<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                ----------------------
                                      FORM 10-K
(Mark One)
/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.  FOR THE FISCAL YEAR ENDED MARCH 31, 1998.

                                          OR

/ /  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

                            DIGITAL MICROWAVE CORPORATION
                (Exact Name of Registrant as Specified in Its Charter)

                DELAWARE                               77-0016028
        (State of Incorporation)          (I.R.S. Employer Identification No.)

     170 ROSE ORCHARD WAY, SAN JOSE,                      95134
               CALIFORNIA                              (Zip Code)
     (Address of Principal Executive
                Offices)

Registrant's telephone number, including area code:  (408) 943-0777

Securities registered pursuant to Section 12 (b) of the Act:  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  X     No
                                               -----     -----

     Indicate by a 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. / /

     State the aggregate market value of the voting stock held by non-affiliates
of Registrant (based on the last reported sale price of $7.00 per share on the
Nasdaq National Market) as of June 24, 1998:  Approximately $241,636,808.

     As of June 24, 1998, there were 46,685,992 shares of Common Stock, par
value $0.01 per share, outstanding.

                         DOCUMENTS INCORPORATED BY REFERENCE
1.   Portions of the Registrant's Annual Report to Stockholders for the fiscal
     year ended March 31, 1998 are incorporated by reference into Parts I and II
     of this Form 10-K Report.  With the exception of those portions which are
     incorporated by reference, the Registrant's Fiscal 1998 Annual Report is
     not deemed filed as part of this Report.

2.   Portions of the Registrant's Proxy Statement for the Annual Meeting of
     Stockholders to be held on August 4, 1998 are incorporated by reference
     into Part III of this Form 10-K Report.


<PAGE>

                                  TABLE OF CONTENTS


                            DIGITAL MICROWAVE CORPORATION
                             1998 FORM 10-K ANNUAL REPORT

                                        PART I
<TABLE>
<CAPTION>

<S>       <C>                                                                                          <C>
Item 1    Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    3
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 Registrant's Common Equity and Related Stockholder Matters  . . . . . . . . . .   18
Item 6    Selected Financial Data  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   18
Item 7    Management's Discussion and Analysis of Financial Condition and Results of Operations  . .   18
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 . . . . . . . . . . . . . . . . . . . .   19
Item 11   Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   19
Item 12   Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . .   19
Item 13   Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . .   19

                                                  PART IV

Item 14   Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . .   20

</TABLE>


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ITEM 1.  BUSINESS

     THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S 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.

INTRODUCTION

     Digital Microwave Corporation ("DMC" or the "Company") designs,
manufactures and markets advanced wireless solutions for worldwide telephone
network interconnection and access. The Company provides its customers with a
broad product line, which contains products that operate using a variety of
transmission frequencies, ranging from 0.3 GHz to 38 GHz, and a variety of
transmission capacities, typically ranging from 64 Kilobits to DS-3 (45 Megabits
per second). The Company's broad product line allows it to market and sell its
products to service providers in many locations worldwide with varying
interconnection and access requirements. DMC designs its products to meet the
requirements of mobile communications networks and fixed access networks
worldwide. The Company's products typically enable its 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.

     In March 1998, the Company merged with MAS Technology Limited ("MAS"), a
New Zealand company, which designs, manufactures, markets and supports digital
microwave radio links for the worldwide telecommunications market.  The
complementary product lines and distribution channels of MAS broadened the range
of wireless connection solutions that the Company offers to its customers
worldwide.

     The Company believes that it is well-positioned to address worldwide market
opportunities for wireless infrastructure suppliers. For example, there are
substantial telecommunications infrastructures being built for the first time in
many African, Asian and Latin American countries; infrastructures are being
expanded in Europe; and PCS interconnect networks are being constructed in the
United States. The Company believes that maintaining close proximity to its
customers provides it with a competitive advantage in securing orders for its
products and in servicing its customers. Local offices enable the Company to
better understand the local issues and requirements of its customers and to
address its customers' individual geographic, regulatory, and infrastructure
requirements. As a result, the Company has developed a global sales, service and
support organization, with offices in Europe, Africa, Asia, New Zealand,
Australia, and the Americas. With its 33 sales or support offices in 25
countries, the Company can respond quickly to its customers' needs and provide
prompt on-site technical support.

     The Company has sold over 95,000 radios, which have been installed in 
over 70 countries. The Company markets its products to service providers 
directly, as well as indirectly through its relationships with original 
equipment manufacturer ("OEM") base station suppliers, such as Motorola, 
Inc., Siemens AG, and Northern Telecom.  Between April 1, 1997 and March 31, 
1998, the Company had sold its products to a number of service providers, 
including Beijing Telecommunication Equipment Factory, Bell South, 
Microelectronics Technology, Mutiara Telecom and SMART Communications, Inc. 
in the Asia/Pacific region; IONICA, Jordan Mobile Telephone Services, and 
Telkom SA in Europe, the Middle East and Africa; and Sprint PCS and Winstar 
Wireless in the Americas.


                                                                          Page 3
<PAGE>

INDUSTRY BACKGROUND

     In recent years, there has been increased worldwide demand for high
performance mobile voice telephony, high speed data communications, fixed and
mobile cellular communications, video broadcast services and paging services.
This demand continues to increase due to: (i) changes in the regulatory
environment in many countries; (ii) the rapid establishment of
telecommunications infrastructures in many developing countries; (iii)
technological advances, particularly in the wireless telecommunications market;
and (iv) 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 and to telecommunications service providers in developing
countries seeking to rapidly increase the availability and quality of
telecommunications services. The upgrade and expansion of existing networks and
the deployment of new networks, such as those for GSM, PCN, and PCS, are
expected to continue to offer growth opportunities for wireless infrastructure
suppliers. Wireless infrastructure suppliers address the requirements of both
mobile communications networks and fixed access networks.

     Cellular telephone and other wireless services have grown rapidly over the
past several years due to deregulation, increased competition, technological
advances, and increasing consumer demand for connectivity to telecommunications
services. The demand for fixed access networks also continues to increase for
many of the same reasons, including the privatization of public telephone
operators, deregulation and the emergence of new applications, such as wireless
local loop, wireless data transport and alternative local telephone facilities
access.

     Wireless networks are constructed using microwave radios and other
equipment to connect cell sites, switching systems, other wireline transmission
systems and other fixed 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 which operate at several frequencies and the
transmission of voice and data typically requires different transmission
capacities. Moreover, networks in different locations are constructed using
different combinations of frequencies and with different transmission
capacities. No one transmission frequency or transmission capacity predominates
in the global market.

     Whether expanding existing networks or deploying new networks, service
providers must choose between constructing such networks using traditional
wireline infrastructure or wireless infrastructure. Traditional wireline
connectivity solutions typically require significant installation periods and
may be relatively expensive to install. In developed countries where wireline
infrastructure is in place, new service providers may have the option to lease
networks from traditional service providers, but in many instances choose not to
do so because leasing arrangements must be entered into with their competitors,
may be comparatively expensive and do not allow control over the network. In
developing countries, many service providers are initially installing 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 are deploying wireless networks as an alternative to the construction
or leasing of traditional wireline networks.

     For several applications, digital microwave 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.  Digital microwave systems are especially advantageous where
geographically dispersed customers or operations, environmental constraints,
difficult terrain, or limited installation times render the installation and
implementation of wireline networks impractical or too costly.

     The Company believes that as telecommunication requirements grow, digital
microwave systems will continue to be used as transmission links to support a
variety of existing and expanding communications networks and applications.  In
this regard, the Company believes that digital microwave systems will be used to
address the connection requirements


Page 4
<PAGE>

of the several markets and applications, including the infrastructure
development market, cellular applications, private networks and wireless analog
replacement applications.

THE DMC SOLUTION

     DMC designs, manufactures and markets advanced, wireless solutions for
worldwide telephone network interconnection and access. The Company provides its
customers with a broad product line, which contains products that operate using
a variety of transmission frequencies, ranging from 0.3 GHz to 38 GHz, and a
variety of transmission capacities, typically ranging from 64 Kilobits to DS-3
(45 Megabits per second), carrying voice, data and video signals. The Company's
broad product line allows it to market and sell its products to service
providers in many locations worldwide with varying interconnection and access
requirements. The Company has sold more than 95,000 radios, which have been
installed in over 70 countries. During the last two years, the Company has sold
its products and provided services to over 300 customers.

     The Company has established offices worldwide, with locations in Europe,
Africa, Asia, New Zealand, Australia, and the Americas. These offices enable the
Company to understand the local issues and requirements of its customers and to
address its customers' individual geographic, regulatory and infrastructure
requirements. In addition, its global sales, service and support organization
allows the Company to respond quickly to its customers' needs and to provide
prompt on-site technical support.

     The Company believes that the use of standard design platforms for both
hardware and software components in the development of its products enables the
Company 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 the Company to offer its 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, reduce the development time of
new features, and facilitate the efficient customization of the Company's
products. The use of standard design platforms also enables the Company to
manufacture its products in a more cost-effective manner. The software features
of many of the Company's product lines provide the Company's customers with a
greater degree of flexibility in installing, operating and maintaining their
networks.

     The Company certifies its products to comply with various standards, such
as European Telecom Standards Institute ("ETSI") and International
Telecommunications Union ("ITU") regulations, which allow the Company to market
and sell its products in Europe and other locations worldwide. In addition, the
Company's manufacturing facilities in San Jose, California and Wellington, New
Zealand are certified to International Standards Organization ("ISO") 9001, a
recognized international quality standard.

THE COMPANY'S STRATEGY

     The Company's strategy is to build on the strength of its current products,
which offer point-to-point solutions, and its strong customer sales, service and
support organization to become a leading provider of integrated wireless
solutions.  Key elements of DMC's strategy include:

     MAINTAIN A COMPREHENSIVE PRODUCT LINE.  The Company anticipates that the
requirements of its customers will continue to evolve as the telecommunications
services market changes and expands.  In this regard, since the Company's
customers often do not know the exact frequency band and capacity needs of their
networks at the time they are awarded franchises, DMC's 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.  The Company believes that the use of standard design platforms and
flexible architectures for both hardware and software components in its products
enables DMC to quickly introduce and commercially ship new products and product
enhancements to address changing market


                                                                         Page 5
<PAGE>

demands.  The Company intends to continue to expand its product line in response
to the varying worldwide requirements of wireless networks.

     PURSUE WORLDWIDE MARKET OPPORTUNITIES.  The Company believes that the
deployment of new wireless telecommunications networks and the upgrade and
expansion of existing networks provide it with many global market opportunities.
In many emerging markets in Africa, Asia and Latin America, substantial
telecommunications networks are being built for the first time; in Europe,
infrastructures are being expanded; and, in the United States, PCS interconnect
networks are being constructed.  The Company intends to continue to pursue
global market opportunities through its established worldwide sales, service and
support organization, as well as through its relationships with OEM base station
suppliers.

     ENHANCE GLOBAL SALES, SERVICE AND SUPPORT ORGANIZATION.  The Company
believes maintaining close proximity to its customers provides it with a
competitive advantage in securing orders and servicing its customers.  Local
offices provide the Company with a better understanding of its customers' needs
and enable the Company to respond to local issues and unique local requirements.
As a result, DMC has developed a global sales, service and support organization,
with offices in Europe, Africa, Asia, New Zealand, Australia, and the Americas.
The Company intends to continue to provide its customers with direct sales,
service and support from local offices.

     LEVERAGE DISTRIBUTION CHANNELS.  The Company markets its products to
service providers directly, as well as indirectly through its relationships with
OEM base station suppliers, such as Motorola, Inc., Siemens AG, and Northern
Telecom, as well as through its relationships with system integrators and
private labelers.  The Company also markets its products through independent
agents and distributors in certain countries.  The Company intends to leverage
upon such relationships and its direct worldwide presence with service providers
to expand its customer base and enhance its global presence.

     FOCUS ON BUSINESS EXPANSION INTO EMERGING APPLICATIONS.  The Company
believes that it can leverage its core technical competencies and its global
sales, service and support organization to enter into emerging applications,
including wireless local loop, wireless data transport, and alternative local
telephone facilities access.  The Company intends to migrate and expand its
product line from a full point-to-point product line to offer multipoint
distribution products with a broader range of traffic handling capacities to
meet emerging market demands.

PRODUCTS

     The Company's principal product families include the SPECTRUM-TM- II,
FibreNex-TM-, DMC Net-Registered Trademark- for
OpenView-Registered Trademark-, DXR-TM- 200, and DXR-TM- 100.

EXISTING PRODUCTS

     SPECTRUM II.  The SPECTRUM II product family, introduced in July 1995,
offers medium capacity ranging from T-1 (1.5 Mbps) to DS-3 (45 Mbps) products
that operate at 7, 8, 13, 15, 18, 23, 26 and 38 GHz.  The SPECTRUM II product
line is smaller in size, less expensive and easier to install than previous
products.  In addition, significantly more functionality is available in the
SPECTRUM II product line because of its enhanced software configurability which
provides the Company's customers with greater flexibility and control.

     FIBRENEX.  The FibreNex product solution, introduced in June 1997, 
consists of a compact add/drop multiplexer ("ADM"), SPECTRUM II radios, and 
the DMC Net for OpenView network management system.  By using the FibreNex 
solution, telecos/PTTs, competitive access providers ("CAPs"), local exchange 
carriers and others can distribute voice, data, and video transport service 
of a 155 Mbps SONET/SDH communications network to multiple end users.  Using 
the ADM, the service provider can tap into fiber infrastructures.  The 
service provider then can apply microwave radios operating at various 
capacities and frequencies to provide wireless extensions of network 
capability into numerous


Page 6

<PAGE>

different locations.  The integrated network management system enables
centralized monitoring of the entire network, including both fiber and radio
elements.

     DMC NET FOR OPENVIEW.  The latest generation solution, DMC Net for 
OpenView is a versatile, interoperable network management system based on the 
HP OpenView platform and is designed for use in small, medium, and large 
telecommunications networks.  Using Simple Network Management Protocol 
("SNMP"), DMC Net for OpenView provides customers with an increased ability 
to manage the hardware of multiple vendors from a common management platform. 
 Centralized management and control allows for the early warning of fault 
conditions and the rapid diagnosis of problems, which reduce downtime and 
lower the cost of maintenance.  DMC Net for OpenView, which is supported on 
Windows NT and will be supported UNIX systems, succeeds standalone network 
element managers sold previously under the DMC Net name.

     DXR 200.  First shipped in 1994, 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 over 2,000 different
configurations, which can incorporate multiple features in the unit to
accommodate the differing communications needs of the Company's customers,
overcome difficult radio frequency environments, accommodate multiple data
speeds and support multiple communication protocols.  The DXR 200 can operate on
every frequency band from 64 Kbps to 2.7 GHz.

     DXR 100.  First shipped in 1996, the DXR 100 product line is designed to
address medium and long haul, trunking applications and capacities higher than
those addressed by the DXR 200.  The DXR 100 supports these higher capacity
environments using spectrum efficient transmission techniques such as QPSK or
QAM modulation and low error rate technologies such as forward error correction
and adaptive equalization.  The DXR 100 provides low to medium capacity links
for cellular applications, basic telephony transmission and customer access
applications, particularly in urban areas.  The DXR 100 supports a variety of
data rates with high spectrum efficiencies and maintains signal reception in
harsh or difficult radio frequency environments.

NEW PRODUCT DEVELOPMENT


The Company intends to continue to focus significant resources on product
development to maintain its competitiveness and to support its entry into new
wireless opportunities, including those in wireless local loop, wireless data
transport and alternative local telephone facilities access.  Programs currently
in progress, if successfully completed, could result in new products which are
both point-to-point and point-to-multipoint and could have the capability to
handle greater amounts of voice and data traffic at increased
cost-effectiveness.

     There can be no assurance that the Company will be successful in developing
and marketing any of the products currently being developed, that the Company
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.  See "Research and Development."

CUSTOMERS

     The Company markets its products to customers in the telecommunications
industry worldwide. The Company's customers include service providers, which
incorporate the Company's products into their telecommunications networks to
deliver services directly to consumers, and OEMs, which provide and install
integrated systems to service providers. The following is a representative list
of customers to which the Company has shipped its products for the period from
April 1, 1997 to March 31, 1998:


                                                                         Page 7
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<TABLE>
<S><C>
--------------------------------------------------------------------------------
 SERVICE PROVIDERS
--------------------------------------------------------------------------------
 AMERICAS
      Baja Celular Mexicana SA de CV     Telcel
      IMPSAT S.A.                        Winstar Wireless
      Sprint PCS
--------------------------------------------------------------------------------
 EUROPE/MIDDLE EAST/AFRICA
      Comviq GSM AB                      Polska Telefonia Komorkowa
      E-Plus Mobilfunk GmbH              Tele Greenland
      Eskom, South Africa                Telkom SA, South Africa
      IONICA                             UAB Omnitel 
      Jordan Mobile Telephone Services   Zimbabwe Post and Telecommunications
      Panafon SA                            Corporation
--------------------------------------------------------------------------------
 ASIA/PACIFIC
      Beijing  Telecommunication         Sapura PCN
       Equipment Factory                 SMART Communications, Inc.
      BellSouth, New Zealand             Star Digitel Limited
      Dhiraaga Maldives                  Sterling Cellular Ltd.
      Microelectronics Technology, Inc.  Zhejiang Unicom
      Mutiara Telecom
--------------------------------------------------------------------------------
 OEMs
--------------------------------------------------------------------------------
      Motorola Inc.                      Siemens AG
      Northern Telecom
--------------------------------------------------------------------------------
</TABLE>
     Although the Company has a large customer base, during any given quarter, a
small number of customers account for a significant portion of the Company's net
sales. In certain circumstances, the Company sells its products to service
providers through OEMs, which provide the service providers with access to
financing and the Company, in some instances, with protection from fluctuations
in foreign currency exchange rates. During Fiscal 1998, 1997 and 1996, Siemens
AG accounted for 5%, 12%, and 19%, respectively, of the Company's net sales. At
March 31, 1998, five customers collectively accounted for approximately 21% of
the Company's $83.2 million backlog. While management considers the Company's
relationships with each of its major customers to be good, there can be no
assurance that the Company's current customers will continue to place orders
with the Company, that orders by existing customers will continue to be at
levels of previous periods, or that the Company will be able to obtain orders
from new customers.  The Company's 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 the failure of the Company to gain additional
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.   See "Factors That May Affect
Future Financial Results."

SALES, MARKETING AND SERVICE

     The Company believes that a direct and continuing relationship with service
providers is a competitive advantage in attracting new customers and satisfying
existing ones. As a result, the Company offers its products and services
principally through its own sales, service and support organization, which
allows the Company to closely monitor the needs of its customers. The Company
has offices in the United States, New Zealand, Australia, Canada, the United
Kingdom, Germany, Jordan, Mexico, Colombia, India, China, Singapore, Argentina,
Brazil, Greece, Indonesia, Malaysia, Russia, Sweden, Denmark, South Africa,
Zimbabwe, Botswana, and the Philippines. The Company's local offices provide it
with a better understanding of its customers' needs and enable the Company to
respond to local issues and unique local requirements.

     The Company has informal relationships with OEM base station suppliers. 
Such relationships increase the Company's ability to pursue the limited 
number of major contract awards each year. In addition, such relationships 
provide the Company's customers with easier access to financing and to 
integrated system providers with a variety of 

Page 8
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equipment and service capabilities. There can be no assurance that the 
Company 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, the Company also markets its products through independent 
agents and distributors, as well as system integrators and brand labelers.

     As of March 31, 1998, the Company employed approximately 460 people in its
sales, service and support organization, approximately 60% of whom primarily
support sales outside the United States.  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. The Company's
customer service and support personnel provide customers with training,
installation, service and maintenance of the Company's systems under contract.
The Company generally offers a standard two-year warranty for all customers on
all of the Company's products other than the DXR 200 and DXR 700 product lines,
for which there is generally a standard one-year warranty for all customers. The
Company provides warranty and post-warranty services from its manufacturing 
locations in the United States, the United Kingdom and New Zealand and its 
service centers in Mexico, Brazil, the Philippines and Canada.

RESEARCH AND DEVELOPMENT

     The Company believes that its ability to enhance its current products,
develop and introduce new products on a timely basis, maintain technological
competitiveness and meet customer requirements is essential to the Company's
continued success. Accordingly, the Company allocates, and intends to continue
to allocate, a significant portion of its resources to research and development
efforts. During Fiscal 1998, Fiscal 1997, and Fiscal 1996, the Company invested
$19.9 million, $13.2 million, and $12.9 million, respectively, on research and
development which represents 6.4%, 6.3%, and 7.5%, respectively, of net sales.
The Company expects research and development expenses to increase in Fiscal
1999. As of March 31, 1998, the Company employed approximately 172 people in its
research and development organization.

     The market for the Company's products is characterized by rapidly changing
technologies and evolving industry standards. Accordingly, the Company's future
performance depends on a number of factors, including its ability to identify
emerging technological trends in its target markets, to develop and to maintain
competitive products, to enhance its products by adding innovative features that
differentiate its products from those of its competitors and to manufacture and
to bring products to market quickly at cost-effective prices. The Company
believes 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. The Company believes that to remain competitive in the future
it will need to continue to develop new products, which will require the
investment of significant financial resources in product development. There can
be no assurance, however, that the Company 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, the Company's business, financial
condition and results of operations could be materially adversely affected.

MANUFACTURING AND SUPPLIERS

     The Company's manufacturing operations consist primarily of final 
assembly, customer software configuration, test and quality control of 
materials and components. The manufacturing process consists primarily of 
materials management, extensive unit and environmental testing of components 
and subassemblies at each stage of the manufacturing process, final assembly 
of the terminals, and prior to shipment, quality assurance testing and 
inspection of all products. The Company has three manufacturing facilities, 
which presently are located in San Jose, California, Wellington, New Zealand 
and East Kilbride, Scotland. The Company recently purchased a manufacturing 
facility in Hamilton, Scotland and intends to sell the East Kilbride 
building. The Company's manufacturing operations in San Jose, California and 
Wellington, New Zealand are certified to 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, 1998, the Company maintained a staff of 
380 manufacturing personnel.


                                                                         Page 9
<PAGE>

     The Company's manufacturing operations are highly dependent upon the
delivery of materials and components by outside suppliers in a timely manner. In
addition, the Company depends in part upon subcontractors to assemble major
components and subassemblies used in its products in a timely and satisfactory
manner. The Company does not generally enter into long-term or volume purchase
agreements with any of its suppliers, and no assurance can be given that such
materials, components and subsystems will be available in the quantities
required by the Company, if at all. The inability of the Company to develop
alternative sources of supply quickly and on a cost-effective basis could
materially impair the Company's ability to manufacture and deliver its products
in a timely manner. There can be no assurance that the Company will not
experience material supply problems or component or subsystem delays in the
future.

     From time to time, the Company has experienced delays and other supply
problems with vendors, but such delays and other problems have not had a
significant impact on the Company's results of operations. To reduce any future
problems associated with delays, the Company has contracted for component and
subassembly parts from additional sources. The Company and its key suppliers
maintain a high level of communication at all levels of their respective
management to ensure that production requirements and constraints are taken into
account in each of their respective production plans.

BACKLOG

     The Company's backlog at March 31, 1998 was $83.2 million, as compared with
$98 million at March 31, 1997. The Company only includes orders scheduled for
delivery within 12 months in its backlog. Product orders in the Company's
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 microwave interconnection and access business is a specialized 
segment of the wireless telecommunications industry and is extremely 
competitive. The Company expects such competition to increase in the future. 
Several established and emerging companies offer a variety of microwave, 
fiber optic, and other connectivity products for applications similar to 
those of the Company's products. Many of the Company's competitors have more 
extensive engineering, manufacturing and marketing capabilities and 
substantially greater financial, technical and personnel resources than the 
Company. In addition, many of the Company's competitors have greater name 
recognition, a larger installed base of products and longer-standing customer 
relationships. The Company considers its primary competitors to be L.M. 
Ericsson, Northern Telecom, Siemens AG, P-COM, Inc., and the Farinon Division 
of Harris Corporation. In addition, other existing competitors include 
Alcatel, Nokia, Innova, SIAE, NEC, and NERA. Both Northern Telecom and 
Siemens AG have product lines that compete with those of the Company, and are 
also OEMs through which the Company markets and sells its products. Some of 
the Company's largest customers could develop the capability to manufacture 
products similar to those manufactured by the Company. Existing and potential 
competition in the industry has resulted in, and will continue to result in, 
significant price competition. The Company believes that competition in its 
markets is based primarily on price, quality, availability, customer service 
and support, breadth of product line, product performance and features, rapid 
delivery, reliability, timing of new product introductions by the Company, 
its customers and its competitors, and the ability of its customers to obtain 
financing. The Company's future success will depend upon its ability to 
address the increasingly sophisticated needs of its customers by enhancing 
its current products, by developing and introducing new products in a timely 
manner that keep pace with technological developments and emerging wireless 
telecommunications services, and by providing such products at competitive 
prices. There can be no assurance that the Company will have the financial 
resources, technical expertise, or marketing, sales, distribution, and 
customer service and support capabilities to compete successfully.  See 
"Factors That May Affect Future Financial Results."


Page 10
<PAGE>

GOVERNMENT REGULATION

     Radio communications are subject to regulation by United States and foreign
laws and international treaties. The Company's equipment must conform to
international requirements established to avoid interference among users of
microwave frequencies and to permit interconnection of telecommunication
equipment. The Company has complied with such rules and regulations with respect
to its 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 have a material
adverse effect on the Company's business, financial condition and results of
operations.

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

INTELLECTUAL PROPERTY

     The Company's ability to compete will depend, in part, on its ability to
obtain and enforce intellectual property protection for its technology in the
United States and internationally. The Company relies upon a combination of
trade secrets, trademarks, copyrights, patents and contractual rights to protect
its intellectual property. For example, the Company presently has two patents
covering its products. In addition, the Company enters into confidentiality and
invention assignment agreements with its employees, and enters into
non-disclosure agreements with its suppliers and appropriate customers so as to
limit access to and disclosure of its proprietary information. There can be no
assurance that any steps taken by the Company 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, the Company's business, financial condition and results of
operations could be materially adversely affected. Moreover, there can be no
assurance that the protection provided to the Company's 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 the Company.

     While the Company's ability to compete may be affected by its ability to
protect its intellectual property, the Company believes that, because of the
rapid pace of technological change in the wireless telecommunications industry,
its innovative skills, technical expertise and ability to introduce new products
on a timely basis will be more important in maintaining its competitive position
than protection of its 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 the Company's personnel,
new product introductions and product enhancements. Although the Company
continues to implement protective measures and intends to defend vigorously its
intellectual property rights, there can be no assurance that these measures will
be successful.

     The wireless telecommunications industry is characterized by numerous
allegations of patent infringement among competitors and considerable related
litigation. Accordingly, the Company may in the future be notified that it is
infringing certain patent or other intellectual property rights of others.
Although there are no such pending lawsuits against the Company or unresolved
notices that the Company is 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 have a material adverse effect on the
Company's business, financial condition and results of operations. The wireless
telecommunications industry is subject to frequent litigation regarding patent
and other intellectual property rights. Certain companies and organizations in
the wireless


                                                                        Page 11
<PAGE>

telecommunications industry have patents that protect their intellectual
property rights in these areas. In the event of an adverse result of any such
litigation, the Company could be required to expend significant resources to
develop non-infringing technology or to obtain licenses to the technology which
is the subject of the litigation. There can be no assurance that the Company
would be successful in such development or that any such license would be
available on commercially reasonable terms.

LITIGATION

     The Company may be a defendant at any time in various suits and is 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 have a
material adverse effect on the consolidated financial position, liquidity or
results of operations of the Company.

EMPLOYEES

     As of March 31, 1998, the Company employed 1,147 full-time and temporary
employees. None of the Company's employees is represented by a collective
bargaining agreement. The Company's future performance will depend in large
measure on its ability to attract and retain highly skilled employees.
Competition for such personnel is intense and there can be no assurance that the
Company will be successful in attracting and retaining highly skilled employees.
The Company has never experienced a work stoppage and believes its relationship
with its employees to be good.


Page 12
<PAGE>

EXECUTIVE OFFICERS OF DMC

     The current executive officers of the Company are as follows:


<TABLE>
<CAPTION>
              NAME                     AGE                         POSITION
              ----                     ---                         --------
<S>                                    <C>     <C>
       Charles D. Kissner              51      Chairman of the Board and Chief Executive Officer
       Sam Smookler                    58      President and Chief Operating Officer
       Frank Carretta, Jr.             53      Senior Vice President, Worldwide Sales, Service and Marketing
       Jack Hillson                    47      Senior Vice President and General Manager, Operations
       John C. Brandt                  41      Corporate Controller
       Carol A. Goudey                 50      Treasurer and Assistant Secretary
       Timothy R. Hansen               37      Vice President, New Business Development
       Paul A. Kennard                 47      Vice President, Engineering
       Shaun McFall                    37      Vice President, Corporate Marketing
       John P. O'Neil                  60      Vice President, Personnel
       Carl A. Thomsen                 53      Vice President, Chief Financial Officer and Secretary
</TABLE>


     Mr. Charles D. Kissner joined the Company as President, Chief Executive
Officer and was elected Director of the Company in July 1995 and Chairman of the
Board in August 1996. He currently serves as Chairman of the Board and Chief
Executive Officer of the Company. Prior to joining the Company, he served as
Vice President and General Manager of the Microelectronics Division of
M/A-COM, Inc. ("M/A-COM"), a manufacturer of radio and microwave communication
products, from July 1993 to July 1995. From February 1990 to July 1993,
Mr. Kissner served as President, Chief Executive Officer, and a Director of
Aristacom International, Inc., a communications software company. Mr. Kissner
currently is a director of Quickturn Design Systems, Inc., a provider of design
emulation systems, Spectrian, Inc., a supplier of linear high power amplifiers
for wireless communications, and American Medical Flight Support, Inc., a
non-profit medical transportation company.

     Mr. Sam Smookler joined the Company as President and Chief Operating
Officer in January 1998.  Prior to joining the Company, he served as President
and Chief Operating Officer of Signal Technology Corporation, a manufacturer of
electronic components and subsystems, from September 1997 to January 1998, and
as President of East Coast Operations from February 1997 to September 1997.
Prior to such time he served as Vice President and General Manager of the
Interconnection Products Division of Augat Corporation, a manufacturer of
telecommunications connection products, from November 1994 to February 1997.
From February 1992 to October 1994, he served as General Manager of a division
of M/A-COM.  In addition, Mr. Smookler served as Group Vice President of Sipex
Corporation, a manufacturer of hybrid semiconductors from 1986 to January 1992.

     Mr. Frank Carretta, Jr. joined the Company as Vice President, Worldwide
Sales and Service in October 1995 and was appointed Senior Vice President,
Worldwide Sales, Service and Marketing in November 1996. Prior to joining DMC,
Mr. Carretta served as Area Sales Director of M/A-COM from July 1992 to
September 1995. From 1988 to June 1992, Mr. Carretta was Vice President of Ward
Davis Associates, a manufacturers' representative company selling electronic
test instrumentation and software development tools.

     Mr. Jack Hillson was appointed Senior Vice President and General Manager,
Operations of the Company in November 1996. He previously served as Vice
President and General Manager, QUANTUM/Magnum Division of the Company from
December 1995 to November 1996. Prior to joining DMC, Mr. Hillson was with
M/A-COM for eleven years, serving in various technical and management positions
with the Semiconductor and Microelectronics Divisions. Most recently,
Mr. Hillson served as the Director of Operations for M/A-COM's Power Hybrids
Division, which manufactures transistors and amplifier modules for the wireless
communications market.


                                                                        Page 13
<PAGE>

     Mr. John C. Brandt joined the Company as Controller in June 1997.  Prior to
joining the Company, Mr. Brandt was employed with Honeywell-Measurex, a
manufacturer of control systems, from 1981 to June 1997, where he served in a
variety of financial positions, and most recently served as Operations
Controller from 1988 to June 1997.

     Ms. Carol A. Goudey joined the Company as Treasurer in April 1996 and was
additionally appointed Assistant Secretary in May 1996. Prior to joining DMC,
she served as Acting Treasurer of California Micro Devices Corporation, a
manufacturer of semiconductor devices, since 1994. Ms. Goudey has also
previously held the position of Corporate Treasurer at both
Ungermann-Bass, Inc., a network systems company, from 1985 to 1989, and System
Industries, Inc., a computer peripheral company, from 1984 to 1985.

     Mr. Timothy R. Hansen has served as Vice President, New Business
Development of the Company since August 1996. He previously served as Vice
President and General Manager, SPECTRUM Division of the Company from
February 1995 to August 1996, and as Vice President and Program Manager of the
SPECTRUM product line. He joined the Company in August 1984 as product manager,
and has held management positions in marketing, planning, sales and order
management.

     Mr. Paul Kennard joined the Company as Vice President, Engineering in April
1996. From 1989 to March 1996, Mr. Kennard was with California Microwave
Corporation, a satellite and wireless communications company, serving as
Director of the Signal Processing Technology Department until his promotion in
1994 to Vice President of Engineering, and then to Senior Vice President of
Engineering in 1995 for the Microwave Network Systems Division.

     Mr. Shaun McFall has served as Vice President, Corporate Marketing of the
Company since February 1995. He joined the Company's UK operations in January
1989, and has held several management positions in marketing. Prior to joining
DMC, he worked for GEC Telecommunications Ltd. in Germany and Ferranti
Industrial Electronics PLC, in Edinburgh, Scotland, both of which are
telecommunications companies.

     Mr. John O'Neil joined the Company as Vice President, Personnel in May
1993. Mr. O'Neil was Vice President of Personnel and Administration of BEI
Electronics, Inc., a defense electronics firm, from January 1989 to April 1993.

     Mr. Carl A. Thomsen joined the Company as Vice President, Chief Financial
Officer and Secretary in February 1995. Prior to joining the Company, he was
Senior Vice President and Chief Financial Officer of Measurex Corporation, a
manufacturer of sensor based process control systems. Mr. Thomsen joined
Measurex Corporation in 1983 as Corporate Controller, was promoted to Vice
President in 1986, to Chief Financial Officer in 1992, and to Senior Vice
President in 1993.


Page 14
<PAGE>

FACTORS THAT MAY AFFECT FUTURE FINANCIAL RESULTS

     The statements in the Annual Report to Stockholders and this Form 10-K
concerning the Company's future products, expenses, revenues, gross margins,
liquidity, and cash needs, as well as the Company's plans and strategies,
contain forward-looking statements concerning the Company's future operations
and financial results.  These forward-looking statements are based on current
expectations, and the Company assumes no obligation to update this information.
Numerous factors could cause actual results to differ materially from those
described in these statements.  In particular, the Company's results can vary
due to economic and competitive conditions, the volume and timing of product
orders received and delivered during the quarter, product margins, the ability
of the Company and its key suppliers to respond to changes made by customers in
their orders, and the timing of new product introductions by the Company and its
competitors.  The Company's results may also vary significantly depending on
other factors, including the mix of products sold; the cost and availability of
components and subsystems; relative prices of the Company's products; adoption
of new technologies and industry standards; competition; fluctuations in foreign
currency exchange rates; regulatory developments; and general economic
conditions.  Furthermore, the Company's backlog may not be representative of
actual sales for any succeeding period because of the timing of orders, delivery
intervals, customer and product mix, and the possibility of changes in delivery
schedules and additions or cancellation of orders.  Prospective investors and
stockholders should carefully consider the factors discussed above and set forth
below in evaluating these forward-looking statements.

     The quarterly operating results of the Company can vary significantly
depending on several factors, any of which could have a material adverse effect
on the Company's business, financial condition or results of operations.  In
particular, the Company's quarterly results of operations can vary due to the
volume and timing of product orders received and delivered during the quarter,
the ability of the Company and its key suppliers to respond to changes made by
customers in their orders, and the timing of new product introductions by the
Company and its competitors.  The quarterly operating results also may vary
significantly depending on other factors, including the mix of products sold,
the cost and availability of components and subsystems, relative prices of the
Company's products, adoption of new technologies and industry standards,
competition, fluctuations in foreign currency exchange rates, regulatory
developments, and general economic conditions.

     Manufacturers of digital microwave telecommunications equipment are
experiencing, and are likely to continue to experience, intense price pressure,
which has resulted, and is expected to continue to result, in downward pricing
pressure on the Company's products.  As a result, the Company has experienced,
and expects to continue to experience, declining average sales prices for its
products.  The Company's future profitability is dependent upon its ability to
improve manufacturing efficiencies, reduce material costs of products, and to
continue to introduce new products and product enhancements.  Any inability of
the Company to respond to increased price competition would have a material
adverse effect on the Company's business, financial condition and results of
operations.

     The markets for the Company's products are extremely competitive, and 
the Company expects that competition will increase.  The Company's existing 
and potential competitors include established and emerging companies, such as 
L.M. Ericsson, Northern Telecom, Siemens AG, Farinon Division of Harris 
Corporation, P-COM, Alcatel, Nokia, Innova, NERA, NEC, and SIAE, many of 
which have more extensive engineering, manufacturing and marketing 
capabilities and significantly greater financial, technical, and personnel 
resources than the Company.  The Company believes that its ability to compete 
successfully will depend on a number of factors both within and outside its 
control, including price, quality, availability, customer service and 
support, breadth of product line, product performance and features, rapid 
delivery, reliability, timing of new product introductions by the Company, 
its customers and its competitors, and the ability of its customers to obtain 
financing.  The Company continues to experience customer demands for shorter 
delivery cycles.  The Company increased its inventory levels in order to 
respond to this demand which, in turn, may increase the risk of obsolescence 
of its inventories.  There can be no assurance that the Company will have the 
financial resources, technical expertise, or marketing, sales, distribution, 
and customer service and support capabilities to compete successfully.

     The Company expects that international sales will continue to account for
the majority of its net product sales for the foreseeable future.  As a result,
the Company is subject to the risks of doing business internationally, including
unexpected changes in regulatory requirements; fluctuations in foreign currency
exchange rates; imposition of tariffs and


                                                                        Page 15
<PAGE>

other barriers and restrictions; the burdens of complying with a variety of
foreign laws; and general economic and geopolitical conditions, including
inflation and trade relationships.  In addition, recent events in Asia,
including depreciation of certain Asian currencies, failures of financial
institutions, stock market declines, and reduction in planned capital investment
at key enterprises, may continue to adversely impact the Company's revenues in
Asian markets.  There can be no assurance that currency fluctuations, changes in
the rate of inflation or any of the aforementioned factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.

     The Company's manufacturing operations are highly dependent upon the
delivery of materials by outside suppliers in a timely manner.  In addition, the
Company depends in part upon subcontractors to assemble major components and
subsystems used in its products in a timely and satisfactory manner.  The
Company does not generally enter into long-term or volume purchase agreements
with any of these suppliers, and no assurance can be given that such materials,
components and subsystems will be available in the quantities required by the
Company, if at all.  The inability of the Company to develop alternative sources
of supply quickly and on a cost-effective basis could materially impair the
Company's ability to manufacture and deliver its products in a timely manner.
There can be no assurance that the Company will not experience material supply
problems or component or subsystem delays in the future.

     The Company has pursued, and will continue to pursue, growth opportunities
through internal development and acquisitions of complementary businesses and
technologies.  Acquisitions may involve difficulties in the retention of
personnel, diversion of management's attention, unexpected legal liabilities,
and tax and accounting issues.  There can be no assurance that the Company will
be able to successfully identify suitable acquisition candidates, complete
acquisitions, integrate acquired businesses into its operations, or expand into
new markets.  Once integrated, acquired businesses may not achieve comparable
levels of revenues, profitability, or productivity as the existing business of
the Company or otherwise perform as expected.  The Company's failure to manage
its growth effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.

     The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches.  The Year 2000 problem is
concerned with whether computer systems will properly recognize date-sensitive
information when the year changes to 2000.  Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.  The Year 2000 problem is pervasive and complex, as virtually every
company's computer operation will be affected in some way.  The Company's
computer programs, which process its operational and financial transactions,
were designed and developed without considering the impact of the upcoming
change in century.  If not corrected, the Company's computer programs could fail
or create erroneous results by or at the year 2000.  The Company has purchased
new computer programs to address this issue and intends to implement these
applications during Fiscal 1999.  The Company is contacting its primary
suppliers and subcontractors to determine that they are developing plans to
address processing transactions in the year 2000 and to monitor their progress
toward Year 2000 capability.  The Company believes that it will expend
approximately $0.5 million for investigating and remedying issues related to
Year 2000 compliance involving its internal operations.  Management believes
that the Year 2000 compliance expenses will not have a material adverse effect
on the Company's earnings.  However, there can be no assurance that Year 2000
problems will not occur with respect to the Company's computer systems.  The
Year 2000 problem may impact other entities with which the Company transacts
business, and the Company cannot predict the effect of the Year 2000 problem on
such entities.

     During any given quarter, a small number of customers account for a
significant portion of the Company's net sales.  The Company's 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.  The loss of any existing customer, a significant
reduction in the level of sales to any existing customer, or the failure of the
Company to gain additional customers could have a material adverse effect on the
Company's business, financial condition and results of operations.


Page 16
<PAGE>

ITEM 2.  PROPERTIES

     The Company's corporate offices and principal research, development and
manufacturing facilities are located in San Jose, California in five leased
buildings aggregating approximately 230,000 square feet.  The Company owns
20,000 square feet of office and manufacturing space in East Kilbride, Scotland,
1,500 square feet of which has been sublet until the year 2004.  The Company
recently purchased 32,000 square feet of office and manufacturing space in
Hamilton, Scotland and intends to sell the East Kilbride building.  The Company
also leases 17,000 square feet in Coventry, England and 45,000 square feet in
Wellington, New Zealand.  The Company leases approximately 45,000 aggregate
square feet of sales and customer service and support offices.  The Company
believes these facilities are adequate to meet its anticipated needs for the
foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

     See "Business -- Litigation" under Item 1 of this Form 10-K and Note 4 of
"Notes to Consolidated Financial Statements" incorporated herein by reference
from the Company's 1998 Annual Report to Stockholders.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          (a)  The Company held a Special Meeting of Stockholders on March 23,
               1998.

          (b)  At the Special Meeting of Stockholders, the following matters
               were voted upon:

          1.   A proposal to approve the issuance of shares of the Company's
               Common Stock pursuant to an Agreement and Plan of Reorganization
               and Amalgamation, dated as of December 22, 1997, by and among the
               Company, South Amalgamation Sub Ltd. and MAS Technology Limited.
<TABLE>
<S>                                          <C>
                    Affirmative votes:       27,735,229
                    Negative votes:              91,879
                    Abstain:                     78,142
                    Non-votes:                7,264,457
</TABLE>
          2.   A proposal to approve an amendment to the Restated Certificate of
               Incorporation of the Company to (a) increase the total number of
               shares that the Company has authority to issue from 65,000,000 to
               100,000,000 shares and (b) increase the number of authorized
               shares of the Company's Common Stock from 60,000,000 to
               95,000,000 shares.
<TABLE>

<S>                                          <C>
                    Affirmative votes:       34,439,390
                    Negative votes:             676,020
                    Abstain                      54,297
                    Non-votes                         0
</TABLE>
          3.   A proposal to approve the adoption of an amendment to the
               Company's 1994 Stock Incentive Plan to increase the number of
               shares of the Company's Common Stock authorized for issuance
               thereunder from 4,666,660 shares to 7,166,660 shares.
<TABLE>

<S>                                          <C>
                    Affirmative votes:       15,956,945
                    Negative votes:          11,696,404
                    Abstain                     251,901
                    Non-votes                 7,264,457
</TABLE>


                                                                        Page 17
<PAGE>

                                       PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

     The section appearing on the inside front cover of the Company's 1998
Annual Report to Stockholders relating to prices of the Company's Common Stock
is incorporated herein by reference.

ITEM 6.  SELECTED FINANCIAL DATA

     The section labeled "Selected Consolidated Financial Data" appearing on
page 15 of the Company's 1998 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" on pages 11 through
15 of the Company's 1998 Annual Report to Stockholders is incorporated herein by
reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  consolidated financial statements and supplementary data, and related
notes and Report of Independent Public Accountants appearing on pages 16 through
29 of the Company's 1998 Annual Report to Stockholders are incorporated herein
by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.


Page 18
<PAGE>

                                       PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information concerning directors and executive officers under the caption
"Election of Directors," "Board Meetings and Committees," "Security Ownership of
Certain Beneficial Owners and Management" and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on August 4, 1998 (the "Proxy
Statement"), is incorporated herein by reference.  In addition, see the
discussion under the caption "Business -- Employees -- Executive Officers" under
Item 1 of this Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

     The information included in the Company's Proxy Statement under the
captions "Compensation of Directors," "Executive Compensation and Other
Information," "Stock Options," "Option Exercises and Holdings," "Compensation
Committee Interlocks and Insider Participation" and "Employment and Termination
Arrangements" is incorporated by reference herein.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information included in the Company's Proxy Statement under the
captions "Security Ownership of Certain Beneficial Owners and Management" and
"Employment and Termination Arrangements" is incorporated by reference herein.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     See "Business -- Manufacturing and Suppliers" under Item 1 of this Form
10-K and Note 4 of "Notes to Consolidated Financial Statements" of the Company's
1998 Annual Report to Stockholders incorporated herein by reference.


                                                                        Page 19
<PAGE>

                                       PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (A)  1.   FINANCIAL STATEMENTS

          The following consolidated financial statements are contained in the
          Company's 1998 Annual Report to Stockholders and are incorporated
          herein by reference pursuant to Item 8:

               1.   Consolidated Balance Sheets as of March 31, 1998 and 1997.

               2.   Consolidated Statements of Operations for each of the three
                    years in the period ended March 31, 1998.

               3.   Consolidated Statements of Stockholders' Equity for each of
                    the three years in the period ended March 31, 1998.

               4.   Consolidated Statements of Cash Flows for each of the three
                    years in the period ended March 31, 1998.

               5.   Notes to Consolidated Financial Statements.

               6.   Report of Independent Public Accountants.


          2.   FINANCIAL STATEMENT SCHEDULES

          The following consolidated financial statement schedule for each of
          the three years in the period ended March 31, 1998 is submitted
          herewith:

               II   Valuation and Qualifying Accounts and Reserves.

          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.

          3.   EXHIBITS

               The Exhibit Index begins on Page 25 hereof.

          (B)  There were no reports on Form 8-K filed by the Registrant during
               the quarter ended March 31, 1998.

          (C)  See Item 14 (a) 3 above.

          (D)  See Item 14 (a) 2 above.


Page 20
<PAGE>

                                      SIGNATURES


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

Date:     June 29, 1998.

DIGITAL MICROWAVE CORPORATION

BY:        /S/ CHARLES D. KISSNER
     ------------------------------
     Charles D. Kissner
     CHAIRMAN OF THE BOARD AND
     CHIEF EXECUTIVE OFFICER


                                                                        Page 21
<PAGE>

                                  POWER OF ATTORNEY


KNOW ALL PERSONS BY THESE PRESENTS:

     That the undersigned officers and directors of Digital Microwave
Corporation 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 Digital Microwave
Corporation 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.

<TABLE>
<CAPTION>
 SIGNATURES                      SIGNING CAPACITY                DATE
 ----------                      ----------------                ----
<S>                              <C>                             <C>
 /s/  CHARLES D. KISSNER         Chairman of the Board and       June 29, 1998
------------------------------   Chief Executive Officer
      Charles D. Kissner

 /s/  CARL A. THOMSEN            Vice President, Chief           June 29, 1998
------------------------------   Financial Officer & Secretary
      Carl A. Thomsen            (Principal Financial and
                                 Accounting Officer)

 /s/  RICHARD C. ALBERDING       Director                        June 29, 1998
------------------------------
      Richard C. Alberding

 /s/  JOHN W. COMBS              Director                        June 29, 1998
------------------------------
      John W. Combs

 /s/  CLIFFORD H. HIGGERSON      Director                        June 29, 1998
------------------------------
      Clifford H. Higgerson

 /s/  JAMES D. MEINDL            Director                        June 29, 1998
------------------------------
      James D. Meindl

 /s/  BILLY B. OLIVER            Director                        June 29, 1998
------------------------------
      Billy B. Oliver

 /s/  HOWARD ORINGER             Director                        June 29, 1998
------------------------------
      Howard Oringer

</TABLE>


Page 22
<PAGE>

                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE


To Digital Microwave Corporation:

     We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Digital Microwave
Corporation's Annual Report incorporated by reference in this Form 10-K, and
have issued our report thereon dated April 21, 1998.  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
the Company's 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 21, 1998


                                                                        Page 23
<PAGE>

                                     SCHEDULE II


DIGITAL MICROWAVE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>


(IN THOUSANDS)
---------------------------------------------------------------------------------------
                                  BALANCE AT     CHARGED TO       BALANCE       BALANCE
                                 BEGINNING OF     COSTS AND      DEDUCTIONS/    AT END
DESCRIPTION                         YEAR          EXPENSES       WRITE-OFF      OF YEAR
---------------------------------------------------------------------------------------
<S>                              <C>             <C>             <C>           <C>
Year Ended March 31, 1998

     Allowance for
        doubtful accounts          $3,362         $  356         $(77)(A)       $3,795


Year Ended March 31, 1997

     Allowance for
        doubtful accounts          $1,373         $1,400         $(589)(A)      $3,362


Year Ended March 31, 1996

     Allowance for
        doubtful accounts          $1,413         $  580         $ 620          $1,373
</TABLE>


(A) Net of transfers from other reserve accounts.


Page 24
<PAGE>


                                    EXHIBIT INDEX

EXHIBIT
NUMBER    DESCRIPTION

2.1       Agreement and Plan of Reorganization and Amalgamation, dated December
          22, 1997, among the Company, South Amalgamation Sub Ltd. and MAS
          (incorporated by reference to Exhibit 2.1 to the Company's
          Registration Statement on Form S-4 (File No. 333-45053)).

3.1       Restated Certificate of Incorporation, as amended as of March 24,
          1998.

3.2       Amended and Restated Bylaws, dated as of March 24, 1998.

4.1       Form of Common Stock Certificate (incorporated by reference to Exhibit
          4.1 to the Company's Annual Report on Form 10-K for the year ended
          March 31, 1988).

4.2       Rights Agreement dated as of October 24, 1991 between the Company and
          Manufacturers Hanover Trust Company of California, including the
          Certificate of Designations for the Series A Junior Participating
          Preferred Stock (incorporated by reference to Exhibit 1 to the
          Company's Current Report on 8-K filed on November 5, 1991).

10.1      Digital Microwave Corporation 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      Lease of premises located at 170 Rose Orchard Way, San Jose,
          California (incorporated by reference to Exhibit 10.5 to the Company's
          Annual Report on Form 10-K for the year ended March 31, 1991).

10.5      Lease of premises located at 130 Rose Orchard Way, San Jose,
          California. (incorporated by reference to Exhibit 10.6 to the
          Company's Annual Report on Form 10-K for the year ended March 31,
          1991).

10.6      Lease of premises located at 110 Rose Orchard Way, San Jose,
          California. (incorporated by reference to Exhibit 10.7 to the
          Company's Annual Report on Form 10-K for the year ended March 31,
          1991).

10.7      Microelectronics Technology, Inc. Development Agreement dated as of
          March 9, 1984 (incorporated by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (File No. 33-13431)).

10.8      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)).


                                                                        Page 25
<PAGE>

10.9*     Technology Transfer & Marketing Agreement dated October 2, 1987
          between Microelectronics Technology Inc. and the Company (incorporated
          by reference to Exhibit 10.17 to the Company's Annual Report on Form
          10-K for the year ended March 31, 1988).

10.10*    Product Acquisition Agreement dated as of September 23, 1992 between
          the Company and Microelectronics Technology, Inc. (incorporated by
          reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K
          for the year ended March 31, 1993).

10.11*    Product Acquisition Agreement dated as of December 28, 1992 between
          the Company and Microelectronics Technology, Inc. (incorporated by
          reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K
          for the year ended March 31, 1993).

10.12*    Teaming Agreement dated as of November 16, 1993 between the Company
          and Siemens AG (including the Supply Agreement dated November 16, 1993
          between Siemens AG and E-Plus Mobilfunk GmbH) (incorporated by
          reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K
          for the year ended March 31, 1994).

10.13     Agreement on Exchange of Interim Equipment dated October 27, 1994
          (incorporated by reference the Company's Quarterly Report on Form 10-Q
          for the quarter ended December 31, 1994).

10.14     Digital Microwave Corporation 1994 Stock Incentive Plan, as amended
          and restated (incorporated by reference to the Company's Proxy
          Statement for the Annual Meeting of Stockholders to be held on
          August 4, 1998).

10.15     Employment Agreement dated May 1, 1996 between the Company and Charles
          D. Kissner (incorporated by reference to Exhibit 10.36 of the
          Company's Annual Report on Form 10-K for the year ended March 31,
          1996).

10.16     Form of Employment Agreement between the Company and certain executive
          officers (incorporated by reference to Exhibit 10.38 of the Company's
          Annual Report on Form 10-K for the year ended March 31, 1996).

10.17     Amendment to Loan Agreement dated June 24, 1996 between the Company
          and the CoastFed Business Credit Corporation (incorporated by
          reference to Exhibit 10.38 of the Company's Quarterly Report on Form
          10-Q for the quarter ended June 30, 1996).

10.18     Amendment to Loan Agreement effective as of June 25, 1996 between the
          Company and the CoastFed Business Credit Corporation (incorporated by
          reference to Exhibit 10.39 of the Company's Quarterly Report on Form
          10-Q for the quarter ended September 30, 1996).

10.19     Form of Employment Agreement between the Company and certain executive
          officers (incorporated by reference to Exhibit 10.28 to the Company's
          Annual Report on Form 10-K for the year ended March 31, 1997).

10.20     Credit Agreement, dated as of June 30, 1997, by and between the
          Company and Bank of America National Trust and Savings Association
          (incorporated by reference to Exhibit 10.1 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended June 30, 1997).

10.21     Lease, dated April 5, 1995, by and between Metropolitan Life Insurance
          Company and Digital Microwave Corporation, relating to 180 Rose
          Orchard Way, San Jose, California (incorporated by reference to
          Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended June 30, 1997).


Page 26
<PAGE>

10.22     Sublease Agreement, dated August 29, 1997, by and between Wyse
          Technology Inc., Digital Microwave Corporation and Wyse Technology
          Investments, Inc., relating to 3745 North First Street, San Jose,
          California.

10.23*    Purchase Agreement, dated January 15, 1998, between the Company and
          Microelectronics Technology, Inc.

10.24*    Purchase Agreement, dated January 15, 1998, between the Company and
          REMEC, Inc.

10.25*    Business Agreement, dated January 26, 1998, between the Company and
          Microelectronics Technology, Inc.

13.1      Portions of 1998 Annual Report to Stockholders incorporated herein by
          reference.

21.1      List of subsidiaries.

23.1      Consent of Independent Public Accountants (included on page 28 of this
          Annual Report on Form 10-K).

24.1      Power of Attorney (included on page 22 of this Annual Report on Form
          10-K).

27.1      Financial Data Schedule for the fiscal year ended March 31, 1998.

27.2      Restated Financial Data Schedule for the fiscal year ended March 31,
          1997.

27.3      Restated Financial Data Schedule for the fiscal year ended March 31,
          1996.

   *      Confidential treatment of certain portions of this exhibit has been
          requested.


                                                                        Page 27
<PAGE>

                      CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



     As independent public accountants, we hereby consent to the incorporation
     of our reports included (or incorporated by reference) in this Form 10-K
     into the Company's previously filed Registration Statements (File Nos.
     33-16539, 33-37173, 33-43155, 33-85270, 33-94438, 333-00855, 333-11385,
     333-11387, 333-11389, 333-25953, 333-48533, 333-48535 and 333-46867) on
     Form S-8.


                                                       /s/  ARTHUR ANDERSEN LLP


San Jose, California
June 26, 1998


Page 28