployment of new products and enhancements to satisfy customer,
industry and market needs. We believe that to remain competitive
in the future, we will need to continue to develop new products,
which require the investment of significant financial resources
in product development. There can be no assurance, however, that
we will successfully complete the development of any future
products, that such products will achieve market acceptance or
that such products will be capable of being manufactured at
competitive prices in sufficient volumes. In the event that such
products are not developed in a timely manner, do not gain
market acceptance or are not manufacturable at competitive
prices, our business, financial condition and results of
operations could be harmed.

Manufacturing and Suppliers

Our manufacturing operations consist primarily of
software configuration, system test and quality management of
Out-door Units (ODUs) and In-door Units
(IDUs). The manufacturing process consists primarily
of demand planning and management, supply chain management,
process engineering and system configuration. We have two
manufacturing facilities, which presently are located in San
Jose, California, and Wellington, New Zealand. We also work very
closely with two key manufacturing suppliers to produce the
majority of our products based primarily on Stratex Networks
designs and developed processes. The manufacturing operations in
San Jose, California and Wellington, New Zealand are certified
to International Standards Organization (ISO) 9001, a recognized
international quality standard. The manufacturing facility in
Wellington, New Zealand is also certified to ISO 14001, an
internationally recognized environmental quality standard. As of
March 31, 2003, we employed 104 people in
manufacturing.

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During the first quarter of fiscal 2003, we
entered into an agreement to outsource the majority of our San
Jose, California manufacturing operations to Microelectronics
Technology Inc. (MTI) in Taiwan. Under the terms of
our agreement with MTI for the transfer of our manufacturing
operations to them, MTI has assumed assembly, integration and
testing of our Altium product family, as well as assembly and
testing of the ODU portion of our XP4 product. The agreement
also provides for continuing cooperation between the companies
for future products now being developed. We are retaining
product design and research and development functions for these
products.

Our manufacturing operations are highly dependent
upon the delivery of completed ODUs and IDUs provided by our
outside suppliers in a timely manner. In addition, we depend for
the most part upon subcontractors to integrate and test the IDUs
and ODUs for delivery to customers. We do not generally enter
into volume purchase agreements with any of our suppliers, and
no assurance can be given that such materials, components and
subsystems will be available in the quantities required by us,
if at all. Our inability to develop alternative sources of
supply quickly and on a cost-effective basis could materially
impair our ability to manufacture and deliver our products in a
timely manner and, depending on the customer, subject us to
delay penalties. There can be no assurance that we will not
experience material supply problems that will cause delays in
the future.

From time to time, we have experienced delays and
other supply problems with our suppliers, but such delays and
other problems have not had a significant impact on our
operating results. We maintain continual communication between
our management and the management of our key suppliers to ensure
that production requirements and constraints are taken into
account in each of our respective production plans.

Backlog

Our backlog at March 31, 2003 was
$50.1 million, compared with $94.1 million at
March 31, 2002. We only include orders scheduled for
delivery within twelve months in our backlog. Product orders in
our current backlog are subject to changes in delivery schedules
or to cancellation at the option of the purchaser without
significant penalty. Accordingly, although useful for scheduling
production, backlog as of any particular date may not be a
reliable measure of sales for any future period because of the
timing of orders, delivery intervals, customer and product mix,
and the possibility of changes in delivery schedules and
additions or cancellations of orders.

Competition

The wireless interconnection and access business
is a specialized segment of the wireless telecommunications
industry and is extremely competitive. We expect that
competition will increase. Many of our competitors have more
extensive engineering, manufacturing and marketing capabilities
and significantly greater financial, technical, and personnel
resources than us. In addition, some of our competitors may have
greater name recognition, broader product lines, a larger
installed base of products and longer-standing customer
relationships. Our existing and potential competitors include
established and emerging companies, such as Alcatel, Ceragon
Networks, L.M. Ericsson, the Microwave Communications
Division of Harris Corporation, NEC, Nera Telecommunications,
Nokia, P-COM, Sagem AS, SIAE, and Siemens AG, as well
as several private companies currently in the start-up stage.
Some of our competitors have product lines that compete with
ours, and are also OEMs through which we market and sell our
products. Some of our largest customers could internally develop
the capability to manufacture products similar to those
manufactured by us and, as a result, their demand for our
products and services may decrease. We believe that our ability
to compete successfully will depend on a number of factors both
within and outside our control, including price, quality,
availability, customer service and support, breadth of product
line, product performance and features, rapid time-to-market
delivery capabilities, reliability, timing of new product
introductions by us, our customers and our competitors, and the
ability of our customers to obtain financing. We cannot assure
you that we will have the financial resources, technical
expertise, or marketing, sales, distribution, and customer
service and support capabilities to compete successfully. For a
more detailed discussion of the competition we face, see
Factors That May Affect Future Financial
Results  Competition could harm our ability to
maintain or improve our position in the market and could
decrease our revenues.

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Government Regulation

Radio communications are subject to regulation by
governmental laws and international treaties. Our equipment must
conform to domestic and international requirements established
to avoid interference among users of microwave frequencies and
to permit interconnection of telecommunications equipment. We
believe that we have complied with such rules and regulations
with respect to our existing products. Any delays in compliance
with respect to future products could delay the introduction of
such products. In addition, radio transmission is subject to
regulation by foreign laws and international treaties. Equipment
to support these services can be marketed only if permitted by
suitable frequency allocations and regulations. Failure by the
regulatory authorities to allocate suitable frequency spectrum
could harm our business, financial condition and results of
operations.

The regulatory environment in which we operate is
subject to change. Regulatory changes, which are affected by
political, economic and technical factors, could significantly
impact our operations by restricting development efforts by us
and our customers, making current systems obsolete or increasing
the opportunity for additional competition. Any such regulatory
changes could harm our business, financial condition and results
of operations. We might deem it necessary or advisable to modify
our systems to operate in compliance with such regulations. Such
modifications could be extremely expensive and time-consuming to
complete.

Intellectual Property

Our ability to compete will depend, in part, on
our ability to obtain and enforce intellectual property
protection for our technology in the United States and
internationally. We rely upon a combination of trade secrets,
trademarks, patents and contractual rights to protect our
intellectual property. For example, we presently have seven
patents, including one foreign patent, and two pending patents
covering our products. In addition, we enter into
confidentiality and invention assignment agreements with our
employees, and enter into non-disclosure agreements with our
suppliers and appropriate customers so as to limit access to and
disclosure of our proprietary information. There can be no
assurance that any steps taken by us will be adequate to deter
misappropriation or impede independent third party development
of similar technologies. In the event that such intellectual
property arrangements are insufficient, our business, financial
condition and results of operations could be harmed. Moreover,
there can be no assurance that the protection provided to our
intellectual property by the laws and courts of foreign nations
will be substantially similar to the remedies available under
United States law or that third parties will not assert
infringement claims against us.

While our ability to compete may be affected by
our ability to protect our intellectual property, we believe
that, because of the rapid pace of technological change in the
wireless telecommunications industry, our innovative skills,
technical expertise and ability to introduce new products on a
timely basis will be more important in maintaining our
competitive position than protection of our intellectual
property. Trade secret, trademark, copyright and patent
protections are important but must be supported by other factors
such as the expanding knowledge, ability and experience of our
personnel, new product introductions and product enhancements.
Although we continue to implement protective measures and intend
to defend vigorously our intellectual property rights, there can
be no assurance that these measures will be successful.

The wireless telecommunication industry is
characterized by frequent allegations of patent infringement
among competitors and considerable related litigation. We may in
the future be notified that we are infringing certain patent or
other intellectual property rights of others. Although there are
currently no such pending lawsuits against us or unresolved
notices that we are infringing upon intellectual property rights
of others, there can be no assurance that litigation or
infringement claims will not occur in the future. Such
litigation or claims could result in substantial costs and
diversion of resources and could harm our business, financial
condition and results of operations. In the event of an adverse
result of any such litigation, we could be required to expend
significant resources to develop non-infringing technology or to
obtain licenses to the technology that is the subject of the
litigation. There can be no assurance that we would be
successful in such development or that any such license would be
available on commercially reasonable terms.

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Employees

As of March 31, 2003, we employed 587
full-time and temporary employees. None of our employees are
represented by a collective bargaining agreement. Our future
performance will depend in large measure on our ability to
attract and retain highly skilled employees. Competition for
such personnel is intense and there can be no assurance that we
will be successful in attracting and retaining highly skilled
employees. We have never experienced a work stoppage and believe
our relationship with our employees is good. Due to the
macroeconomic and capital spending issues affecting the
telecommunications industry, we undertook a reduction in work
force of approximately 23% during fiscal 2003.

Factors That May Affect Future Financial
Results

The statements contained in this Annual Report on
Form 10-K concerning our future products, expenses,
revenues, gross margins, liquidity and cash needs, as well as
our plans and strategies, contain forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995 and Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Exchange Act of 1934, as
amended. All statements, trend analyses and other information
contained herein about the markets for our services and products
and trends in revenue, as well as other statements identified by
the use of forward-looking terminology, including
anticipate, believe, plan,
estimate, expect, goal and
intend, or the negative of these terms or other
similar expressions, constitute forward-looking statements.
These forward-looking statements are based on current
expectations, and we assume no obligation to update this
information. The forward looking statements in this Annual
Report include, without limitation, statements regarding:



| |   |                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our belief that as broadband access and
    telecommunications requirements grow, wireless systems will
    continue to be used as transmission links to support a variety
    of existing and expanding communications networks and
    applications;                                                                          
|
| |  | Our belief that wireless systems will be used to
    address the connection requirements of several markets and
    applications;                                                                                                                                                                                               
|
| |  | Our belief that the use of standard design
    platforms for both hardware and software components in the
    development of our products enables us to more rapidly introduce
    and commercially ship new products and product enhancements to
    address changing market demands;                                          
|
| |  | Our anticipation that the requirements of our
    customers will continue to evolve as the telecommunications
    services markets change and expand;                                                                                                                                                                           
|
| |  | Our intent to continue to expand our product
    lines in response to the varying worldwide requirements of
    wireless networks;                                                                                                                                                                                              
|
| |  | Our belief that we are well positioned to address
    worldwide market opportunities for wireless infrastructure
    suppliers;                                                                                                                                                                                                 
|
| |  | Our belief that maintaining close proximity to
    our customers provides us with a competitive advantage in
    securing orders for our products and in servicing our customers;                                                                                                                                               
|
| |  | Our intent to leverage upon our business
    relationships and our direct worldwide presence with service
    providers to expand our customer base and enhance our global
    presence;                                                                                                                                        
|
| |  | Our belief that we can leverage our core
    technical competencies and our global sales, service and support
    organization to enter into growing business applications for our
    products, including wireless local loop, data access, wireless
    data transport, and alternative local telephone facilities
    access;
|
| |  | Our intent to continue to focus significant
    resources on product development to maintain our competitiveness
    and to support our entry into new wireless opportunities,
    including wireless data transport and alternative local
    telephone facilities access;                                                     
|
| |  | Our belief that a direct and continuing
    relationship with service providers is a competitive advantage
    in attracting new customers and satisfying existing ones;                                                                                                                                                        

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| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our belief that our ability to enhance our
    current products, develop and introduce new products on a timely
    basis, maintain technological competitiveness and meet customer
    requirements is essential to our success;     
|
| |  | Our intent to continue to allocate a significant
    portion of our resources to research and development efforts;                                                                                                                    
|
| |  | Our expectation that research and development
    spending to be slightly higher in fiscal 2004 as we design and
    deliver our new product family called Eclipse near the end
    of calendar 2003;                                
|
| |  | Our intent to design and deliver our new product
    family called Eclipse near the end of calendar 2003;                                                                                                                            
|
| |  | Our belief that the use of flexible architectures
    and components assists in the rapid deployment of new products
    and enhancements to satisfy customer, industry and market needs;                                             
|
| |  | Our belief that to remain competitive in the
    future, we will need to continue to develop new products, which
    require the investment of significant financial resources in
    product development;                            
|
| |  | Our belief that our ability to compete
    successfully will depend on a number of factors both within and
    outside our control;                                                                                                   
|
| |  | Our belief that our leased facilities are
    adequate to meet our anticipated needs for the foreseeable
    future; and                                                                                                              
|
| |  | Our belief that the ultimate disposition of
    proceedings to which we are subject to and which arise in the
    normal course of business will not harm our consolidated
    financial position, liquidity or results of operations.

Numerous factors, including the risk factors
discussed below, economic and competitive conditions, timing and
volume of incoming orders, shipment volumes, product margins and
foreign exchange rates, could cause actual results to differ
materially from those described in these statements, and
prospective investors and stockholders should carefully consider
these factors set forth below and elsewhere in evaluating these
forward-looking statements.

Competition could harm our ability to maintain
or improve our position in the market and could decrease our
revenues.

The wireless interconnection and access business
is a specialized segment of the wireless telecommunications
industry and is extremely competitive. We expect that
competition will increase. Many of our competitors have more
extensive engineering, manufacturing and marketing capabilities
and significantly greater financial, technical, and personnel
resources than we have. In addition, some of our competitors may
have greater name recognition, broader product lines, a larger
installed base of products and longer-standing customer
relationships. Our existing and potential competitors include
established and emerging companies, such as Alcatel, Ceragon
Networks, L.M. Ericsson, Microwave Communications Division of
Harris Corporation, NEC, Nera, Nokia, P-COM, Sagem AS, SIAE and
Siemens AG, as well as several private companies currently in
the start-up stage. Some of our competitors have product lines
that compete with ours, and are also OEMs through whom we market
and sell our products. Some of our largest customers could
internally develop the capability to manufacture products
similar to those manufactured by us and, as a result, their
demand for our products and services may decrease.

In addition, we compete for acquisition and
expansion opportunities with many entities that have
substantially greater resources than we have. Furthermore, any
acquisition we contemplate and subsequently complete may
encourage certain of our competitors to enter into additional
business combinations, to accelerate product development, or to
engage in aggressive price reductions or other competitive
practices, thereby creating even more powerful or aggressive
competitors.

We believe that our ability to compete
successfully will depend on a number of factors both within and
outside our control, including price, quality, availability,
customer service and support, breadth of product line,

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product performance and features, rapid
time-to-market delivery capabilities, reliability, timing of new
product introductions by us, our customers and our competitors,
the ability of our customers to obtain financing, and
uncertainty of regional socio- and geopolitical factors. We
cannot assure you that we will have the financial resources,
technical expertise, or marketing, sales, distribution, and
customer service and support capabilities to compete
successfully.


If we fail to maintain our relationships with
original equipment manufacturers, our distribution channels
could be harmed, which could cause our revenues to
decrease.

We have relationships with OEM base station
suppliers and in selected countries we also market our products
through independent agents and distributors. These relationships
increase our ability to pursue the limited number of major
contract awards each year. In addition, these relationships are
intended to provide our customers with easier access to
financing and to integrated systems providers with a variety of
equipment and service capabilities. We may not be able to
continue to maintain and develop these relationships or, if
these relationships are developed, they may not be successful.
Our inability to establish or maintain these distribution
relationships could restrict our ability to market our products
and thereby result in significant revenue shortfalls. If these
revenue shortfalls occur, our business, financial condition and
results of operations may be harmed.

Our industry is volatile and subject to
frequent changes, and we may not be able to respond effectively
or in a timely manner to these changes.

We participate in a highly volatile industry that
is characterized by vigorous competition for market share and
rapid technological development. These factors could result in
aggressive pricing practices and growing competition both from
start-up companies and from well-capitalized telecommunication
systems providers, which, in turn, could decrease our revenues.
In response to changes in our industry and market conditions, we
may restructure our activities to more strategically realign our
resources. This includes assessing whether we should consider
disposing of, or otherwise exiting, businesses and reviewing the
recoverability of our tangible and intangible assets. Any
decision to limit investment in our tangible and intangible
assets or to dispose of or otherwise exit businesses may result
in the recording of accrued liabilities for special charges,
such as workforce reduction costs. In June 2002, we entered into
an agreement with Microelectronics Technology Inc.
(MTI) to outsource our San Jose, California
manufacturing operations to MTI. As a result of changes
associated with this agreement, as well as other reductions in
operating expenses and facilities, we reduced our worldwide
headcount by approximately 23% and recorded restructuring
charges of $28.2 million in fiscal 2003. Additionally,
accounting estimates with respect to the useful life and
ultimate recoverability of our carrying basis of assets could
change as a result of such assessments and decisions, and could
harm our results of operations.

Because of the severe economic downturn in the
world economy, and bankruptcies and financial difficulties in
the competitive local exchange carrier (CLEC)
business, the demand for our products and services may
decrease.

Due to the continued economic downturn in the
world economy, as well as the global tightening of the capital
markets for telecommunications and mobile cellular projects
during calendar 2002 and the first calendar quarter of 2003, our
business opportunities have decreased in Europe, China and the
Americas. To the extent that the economic downturn and the
global tightening of the capital markets continue, the demand
for our products and services may decrease further in these
countries and geographic regions. The continuing decline in
financial condition of CLECs, including those currently involved
in bankruptcy proceedings, may continue to have a negative
impact on our financial results. In the fourth quarter of fiscal
2003 we received demand letters from the bankruptcy estate
trustees of prior CLEC customers who had previously declared
bankruptcy. The bankruptcy trustees for these companies are
claiming that we received preference payments, as defined in the
United States Bankruptcy Code, totaling $10.8 million. We
intend to vigorously defend ourselves against these claims.
Because of the inherent uncertainties of litigation in general
and our analysis of the issues presented by these threatened
litigations is not yet complete, we cannot assure you that the
ultimate

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outcomes will be in our favor. If we do not
ultimately prevail against these claims, we will be required to
remit to the counsel to the unsecured creditors for the benefit
of such creditors some or all of the $10.8 million.
Repayment of these amounts could have a negative impact on our
results of operations. We have recorded an amount of
$7.5 million in the fourth quarter of fiscal year 2003
which we believe is appropriate given the current uncertainty of
these claims. Repayment in excess of the amounts reserved of
these amounts could have a negative impact on our results of
operations.


In addition, the terrorist attack of
September 11, 2001, the subsequent military response by the
United States, the aftermath of the U.S. war against Iraq, and
the general socio- and geopolitical conditions in the Middle
East, have negatively impacted, and may continue to negatively
impact, the economy in general. This could impact our current
and future business in the Middle East and could result in our
customers delaying or canceling the purchase of our products,
which would have a significant negative impact on our revenues.

Consolidation within the telecommunications
industry and among suppliers could decrease our
revenues.

The telecommunications industry has experienced
significant consolidation among its participants, and we expect
this trend to continue. Some operators in this industry have
experienced financial difficulty and have filed, or may file,
for bankruptcy protection. Other operators may merge and one or
more of our competitors may supply products to such companies
that have merged or will merge. This consolidation could result
in purchasing decision delays by the merged companies and
decrease opportunities for us to supply our products to the
merged companies. We may also see similar consolidation among
suppliers, which may further decrease our opportunity to market
and sell our products.

Our average sales prices are
declining.

Currently, manufacturers of digital microwave
telecommunications equipment are experiencing, and are likely to
continue to experience, on-going price pressure. This price
pressure has resulted in, and is expected to continue to result
in, downward pricing pressure on our products. As a result, we
have experienced, and expect to continue to experience,
declining average sales prices for our products. Our future
profitability is dependent upon our ability to improve
manufacturing efficiencies, reduce costs of materials used in
our products, and to continue to introduce new products and
product enhancements. Our inability to respond to increased
price competition will harm our business, financial condition
and results of operations. Since our customers frequently
negotiate supply arrangements far in advance of delivery dates,
we must often commit to price reductions for our products before
we are aware of how, or if, cost reductions can be obtained. As
a result, current or future price reduction commitments could,
and any inability by us to respond to increased price
competition would, harm our business, financial condition and
results of operations.

Because a significant amount of our revenues
comes from a few customers, the termination of any of these
customer relationships may harm our business.

Sales of our products are concentrated in a small
number of customers. Two customers accounted for approximately
11% and 10% of net sales for fiscal 2003 and one customer
accounted for 15% of net sales for fiscal year 2002. No
customers accounted for more than 10% of net sales during fiscal
year 2001. Three customers accounted for approximately 16%, 16%
and 14%, respectively, of the total accounts receivable balance
at the end of fiscal 2003. Three customers accounted for
approximately 16%, 15% and 12%, respectively, of the total
accounts receivable balance at the end of fiscal 2002. The
worldwide telecommunications industry is dominated by a small
number of large corporations, and we expect that a significant
portion of our future product sales will continue to be
concentrated in a limited number of customers. In addition, our
customers typically are not contractually obligated to purchase
any quantity of products in any particular period, and product
sales to major customers have varied widely from period to
period. In addition, as a result of the global tightening of the
capital markets for the telecommunications and mobile cellular
projects in calendar year 2002 and first quarter of calendar
year 2003, the demand for our products and services has
decreased and may continue to decrease. The loss of any existing
customer, a significant reduction in the level of sales to any
existing customer, or our inability to gain additional customers
could result in further declines

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in our revenues. If these revenue declines occur,
our business, financial condition, and results of operations
would be harmed.


Due to our significant volume of international
sales, we are susceptible to a number of political, economic and
geographic risks that could harm our business if they
occur.

We are highly dependent on sales to customers
outside the United States. During fiscal 2001, 2002, and 2003,
sales to international customers accounted for 69%, 92% and 95%
of our net sales, respectively. In fiscal 2001, 2002, and 2003,
sales to the Middle East/ Africa region accounted for
approximately 10%, 11% and 21% of our net sales, respectively.
Also a significant portion of our international sales are in
lesser developed countries. We expect that international sales
will continue to account for the majority of our net product
sales for the foreseeable future. As a result, the occurrence of
any international, political, economic or geographic event that
adversely affects our business could result in significant
revenue shortfalls. These revenue shortfalls could cause our
business, financial condition and results of operations to be
harmed. Some of the risks and challenges of doing business
internationally include:



| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | unexpected changes in regulatory requirements;                                                          
|
| |  | fluctuations in foreign currency exchange rates;                                                        
|
| |  | imposition of tariffs and other barriers and
    restrictions;                                          
|
| |  | management and operation of an enterprise spread
    over various countries;                            
|
| |  | burden of complying with a variety of foreign
    laws;                                                 
|
| |  | general economic and geopolitical conditions,
    including inflation and trade relationships;          
|
| |  | war and acts of terrorism;                                                                              
|
| |  | currency exchange controls;                                                                             
|
| |  | unforeseen changes in export regulations; and                                                           
|
| |  | the current severe acute respiratory syndrome and
    its effect on our suppliers and customers in Asia.

In addition, in order to maintain competitiveness
in an environment of restrictive third party financing, we may
have to offer customer financing that is recorded on our balance
sheet. This may result in deferred revenue recognition and
additional credit risk.

The inability of our subcontractors to
perform, or our key suppliers to manufacture and deliver our
products, could cause our products to be produced in an untimely
or unsatisfactory manner.

Our manufacturing operations, which have been
substantially subcontracted, are highly dependent upon the
delivery of materials by outside suppliers in a timely manner.
We have significant operations in the United Kingdom and New
Zealand, and outsourcing arrangements in Asia. Also, we depend
in part upon subcontractors to assemble major components and
subsystems used in our products in a timely and satisfactory
manner. Sales of our Altium and XP4 products for fiscal 2003
accounted for approximately 64% of total revenues. We do not
generally enter into long-term or volume purchase agreements
with any of our suppliers, and we cannot assure you that such
materials, components and subsystems will be available to us at
such time and in quantities we require, if at all. In addition,
due to the rapid and increasingly severe economic downturn, our
suppliers have experienced and are continuing to experience
various financial difficulties, which may impact their ability
to supply the materials, components and subsystems that we
require. Our inability to develop alternative sources of supply
quickly and on a cost-effective basis could materially impair
our ability to manufacture and deliver our products to our
customers in a timely manner. We cannot assure you that we will
not experience material supply problems or component or
subsystem delays in the future. Also, our subcontractors may not
be able to maintain the quality of our products, which might
result in a large number of product returns by customers and
could harm our business, financial condition and results of
operations.

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Additional risks associated with the outsourcing
of our manufacturing operations to MTI in Taiwan could include,
among other things: (i) political risks due to political
issues between Taiwan and The Peoples Republic of China,
(ii) risk of natural disasters in Taiwan, which is subject
to earthquakes and typhoons, (iii) economic and regulatory
developments and (iv) the possible effects of the current
severe respiratory syndrome and (v) other events leading to
the disruption of manufacturing operations.

The global tightening of capital markets for
the telecommunications and mobile cellular projects may result
in inventory, which we cannot sell or be required to sell at
distressed prices.

Many of our current and potential customers
require significant capital funding to finance their
telecommunications and mobile cellular projects, which include
the purchase of our products and services. Due to the on going
tightening of capital markets worldwide, available funding for
these projects has been and may continue to be unavailable to
some customers and thereby slow or halt the purchase of our
products and services. This reduction in demand has resulted in
excess inventories on hand, and could result in additional
excess inventories in the future. If funding continues to be
unavailable to our customers or their customers, we may be
forced to take additional reserves for excess inventory. Or we
may have to extend more and longer credit terms to our
customers, which could negatively impact our cash and possibly
result in higher bad debt expense. We cannot assure you that we
will be successful in matching our inventory purchases with
anticipated shipment volumes. As a result, we may fail to
control the amount of inventory on hand and may be forced to
take unanticipated additional reserves. Such additional
inventory reserves, if required, would decrease our profits.

If we fail to manage our internal development
or successfully integrate acquired businesses, we may not
effectively manage our growth and our business may be
harmed.

Future growth of our operations depends, in part,
on our ability to introduce new products and develop
enhancements to existing products to meet the emerging trends in
our industry. We have pursued, and will continue to pursue,
growth opportunities through internal development, minority
investments and acquisitions of complementary businesses and
technologies. We are unable to predict whether and when any
prospective acquisition candidate will become available or the
likelihood that any acquisition will be completed and
successfully integrated. Once integrated, acquired businesses
may not achieve comparable levels of revenues, profitability or
productivity to our existing business or otherwise perform as
expected. Also, acquisitions may involve difficulties in the
retention of personnel, diversion of managements
attention, risks of our customers and the customers of acquired
businesses deferring purchase decisions as they evaluate the
impact of the acquisition, unexpected legal liabilities, and tax
and accounting issues. Our failure to manage growth effectively
could harm our business, financial condition and results of
operations.

The unpredictability of our quarter-to-quarter
results may harm the trading price of our common
stock.

Our quarterly operating results may vary
significantly in the future for a variety of reasons, many of
which are outside of our control, and any of which may harm our
business. These factors include:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | volume and timing of product orders received and
    delivered during the quarter;                           
|
| |  | our ability and the ability of our key suppliers
    to respond to changes made by customers in their orders;
|
| |  | timing of new product introductions by us or our
    competitors;                                            
|
| |  | changes in the mix of products sold by us;                                                                   
|
| |  | cost and availability of components and
    subsystems;                                                      
|
| |  | downward pricing pressure on our products;                                                                   
|
| |  | adoption of new technologies and industry
    standards;                                                     
|
| |  | competitive factors, including pricing,
    availability and demand for competing products;                  
|
| |  | war and acts of terrorism;                                                                                   

14



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##### Table of Contents





| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | ability of our customers to obtain financing to
    enable their purchase of our products;                                                                                                    
|
| |  | fluctuations in foreign currency exchange rates;                                                                                                                                              
|
| |  | regulatory developments;                                                                                                                                                                      
|
| |  | general economic conditions worldwide;                                                                                                                                                        
|
| |  | claims or litigation related to the continuing
    decline in financial conditions of CLECs including but not
    limited to those CLECs currently involved in bankruptcy
    proceedings; and
|
| |  | the current severe acute respiratory syndrome and
    its effect on our suppliers and customers in Asia.                                                                                      

Our quarterly results are difficult to predict
and delays in product delivery or closing of a sale can cause
revenues and net income to fluctuate significantly from
anticipated levels. In addition, we may increase spending in
response to competition or to pursue new market opportunities.
Accordingly, we cannot assure you that we will be able to
sustain profitability in the future, particularly on a
quarter-to-quarter basis.

Because of intense competition for highly
skilled personnel, we may not be able to recruit and retain
qualified personnel.

Due to the specialized nature of our business,
our future performance is highly dependent upon the continued
services of our key engineering personnel and executive
officers, including Charles D. Kissner, who currently serves as
our Chairman of the Board and Chief Executive Officer. The loss
of any key personnel could harm our business. Our prospects
depend upon our ability to attract and retain qualified
engineering, manufacturing, marketing, sales and management
personnel for our operations. Competition for personnel is
intense and we may not be successful in attracting or retaining
qualified personnel. The failure of any key employee to perform
in his or her current position or our inability to attract and
retain qualified personnel could harm our business and deter our
ability to expand our business.

If we are unable to protect our intellectual
property rights adequately, we may be deprived of legal recourse
against those who misappropriate our intellectual
property.

Our ability to compete will depend, in part, on
our ability to obtain and enforce intellectual property
protection for our technology in the United States and
internationally. We currently rely upon a combination of trade
secrets, trademark, patents and contractual rights to protect
our intellectual property. In addition, we enter into
confidentiality and invention assignment agreements with our
employees, and enter into non-disclosure agreements with our
suppliers and appropriate customers so as to limit access to and
disclosure of our proprietary information. We cannot assure you
that any steps taken by us will be adequate to deter
misappropriation or impede independent third party development
of similar technologies. In the event that such intellectual
property arrangements are insufficient, our business, financial
condition and results of operations could be harmed. We have
significant operations in the United Kingdom and New Zealand,
and outsourcing arrangements in Asia. We cannot assure you that
the protection provided to our intellectual property by the laws
and courts of foreign nations will be substantially similar to
the remedies available under United States law. Furthermore, we
cannot assure you that third parties will not assert
infringement claims against us based on foreign intellectual
property rights and laws that are different from those
established in the United States.

Defending against intellectual property
infringement claims could be expensive and could disrupt our
business.

The wireless telecommunications industry is
characterized by vigorous protection and pursuit of intellectual
property rights, which has resulted in often protracted and
expensive litigation. We may in the future be notified that we
are infringing upon certain patent or other intellectual
property rights of others. Such litigation or claims could
result in substantial costs and diversion of resources. In the
event of an adverse result of any such litigation, we could be
required to pay substantial damages, cease the licensing of
allegedly infringing technology or the sale of allegedly
infringing products and expend significant resources to develop

15



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##### Table of Contents



non-infringing technology or to obtain licenses
for the infringing technology. We cannot assure you that we
would be successful in developing such non-infringing technology
or that any license for the infringing technology would be
available to us on commercially reasonable terms, if at all.


If sufficient radio frequency spectrum is not
allocated for use by our products, and we fail to obtain
regulatory approval for our products, our ability to market our
products may be restricted.

Radio communications are subject to regulation by
United States and foreign laws and international treaties.
Generally, our products must conform to a variety of United
States and international requirements established to avoid
interference among users of transmission frequencies and to
permit interconnection of telecommunications equipment. Any
delays in compliance with respect to our future products could
delay the introduction of such products.

In addition, both in the United States and
internationally, we are affected by the allocation and auction
of the radio frequency spectrum by governmental authorities.
Such governmental authorities may not allocate sufficient radio
frequency spectrum for use by our products or we may not be
successful in obtaining regulatory approval for our products
from these authorities. Historically, in many developed
countries, the unavailability of frequency spectrum has
inhibited the growth of wireless telecommunications networks. In
addition, to operate in a jurisdiction, we must obtain
regulatory approval for our products. Each jurisdiction in which
we market our products has its own regulations governing radio
communications. Products that support emerging wireless
telecommunications services can be marketed in a jurisdiction
only if permitted by suitable frequency allocations, auctions
and regulations, and the process of establishing new regulations
is complex and lengthy. If we are unable to obtain sufficient
allocation of radio frequency spectrum by the appropriate
governmental authority or obtain the proper regulatory approval
for our products, our business, financial condition and results
of operations may be harmed.

If we fail to develop products that meet our
customers technical specifications on a timely basis, our
business may be harmed.

The existing and potential markets for our
products and technology are characterized by ever-increasing
performance requirements, evolving industry standards, rapid
technological changes and product obsolescence. These
characteristics lead to frequent new products and technology
introductions and enhancements, shorter product life cycles and
changes in customer demands. We cannot assure you that we will
be successful in developing or marketing any of our products
currently being developed. Moreover, we cannot assure you that
we will not experience difficulties that could further delay or
prevent the successful development, introduction and sale of
future products, or that these products will adequately meet the
requirements of the marketplace and achieve market acceptance.

We may not successfully adapt to regulatory
changes in our industry, which could significantly impact the
operation of our business.

The regulatory environment in which we operate is
subject to change. Regulatory changes, which are affected by
political, economic and technical factors, could significantly
impact our operations by restricting development efforts by us
and our customers, making current products and systems in the
industry obsolete or increasing the opportunity for additional
competition. Any such regulatory changes could harm our
business, financial condition and results of operations. It may
be necessary or advisable in the future to modify our products
to operate in compliance with such regulations. Such
modifications could be extremely expensive and time-consuming to
complete.

Our stock price may be volatile, which may
lead to losses by investors.

Announcements of developments related to our
business, announcements by competitors, quarterly fluctuations
in our financial results and general conditions in the
telecommunications industry in which we compete, or the
economies of the countries in which we do business and other
factors could cause the price of our common stock to fluctuate,
perhaps substantially. In addition, in recent years the stock
market has

16



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experienced extreme price fluctuations, which
have often been unrelated to the operating performance of
affected companies. These factors and fluctuations could lower
the market price of our common stock.







|        |           
|------- | ----------
|Item 2. | Properties

Our corporate offices and principal research and
development facilities are located in San Jose, California in
one leased building of approximately 60,000 square feet. We have
vacated two other buildings in San Jose of approximately 73,000
square feet; however, we have ongoing lease commitments for
these buildings. We also lease three buildings in Milpitas,
California totaling 80,000 square feet. Two of these buildings
are used for warehousing. We have vacated the other building of
approximately 28,000 square feet. We have an ongoing lease
commitment for the vacated building. In the vacated building, we
have sub-tenants occupying the majority of the building.
Although we have discontinued our Seattle, Washington
operations, we have ongoing lease commitments. The Seattle
facility consists of two leased buildings aggregating
approximately 101,000 square feet of office and manufacturing
space.

We also own a 44,000 square foot service and
repair facility in Hamilton, Scotland and lease 11,500 square
feet of office space in Coventry, England, of which 10,000
square feet has been vacated and a termination lease agreement
is currently being negotiated. We lease 25,000 square feet of
office space and own an additional 28,000 square feet of office
and manufacturing space in Wellington, New Zealand. Additionally
we lease an aggregate of approximately 32,000 square feet
worldwide for sales, customer service and support offices. We
believe these facilities are adequate to meet our anticipated
needs for the foreseeable future.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

We may be a defendant at any time in various
suits and are subject to various claims that arise in the normal
course of business. In the opinion of management, the ultimate
disposition of these proceedings will not harm our consolidated
financial position, liquidity or results of operations.






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

None.




PART II






|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Equity and Related Stockholder Matters

The section labeled Quarterly Financial
Data and Other Equity Compensation Plan
Information appearing in our 2003 Annual Report to
Stockholders is incorporated herein by reference.






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The section labeled Selected Consolidated
Financial Data appearing in our 2003 Annual Report to
Stockholders is incorporated herein by reference.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The information appearing under the caption
Managements Discussion and Analysis of Financial
Condition and Results of Operations in our 2003 Annual
Report to Stockholders is incorporated herein by reference.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

The information appearing under the caption
Quantitative and Qualitative Disclosures About Market
Risk in our 2003 Annual Report to Stockholders is
incorporated herein by reference.

17



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##### Table of Contents








|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

The consolidated financial statements and
supplementary data, and related notes and Report of Independent
Auditors appearing in our 2003 Annual Report to Stockholders are
incorporated herein by reference.






|        |                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Independent Auditor on Accounting and Financial
    Disclosure

We filed Form 8-K on June 13, 2002
regarding our change in certifying accountants.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

The section labeled Directors and Executive
Officers of our definitive Proxy Statement to be filed
hereafter for the annual meeting of stockholders to be held on
July 15, 2003 is incorporated herein by reference.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The section entitled Compensation of
Directors and Certain Executive Officers, of our
definitive Proxy Statement to be filed hereafter for the annual
meeting of stockholders to be held on July 15, 2003 is
incorporated herein by reference.






|         |                                                                                                                  
|-------- | -----------------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Management related Stockholder
    Matters

The section labeled Security Ownership of
Certain Beneficial Owners and Management of our definitive
Proxy Statement to be filed hereafter for the annual meeting of
stockholders to be held on July 15, 2003 is incorporated
herein by reference.

In response to the SECs Release
No. 33-8048, the following information is being provided:

Securities Authorized for Issuance Under
Equity Compensation Plans

|                                                               |  |                  |            |                |  |                   |      |  |  |  |           | 
|-------------------------------------------------------------- |  | ---------------- | ---------- | -------------- |  | ----------------- | ---- |  |  |  | --------- | 
|                                                               |  |                  |            |                |  | (c)              
|                                                               |  | (a)              |            |                |  | Number of        
|                                                               |  | Number of        |            | (b)            |  | Securities       
|                                                               |  | Securities to be |            | Weighted-      |  | Remaining        
|                                                               |  | Issued Upon      |            | Average        |  | Available for    
|                                                               |  | Exercise of      |            | Exercise Price |  | Future Issuance  
|                                                               |  | Outstanding      |            | of Outstanding |  | Under Plans      
|                                                               |  | Options,         |            | Options,       |  | (Excluding       
|                                                               |  | Warrants and     |            | Warrants and   |  | Securities Listed
|Plan Category                                                  |  | Rights           |            | Rights         |  | in Column (a))   
|                                                               |  |                  |            |                |  |                  
|Equity compensation plans approved by security
    holders     |  |                  | 11,590,535 |                |  | $                 | 8.54 |  |  |  | 9,281,430 | 
|Equity compensation plans not approved by
    security holders |  |                  | 667,100    |                |  | $                 | 9.16 |  |  |  | 104,731   | 
|Total                                                          |  |                  | 12,257,635 |                |  | $                 | 8.57 |  |  |  | 9,386,161 | 

The equity compensation plans not approved by the
security holders include the 1996 and 1998 Plans. The 1996 Plan
authorizes 1,000,000 shares of Common Stock to be reserved
for issuance to non-officer key employees as an incentive to
continue to serve with us. The 1996 Plan will terminate on the
date on which all shares available have been issued. The 1998
Non-Officer Employee Stock Option Plan (the 1998
Plan) became effective on January 2, 1998 and
authorizes 500,000 shares of Common Stock to be reserved
for issuance to non-officer key employees as an incentive to
continue to serve with us. The 1998 Plan will terminate on the
date on which all shares available have been issued.

18



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##### Table of Contents








|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The section labeled Certain Relationships
and Related Transactions of our definitive Proxy Statement
to be filed hereafter for the annual meeting of stockholders to
be held on July 15, 2003 is incorporated herein by
reference.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

(a) Evaluation and disclosure controls
and procedures.Our Chief Executive
Officer and our Chief Financial Officer, after evaluating the
effectiveness of the companys disclosure controls
and procedures (as defined in the Securities Exchange Act
of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date
(Evaluation Date) within 90 days before the filing date of
this annual report, have concluded that as of the Evaluation
Date, our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us and
our consolidated subsidiaries would be made known to them by
others within those entities.

(b) Changes in internal
controls.There were no significant
changes in our internal controls, or to our knowledge, in other
factors that could significantly affect our disclosure controls
and procedures subsequent to the Evaluation Date.




PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedule, and
    Reports on Form 8-K

(a) The following documents have been filed
as a part of this Annual Report on Form 10-K.

1.     Index to
Financial Statements



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following consolidated financial statements
    are contained in our 2003 Annual Report to Stockholders and are
    incorporated herein by reference pursuant to Item 8:



| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | (i) Consolidated Balance Sheets as of
    March 31, 2003 and 2002.                                                           
|
| | (ii) Consolidated Statements of Operations
    for each of the three years in the period ended March 31,
    2003.           
|
| | (iii) Consolidated Statements of
    Stockholders Equity for each of the three years in the
    period ended March 31, 2003.
|
| | (iv) Consolidated Statements of Cash Flows
    for each of the three years in the period ended March 31,
    2003.           
|
| | (v) Notes to Consolidated Financial
    Statements.                                                                          
|
| | (vi) Reports of Independent Auditors.                                                                                        

2.     Financial
Statement Schedule



| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The following consolidated financial statement
    schedule for each of the three years in the period ended
    March 31, 2003 is submitted herewith:



| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Schedule II: Valuation and Qualifying
    Accounts and Reserves.                                                                                                                                                                                                              
|
| | Reports of Independent Auditors on Schedule.                                                                                                                                                                                                                                  
|
| | Schedules not listed above have been omitted
    because they are not applicable or required, or information
    required to be set forth therein is included in the Consolidated
    Financial Statements, including the Notes thereto, incorporated
    herein by reference.

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3.     Exhibits



| |                                                                          
| | -------------------------------------------------------------------------
| | The exhibits listed on the Exhibit Index
    beginning on Page 32 hereof.
|
| | (b) We filed one Form 8-K on
    June 13, 2002.                          
|
| | (c) We filed one Form 8-K on
    August 19, 2002.                        
|
| | (d) See Item 15(a)3 above.                                               
|
| | (e) See Item 15(a)2 above.                                               

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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15 (d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: May 19, 2003.



| |                       
| | ----------------------
| | STRATEX NETWORKS, INC.



| |     |                       
| | --- | ----------------------
| | By: | /s/ CHARLES D. KISSNER

| |                          
| | -------------------------
| |                          
| | Charles D. Kissner       
| | Chairman of the Board and
| | Chief Executive Officer  

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of
Stratex Networks, Inc. do hereby constitute and appoint
Charles D. Kissner and Carl A. Thomsen, and each of
them, the lawful attorney and agent or attorneys and agents with
power and authority to do any and all acts and things and to
execute any and all instruments which said attorneys and agents,
or either of them, determine may be necessary or advisable or
required to enable Stratex Networks, Inc. to comply with the
Securities and Exchange Act of 1934, as amended, and any rules
or regulations or requirements of the Securities and Exchange
Commission in connection with this Form 10-K Report.
Without limiting the generality of the foregoing power and
authority, the powers include the power and authority to sign
the names of the undersigned officers and directors in the
capacities indicated below to this Form 10-K report or
amendment or supplements thereto, and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents
or either of them, shall do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several
counterparts.

IN WITNESS WHEREOF, each of the undersigned has
executed this Power of Attorney as of the date indicated
opposite his name.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|                                             |  |                                                                                                                 |  |              |  | 
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------ |  | 
|                                             |  |                                                                                                                 |  |             
|Signatures                                   |  | Signing Capacity                                                                                                |  | Date        
|                                             |  |                                                                                                                 |  |             
|/s/ CHARLES D. KISSNERCharles D. Kissner     |  | Chairman of the Board and Chief Executive Officer                                                               |  | May 19, 2003
|                                            
|/s/ CARL A. THOMSENCarl A. Thomsen           |  | Senior Vice President, Chief Financial
    Officer & Secretary (Principal Financial and Accounting
    Officer) |  | May 19, 2003
|                                            
|/s/ RICHARD C. ALBERDINGRichard C. Alberding |  | Director                                                                                                        |  | May 19, 2003
|                                            
|/s/ EDWARD F. THOMPSONEdward F. Thompson     |  | Director                                                                                                        |  | May 19, 2003

21



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|                                         |  |                  |  |              |  | 
|---------------------------------------- |  | ---------------- |  | ------------ |  | 
|                                         |  |                  |  |             
|Signatures                               |  | Signing Capacity |  | Date        
|                                         |  |                  |  |             
|                                        
|/s/ JOHN W. COMBSJohn W. Combs           |  | Director         |  | May 19, 2003
|                                        
|/s/ JAMES D. MEINDLJames D. Meindl       |  | Director         |  | May 19, 2003
|                                        
|/s/ V. FRANK MENDICINOV. Frank Mendicino |  | Director         |  | May 19, 2003
|                                        
|/s/ WILLIAM A. HASLERWilliam A. Hasler   |  | Director         |  | May 19, 2003

22



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of

Stratex Networks, Inc.


San Jose, California


We have audited the consolidated financial
statements of Stratex Networks, Inc. and subsidiaries
(formerly DMC Stratex Networks, Inc. and hereafter
referred to as the Company) as of March 31,
2003, and for the year then ended, and have issued our report
thereon dated April 25, 2003; such financial statements and
report are included in your 2003 Annual Report to Stockholders
and are incorporated herein by reference. Our audit also
included the 2003 financial statement schedule of the Company
listed in Item 15a(2). This financial statement schedule is
the responsibility of the Companys management. Our
responsibility is to express an opinion based on our audit. In
our opinion, the 2003 financial statement schedule listed in
Item 15a(2), when considered in relation to the 2003 basic
consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein. The financial statement schedule, for the years ended
March 31, 2002 and 2001, was audited by other auditors who
have ceased operations. Those auditors expressed an opinion, in
their report dated April 22, 2002, that such 2002 and 2001
financial statement schedule, when considered in relation to the
2002 and 2001 basic consolidated financial statements taken as a
whole, presented fairly, in all material respects, the
information set forth therein.



| |                          
| | -------------------------
| | /s/ DELOITTE & TOUCHE LLP

San Jose, California

April 25, 2003


23



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##### Table of Contents



The following report of Arthur Andersen LLP
(Andersen) is a copy of the original report dated
April 22, 2002, rendered on the schedule listed in item
14a(2) of included in the Form 10-K for the year ended
March 31, 2002. The SEC has provided regulatory relief
designed to allow public companies to dispense with the
requirements to file a reissued report and consent of Andersen
in certain circumstances. After reasonable efforts, we have not
been able to obtain a reissued report from Andersen.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SCHEDULE

To DMC Stratex Networks, Inc.:

We have audited in accordance with generally
accepted auditing standards, the consolidated financial
statements included in DMC Stratex Networks, Inc.s 2002
Annual Report incorporated by reference in this Form 10-K,
and have issued our report thereon dated April 22, 2002.
Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole.
The schedule listed in item 14a(2) is the responsibility of
our management and is presented for purposes of complying with
the Securities and Exchange Commissions rules and is not
part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the
consolidated financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as
a whole.



| |                        
| | -----------------------
| | /s/ ARTHUR ANDERSEN LLP

San Jose, California

April 22, 2002


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##### Table of Contents



STRATEX NETWORKS, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF
THE

SARBANES-OXLEY ACT OF 2002


I, Charles D. Kissner, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of Stratex Networks, Inc.
    (the registrant);                                                                                                                                                                                                                                           
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and have:                                                                                                          



| |                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
|
| | (b)     evaluated the
    effectiveness of the registrants disclosure controls and
    procedures as of a date within 90 days prior to the filing
    date of this annual report (the Evaluation Date); and                                                                                                          
|
| | (c)     presented in
    this annual report our conclusions about the effectiveness of
    the disclosure controls and procedures based on our required
    evaluation as of the Evaluation Date;                                                                                                                       



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)     all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrants ability to
    record, process, summarize and report financial data and have
    identified for the registrants auditors any material
    weaknesses in internal controls; and
|
| | (b)     any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrants
    internal controls; and                                                                                                                                                



| |                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether there were significant changes in
    internal controls or in other factors that could significantly
    affect internal controls subsequent to the date of our most
    recent evaluation, including any corrective actions with regard
    to significant deficiencies and material weaknesses.



| |    |                       
| | -- | ----------------------
| | By | /s/ CHARLES D. KISSNER

| |                                     
| | ------------------------------------
| |                                     
| | Charles D. Kissner                  
| | Chairman and Chief Executive Officer

Date: May 19, 2003

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STRATEX NETWORKS, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF
THE


SARBANES-OXLEY ACT OF 2002


I, Carl A. Thomsen, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of Stratex Networks, Inc.
    (the registrant);                                                                                                                                                                                                                                           
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and have:                                                                                                          



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our required evaluation as of the
    Evaluation Date;                                                                                                                   



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this annual report whether there were significant changes in
    internal controls or in other factors that could significantly
    affect internal controls subsequent to the date of our most
    recent evaluation, including any corrective actions with regard
    to significant deficiencies and material weaknesses.



| |    |                    
| | -- | -------------------
| | By | /s/ CARL A. THOMSEN

| |                        
| | -----------------------
| |                        
| | Carl A. Thomsen        
| | Chief Financial Officer

Date: May 19, 2003

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##### Table of Contents



Schedule II

Stratex Networks, Inc.

Valuation and Qualifying Accounts and
Reserves

Allowance for Doubtful Accounts

|                          |  |              |        |            |  |             |        |         |  |   |         |   |  |   |        | 
|------------------------- |  | ------------ | ------ | ---------- |  | ----------- | ------ | ------- |  | - | ------- | - |  | - | ------ | 
|                          |  | Balance at   |        | Charged to |  |             |        | Balance
|(In thousands)            |  | Beginning of |        | Costs and  |  | Deductions/ |        | at End 
|Description               |  | Year         |        | Expenses   |  | Write-off   |        | of Year
|                          |  |              |        |            |  |             |        |        
|Year Ended March 31, 2003 |  | $            | 9,315  |            |  | $           | 213    |         |  | $ | (3,133  | ) |  | $ | 6,395  | 
|Year Ended March 31, 2002 |  | $            | 26,643 |            |  | $           | 6,530  |         |  | $ | (23,858 | ) |  | $ | 9,315  | 
|Year Ended March 31, 2001 |  | $            | 4,652  |            |  | $           | 23,608 |         |  | $ | (1,617  | ) |  | $ | 26,643 | 

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##### Table of Contents






EXHIBIT INDEX

|        |    |             |  |                                                                                                                                                                                                                                            
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 2  | .1          |  | Certificate of Ownership and Merger merging
    Stratex Networks, Inc. into Digital Microwave Corporation
    (incorporated by reference to Exhibit 2.1 to the
    Companys Quarterly Report on Form 10-Q filed on
    August 11, 2000).  
|        | 3  | .1          |  | Certificate of Amendment to the Restated
    Certificate of Incorporation amended as of August 9, 2000
    (incorporated by reference to Exhibit 3.1 to the
    Companys Quarterly Report on Form 10-Q filed on
    August 11, 2000).     
|        | 3  | .2          |  | Amended and Restated Bylaws, dated as of
    October 17, 2001 (incorporated by reference to
    Exhibit 3.2 to the companys Quarterly Report on
    Form 10-Q filed on November 13, 2001).                                                
|        | 3  | .3          |  | Certificate of Amendment to the Restated
    Certificate of Incorporation, amended as of September 9,
    2002 (incorporated by reference to Exhibit 3.2 to the
    Companys Quarterly Report on Form 10Q filed on
    November 14, 2002).
|        | 4  | .1          |  | Form of Indenture (incorporated by reference to
    Exhibit 4.3 to the companys registration statement
    filed on Form S-3 on November 28, 2000).                                                                                       
|        | 4  | .2          |  | Form of Debt Warrant Agreement, including form of
    Debt Warrant Certificate (incorporated by reference to
    Exhibit 4.4 to the companys Registration Statement
    filed on Form S-3 on November 28, 2000).                          
|        | 4  | .3          |  | Form of Common Stock Warrant Agreement, including
    form of Common Stock Warrant Certificate (incorporated by
    reference to Exhibit 4.5 to the Companys Registration
    Statement filed on Form S-3 on November 28, 2000).          
|        | 4  | .4          |  | Form of Senior Debenture (incorporated by
    reference to Exhibit 4.6 to the Companys Registration
    Statement filed on Form S-3 on November 28, 2000).                                                                                
|        | 4  | .5          |  | Loan and Security Agreement between Stratex
    Networks, Inc. and Silicon Valley Bank dated January 21,
    2003.                                                                                                                         
|        | 10 | .1          |  | Stratex Networks, Inc. 1984 Stock Option Plan, as
    amended and restated on June 11, 1991 (incorporated by
    reference to Exhibit 10.1 to the Companys Annual
    Report on Form 10-K for the year ended March 31, 1991).             
|        | 10 | .2          |  | Form of Installment Incentive Stock Option
    Agreement (incorporated by reference to Exhibit 28.2 to the
    Companys Registration Statement on Form S-8 (File
    No. 33-43155)).                                                      
|        | 10 | .3          |  | Form of Installment Non-qualified Stock Option
    Agreement (incorporated by reference to Exhibit 28.3 to the
    Companys Registration Statement on Form S-8 (File
    No. 33-43155)).                                                  
|        | 10 | .4          |  | Form of Indemnification Agreement between the
    Company and its directors and certain officers (incorporated by
    reference to Exhibit 10.16 to the Companys
    Registration Statement on Form S-1 (File
    No. 33-13431)).         
|        | 10 | .5          |  | Stratex Networks, Inc. 1994 Stock Incentive Plan,
    as amended and restated on May 1, 1996 (incorporated by
    reference to the Companys Proxy Statement for the Annual
    Meeting of Stockholders to be held on August 4, 1998).     
|        | 10 | .6          |  | Stratex Networks, Inc. 1994 Stock Incentive Plan,
    as amended and restated on May 1, 1996 (incorporated by
    reference to the Companys Proxy Statement for the Annual
    Meeting of Stockholders to be held on August 4, 1998).     
|        | 10 | .6          |  | Stratex Networks, Inc. 1998 Non-Officer Employee
    Stock Option Plan (incorporated by reference to
    Exhibit 99.1 to the Companys Registration Statement
    on Form S-8 (File No. 333-48535)).                                       
|        | 10 | .7          |  | Restated Employment Agreement, dated as of
    May 14, 2002, by and between Stratex Networks, Inc. and
    Charles D. Kissner.                                                                                                             
|        | 10 | .8          |  | Stratex Networks, Inc. 1999 Non-Officer Employee
    Restricted Stock Purchase Plan (incorporated by reference to
    Exhibit 99.1 to the companys Registration Statement
    on Form S-8 (File No. 333-76233)).                          
|        | 10 | .9          |  | Stratex Networks, Inc. 1999 Employee Stock
    Purchase Plan (incorporated by reference to Exhibit 99.1 to
    the Companys Registration Statement on Form S-8 (File
    No. 333-80281)).                                                 

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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .10         |  | Employment Agreement dated as of May 14,
    2002, by and between the Company and Carl A. Thomsen.                                                                                                                                                                                                                             
|        | 10 | .11         |  | Form of Employment Agreement dated as of
    May 14, 2002, by and between the company and John C.
    Brandt, Carol A. Goudey, Edward T. Gardner, Paul Kennard, Shaun
    McFall, Ryan Panos, Robert Schlaefli, Timothy Hansen and John P.
    ONeil.                                                                         
|        | 10 | .12         |  | Lease, dated February 16, 2000, by and
    between Corporate Technology Centre Associates II LLC and
    Stratex Networks, Inc., relating to 130 Rose Orchard Way,
    San Jose, California (incorporated by reference to
    Exhibit 10.24 to the Companys Annual Report on
    Form 10-K for the year ended March 31, 2000).
|        | 10 | .13         |  | Lease, dated February 16, 2000, by and
    between Corporate Technology Centre Associates II LLC and
    Stratex Networks, Inc., relating to 170 Rose Orchard Way,
    San Jose, California (incorporated by reference to
    Exhibit 10.25 to the Companys Annual Report on
    Form 10-K for the year ended March 31, 2000).
|        | 10 | .14         |  | Lease, dated February 16, 2000, by and
    between Corporate Technology Centre Associates II LLC and
    Stratex Networks, Inc., relating to 180 Rose Orchard Way,
    San Jose, California (incorporated by reference to
    Exhibit 10.26 to the Companys Annual Report on
    Form 10-K for the year ended March 31, 2000).
|        | 10 | .15         |  | DMC Stratex Networks, Inc. 2002 Stock Incentive
    Plan.                                                                                                                                                                                                                                                                      
|        | 13 | .1          |  | Portions of the 2003 Annual Report to
    Stockholders incorporated herein by reference.                                                                                                                                                                                                                                       
|        | 23 | .1          |  | Independent Auditors Consent (in this
    Annual Report on Form 10-K).                                                                                                                                                                                                                                                        
|        | 23 | .2          |  | Consent of prior Independent Public Accountants.
    (in this Annual Report on Form 10-K).                                                                                                                                                                                                                                     
|        | 24 | .1          |  | Power of Attorney (in this Annual Report on
    Form 10-K).                                                                                                                                                                                                                                                                    
|        | 99 | .1          |  | Certification of Charles D. Kissner, Chief
    Executive Officer, pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                               
|        | 99 | .2          |  | Certification of Carl A. Thomsen, Chief Financial
    Officer, pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.                                                                                                                                                                                                  

29