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

FORM 10-K

INTERWAVE COMMUNICATIONS INTERNATIONAL, LTD.
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(g)of the Act:
Common Shares, par value $.001 per share
(Title of class)

        Indicate by check mark whether 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 ý    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 this Form 10-K or any amendment to the Form 10-K. o

        Aggregate market value of the voting shares held by non-affiliates of the Registrant, based upon the closing price of $0.6405 on September 5, 2002 on the NASDAQ was $28,423,065. Calculation of holdings by non-affiliates is based upon the assumption, for these purposes only, that executive officers, directors, nominees, and person's holding 5% or more of Registrant's Common Shares are affiliates. Number of shares of the Registrant's common shares outstanding at September 5, 2002: 58,130,029

DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of the Registrant's proxy statement for its Annual Meeting of Shareholders to be held on December 6, 2002, are incorporated by reference in Part III of this report.

2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

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PART I

Item 1. Business

        We make many statements in this report, such as statements regarding our plans, objectives, expectations and intentions and others that are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We may identify these statements by the use of the future tense or words such as "believe," "anticipate," "intend," "may," "expect," "estimate," "will," "continue," "plan" and similar expressions. These forward-looking statements may involve risks and uncertainties. You should read statements that contain these words carefully, because they discuss our expectations about our future performance, contain projections of our future operating results and our future financial condition, or state other "forward-looking" information. There may be events in the future, however, that we are not able to predict or over which we have no control. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we discuss in "Risk Factors That May Affect Future Results" and elsewhere in this report. These forward-looking statements speak only as of the date of this report, and we caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in this report.

Overview

        interWAVE Communications International, Ltd., ("we," "us," "the Company," or "interWAVE") is a global provider of scaleable wireless infrastructure networks that offer a cost effective solution to extend coverage and connection to hard to reach areas. These systems support voice and data in both mobile and fixed environments.

        interWAVE's cellular networks target communities with a few thousand subscribers that could grow up to more than a hundred thousand subscribers. The entire cellular network is based on a common hardware platform, where the software for the full functionality cellular switch, the base station controller, as well as the base station reside on a single hardware system. This gives the operator a simple, easy to support and maintain network that is software configurable to various network architectures.

        Over the last fiscal year, interWAVE expanded its product line to include a high capacity switch that can support more than a hundred thousand subscribers. This can operate as a Mobile Switching Center (MSC) or a gateway to satellite or other wire line networks. With the high end product line, interWAVE is able to offer operators an upgrade path to higher capacity networks.

        interWAVE's product line has been enhanced this year to provide data services with GPRS, and increased its product and technology base with the recent addition of its CDMA2000 IP based product line and technology with the acquisition of substantially all of the assets of GBase Communications ("GBase") completed in September 2002.

        We market and sell our solutions around the world through our direct sales force and others utilizing a multi-tiered sales strategy which includes selling to wireless service providers, communications equipment providers, and to systems integrators, including value added resellers ("VARs") which integrate our systems with the products of other companies. Since 1997 we have sold over 3,000 units based on the Global Standard for Mobile Communications ("GSM"), which have been installed in over 35 countries. As a result of the Wireless Inc. acquisition in June 2001, we have broadband systems deployed in over 50 countries worldwide. We have a strategic relationship with Hutchison Whampoa and its subsidiary Hutchison Telecommunications International, Ltd. ("Hutchison"), one of the leading global GSM cellular operators. As of June 30, 2002, Hutchison affiliates own 4.46% of our fully diluted shares. Hutchison affiliates have deployed our products in networks in Hong Kong, Sri Lanka, and Paraguay. We also have a strategic, multi-faceted relationship with Eastern Communications Co., Ltd. ("Eastcom") in the People's Republic of China. Eastcom is a

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leading provider of both GSM and Code Division Multiple Access ("CDMA") equipment in China and owns 10.32% of our fully diluted shares as of June 30, 2002.

        There has been a tremendous slow down in the broadband wireless market. The overall market for broadband access in 2002 has fallen to below $1 billion according to an analyst's estimate. Broadband access demand has diminished significantly due to the financial difficulties of Internet service providers ("ISPs"), and the availability of other broadband access alternatives, such as DSL and cable. The sales channel for the broadband access market has become more specialized, where suppliers deliver an integrated bundled solution, as a complete network provider for specialized markets. As a result, in May 2002, interWAVE sold the rights to a number of its low speed 64kbits, and 128kbits broadband products, including the respective intellectual property rights for certain products, to Young Design, Inc. ("YDI"), a company focused on delivering broadband networks for ISPs with a complete solution set for both in-door and out-door installations. interWAVE will continue to include YDI's newly-acquired broadband products as part of interWAVE's turnkey GSM network solution. In addition, YDI is licensed to sell interWAVE's WaveNet Link 4X solution-a medium-capacity, point-to-point, broadband radio and will begin to distribute interWAVE's WaveNet Link CX (45Mbit) solution-an industry first, high-capacity, all outdoor, point-to-point, broadband radio-throughout its North American sales channel.

GSM Products

        We offer a complete line of compact GSM systems. We have pioneered what we believe is the only commercially available system that provides all of the infrastructure equipment and software necessary to support an entire wireless network within a single, compact enclosure. We have designed our systems to serve the following applications:

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Community Networks. Our systems enable wireless service providers to add capacity in heavy usage areas and to provide telephone service in previously under-served communities.



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Specialized Networks. The compact nature of our systems allows innovative uses of these systems in applications which were previously impossible. These include the deployment of emergency applications, military applications and cellular usage on cruise ships, containerized networks or network on wheels for rapid deployments.



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Private or Enterprise Networks. Our systems allow wireless users in organizations such as large corporations, government entities, convention centers, technology parks and universities to maintain connection with the organization's private telephone network whether the users are in their offices, out of their offices or moving between locations.

Broadband Products

        Our high-speed, or broadband, wireless systems enable international and domestic communications service providers, telephone operating companies and private network operators to deliver voice and high-speed data services to their customers. These products were the result of our acquisition of Wireless Inc. in June of 2001. Our systems are designed as an alternative to fiber optic, copper-based and cable-based communication transmission methods and allow a service provider to use the broadband products for infrastructure build outs or to rapidly deliver high-speed Internet access in a service area. These systems serve the following applications:

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Medium Speed Transport. Operating in licensed and unlicensed frequencies these products provide bandwidth from 1.5 Megabits per second ("Mbps") up to 45 Mbps with a variety of applications. These allow both operators and private companies to connect locations with Internet Protocol ("IP") and circuit interfaces.

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Broadband Access. Our systems provide a family of Point-to-Multi-Point wireless systems that are typically used to facilitate high speed Internet access for small and medium sized businesses.

Wireless Industry Trends and Directions

        Wireless infrastructure spending as forecasted by Morgan Stanley's recent August report on Wireless Equipment was adjusted downward to reflect a - -17.5% growth rate for 2002, and a -3% for 2003. Global capital expenditure ("CAPEX") spending for wireless carriers was $50.7 billion in 1999, $65.4 billion in 2000 and $72 billion in 2001. The projected spending for 2002 is $66.5 billion, dropping to $61.8 billion in 2003, down to $56.4 billion in 2004, and $54.3 billion in 2005. This report attributes much of the reduction in spending to global economic weakness, as well as the financial difficulties of many of the large carriers.

        The slowdown in 3G is also one of the reasons for the negative growth rates. The report maintains that Europe will continue to see more than $17 billion in spending for wireless infrastructure, growing modestly to $18.7 billion by 2005. North American spending on the other hand, from a peak of $20.4 billion in 2001, is estimated to drop to $20.1 billion in 2002, and then down to $13.6 billion in 2005. North American wireless infrastructure CAPEX is able to sustain more than $20 billion despite a recession due to the carriers' need to complete their build outs for 2.5G, GPRS, as well as CDMA2000 in order to upgrade to the latest digital network technologies. Wireless capital spending is expected to be reduced over the next few years, as the build outs are completed. Asia, which achieved $18.2 billion in 2001, is projected to drop to $14.9 billion in 2002, and down to $10 billion in 2005.

        Many analysts see a growing competition in data services being provided in hot spots by 802.11 technologies, which is an unlicensed, inexpensive technology that is easy to install. Although 802.11 has shortcomings of lack of guaranteed performance, questionable security, and lack of high speed mobility support, the subscriber growth rate and adoption rate of 802.11 hot spot technology has been dramatic.

        The contraction in China's market for telecommunications equipment in the first half of calendar 2002, due in part to over-provisioning by the Chinese carriers in prior years, the introduction of low cost services like PHS driving the price of cellular services down, as well as the severe competition presented by the domestic suppliers who have been aggressively pursuing market share through a price war, set the stage for an industry price shakeout in China. Carriers in China are seeing lower revenue per user (RPU) for the new subscribers as wireless penetration goes from the initial business users to the everyday casual users. Reduction in budget by Chinese carriers mid-stream during the 2002 year, shrunk the overall CAPEX spending in China by at least 30% between both China Mobile and China Unicom.

        According to P.R. China's Information Industry Ministry, the country has 300 million telephone users, including 131 million mobile phone subscribers. In the first nine months of 2002, China's telecom companies jointly invested about 140 billion yuan (US$17 billion), generating accumulated revenues of 257 billion yuan (US$31 billion), the Ministry said.

        According to Global Wireless news of July 2002, China Mobile Communications ("China Mobile"), China's largest mobile service provider, announced it will invest 50 billion yuan (US$6 billion) in mobile-phone infrastructure in the western part of China during the next three years. During the past three years, China Mobile has already invested 54 billion yuan (US$6.5 billion) in upgrading and expanding its western network. The western China region currently accounts for only 10 percent of the China Mobile network, but is expected to grow to 23 percent by 2005. The mobile-phone penetration rate is more than 19 percent in the East of China, but only 7 percent in the West of China, with 90 percent of China Mobile's customers living in the eastern part of the country. The expansion to the West represents an excellent opportunity for interWAVE, where the compactness of interWAVE's products, and the ability to reduce back haul traffic through local switching in the base station node platform, gives operators the ability to build out networks for villages and towns economically.

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        The wireless equipment market overall is now, more than ever before, sensitive to overall cost, with emphasis not only in the actual equipment pricing, but also in the service and technology value contributed by the equipment supplier. interWAVE continues to succeed with customers seeking these differentiated value propositions, where the simplicity, yet standard compliance and full functionality of interWAVE's products offer customers rapid deployment, ease of installation, support and maintenance. These values and the ability to achieve breakeven early become the critical factors for the selection of interWAVE as the wireless equipment supplier.

        On broadband wireless, while personal computer sales are stagnant, global sales of wireless systems using so-called Wireless LAN (WLAN) technology, continue to boom, according to the research group Gartner Dataquest. Global sales of WLAN system units are forecast to increase 73% in 2003 to 26.5 million units, up from 15.5 million units in 2002. The average price per unit is falling quickly, which means that revenues will grow much more slowly—by 26 percent to $2.8 billion. Wireless LAN, often referred to by the numeric tag 802.11, uses wireless base stations hooked up to a fixed-line network, which establish a radio connection over a distance of up to 100 meters to a computer fitted with a WLAN adapter card. Increasingly the WLAN radio will be integrated on the mother board of a personal computer.

        In 2002, approximately 10% of all portable PCs will be shipped with a wireless LAN adapter card included and this percentage is expected to increase to 31 percent in 2004. By 2007, Gartner Dataquest forecasts 68% of all mobile PCs shipped will include a wireless LAN capability. In the corporate world the penetration will be even higher. Gartner Dataquest forecasts the penetration rate of wireless LAN into the professional portable PC installed base will grow from 9% in 2000 to almost 50% by the end of 2003, and to more than 90% by 2007.

        Because of the significance of this market driving wireless data services, interWAVE delivered 802.WAVE this year and demonstrated our 802.WAVE product at the GSM World Congress. The 802.WAVE product provides the bridging between cellular and LAN networks, where users can log into a public wireless LAN network to access the Internet by subscribing to services offered by cellular operators using the same authentication, roaming and billing infrastructure in a seamless and transparent way.

        The need for the service providers to integrate the management and support of subscribers across cellular and LAN networks is inevitable, as the popularity of the inexpensive 802.11 technology becomes more pervasive and begins to erode some of the data service market offered by 3G. interWAVE is prepared to address this opportunity by offering a mobile, LAN gateway integration server that can be installed at a central office, or on a campus or building premise.

Global System for Mobile Communications Standard

        The GSM standard is the dominant standard worldwide followed by the code division multiple access standard, or CDMA, the time division multiple access standard, or TDMA, and analog standards. According to the Comprehensive Guide to Wireless Technologies, all of the digital standards, including GSM, CDMA and TDMA, offer clearer voice communications than the older analog standards. We believe that digital standards will attract even more users in the future, as functions such as high-speed data communications become available. The GSM standard allows users to send and receive text messages and allows users to roam across international boundaries without an interruption in service.

        According to the GSM Association, GSM is the world's most widely accepted digital wireless standard with 643 million users in 2001 and is projected to grow to over 1.4 billion users by 2006. In 2001, GSM accounted for approximately 68% of the world's wireless market and CDMA, TDMA and analog accounted for 12%, 10% and 4% of the world's market, respectively. GSM is the dominant standard in Europe as a result of the European Union's decision to endorse a single unifying digital

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standard in the 1980s. In Asia, the rate of acceptance of the GSM standard is growing rapidly as wireless service providers have selected GSM to offer differentiated services and to increase capacity. On November 1, 1999, the GSM Association and the Universal Wireless Communications Consortium, the governing bodies of the GSM and TDMA standards, respectively, announced an agreement to jointly develop standards that enable GSM and TDMA systems to operate together. International standards organizations have established the next generation of standards, the third generation ("3G") standards, that will replace all three of these technologies.

        Early in the history of the wireless market, analog standards achieved a strong presence in the United States while the GSM standard was being adopted in Europe. According to International Data Corporation ("IDC"), at the end of 2001, 7.0% of the 120 million wireless users in the United States were using the GSM standard, up from 5.6% in 1999. IDC projects the total number of wireless users to grow to 168 million, with 20% using GSM, in the United States by 2004. Today, although the acceptance of the GSM standard in North America is in its early stages, increased penetration of the GSM standard is being driven by its ability to support international roaming, and will be further driven by its advanced data transmission and messaging capabilities. AT&T Wireless and Cingular originally deployed TDMA but have now deployed GSM also to replace TDMA. GSM has been adopted in North America by communications service providers, including Microcell, Cingular, VoiceStream, and AT&T Wireless.

        Both CDMA and TDMA also have significant presence in the United States. Sprint PCS and Verizon have deployed CDMA.

3G

        An international consortium of standards bodies has established the specifications for the next generation of wireless standards, referred to as the 3G wireless standards. There are two specifications for 3G, one is UMTS, and the other is CDMA2000, an umbrella technology which includes 1XRTT for voice and EVDO for data. The wide band standard is intended to improve data speeds to achieve 2Mbits or greater and increased voice capacity. CDMA2000 has been adopted by U.S. operators, Korean operators, KDDI in Japan and China Unicom. Some Latin America and Eastern European wireless operators are also planning to adopt this standard. UMTS is the 3G standard for the licenses issued in Europe, and is the follow on standard for GSM and GPRS.

        There has been a delay in deployment of UMTS 3G in Europe, due primarily to financial challenges of the Western European operators. There is also a delay in UMTS handset availability, resulting in a slowdown in overall deployments, even for large operators such as Hutchison 3G, which is the leading operator currently driving the UMTS 3G roll out in Europe.

CDMA 2000

        CDMA2000, also known as IS-2000, is an umbrella technology for the evolution of CDMAOne/IS-95 to 3rd generation services. CDMA2000 will provide enhanced services to CDMAOne subscribers, as well as forward and backward capabilities in terminals. Qualcomm, Inc. ("Qualcomm") owns the key intellectual property for CDMA technology. Wireless equipment manufacturers license CDMA technology from Qualcomm.

        CDMA2000 can be deployed in several phases. The first phase, CDMA2000 1X, should support an average of 144 kbps packet data in a mobile environment. The second release of 1X, called 1XEV-DO should support data rates up to 2 Mbits/sec on a dedicated data carrier. Finally, 1XEV-DV should support even higher peak rates, simultaneous voice and high speed data, as well as improved Quality of Service mechanisms.

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        A key component of CDMA2000 systems will be a new Packet Core Network (PCN) that allows for the delivery of packet data services with more speed and security. The CDMA2000 PCN is one of the first steps in the evolution of CDMA2000 systems to an all-IP and multi-media architecture.

        CDMA2000 is more widely deployed in the U.S., Korea, Japan and China. This technology is an evolutionary upgrade to CDMA IS-95, the predecessor to CDMA2000. The combined number of subscribers for this CDMA standard is over 100 million. The compound annual growth rate of CDMA2000 equipment sales has been about 25% to 30% per year. The market size for CDMA is more than $5 billion and is growing at a rate of 25% to 30% per year as operators upgrade their IS-95 networks to address demands for higher performance data services.

        interWAVE invested in September 2002 in the acquisition of CDMA2000 technology and purchased the technology from GBase Communications ("GBase"), a private company with a IP based product line and technology for pico, micro and macro cell base stations supporting 1XRTT CDMA, with features that are anticipated to be enhanced to support 1XEVDO and eventually 1XEVDV. interWAVE's strategic partner, Eastcom in China, as well as its strategic customer Hutchison should both offer excellent opportunities for distribution and use of the CDMA2000 product line. interWAVE obtained a license from Qualcomm for enterprise applications of CDMA2000 technology from GBase.

        CDMA2000 is not constrained to only the IMT band; it is defined to operate in all existing allocated spectrum for wireless telecommunications, thereby maximizing flexibility for operators. Furthermore, CDMA2000 delivers 3G services which occupy a very small amount of spectrum (1.25 MHz per carrier), protecting this precious resource of spectrum for operators. These frequency bands include: 450 MHz, 700 MHz, 800 MHz, 900 MHz, 1700 MHz, 1800MHz, 1900 MHz, and 2100 MHz.

        In the second half of calendar year 2002, there should be a substantial increase in the number of CDMA2000 users as Verizon Wireless and Sprint PCS Group roll out CDMA2000 1X advanced wireless networks in North America. Near term projections for the demand for additional CDMA2000 handsets for the balance of the year 2002 is for more than 20 million units, based on recent Qualcomm announcements on the number of CDMA2000 handset chips that will be shipped by end of September 2002.

Key Developing Market Opportunities

Community Solutions

        Community networks enable the introduction of wireless service to these areas that wireless providers currently do not serve or to areas that may not have any telephone service. Wireless solutions such as wireless local loop networks offer the most cost-effective way to provide telephone service to areas with no current service. Wireless local loop networks are wireless communications systems that connect users to the public telephone network using radio signals as a substitute for traditional landline connections. These markets offer substantial growth potential due to the relatively low level of rural and remote telephone service penetration and the continued need for low-cost communications services. In addition, wireless solutions provide a high-value proposition in developing countries since these solutions are generally less expensive due to the lack of an established infrastructure in these countries. To succeed in the community networks market, we believe wireless service providers need to employ network systems that minimize initial capital expenditures while providing the flexibility to scale cost-effectively as demand grows. In addition, wireless service providers need to minimize ongoing operating costs, such as the charges associated with routing calls through a central switch.

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Home Zone Networks

        Our WAVEXchange™ local switch serves as switching capacity for Home Zones, in which the GSM subscriber has a service similar to cordless telephony, with mobility within the Home Zone covered by the WAVEXchange™. In a city served by a central switch of high capacity, such as a Nortel switch, the WAVEXchange Home Zones can create an underlay network with local switching, where the subscribers may access the services of the central switch. In other networks, our WAVETransit™ switch may connect clusters of Home Zones and provide access to the Public Switched Telephone Network ("PSTN"). We have deployed a Home Zone network for a subsidiary of Hutchison in Sri Lanka and also a nationwide Home Zone network in Paraguay for a subsidiary of Hutchison. Our TurboMAX™ base transceiver station ("BTS") provides high power coverage in Home Zone networks. The Home Zone approach allows the operators to build out a nationwide network incrementally, thus minimizing large up front investments required using traditional network buildout methods. Every Home Zone can be independently expanded and managed to provide full cellular network services.

Specialty Applications

        The compact size of our GSM infrastructure equipment and packaging expertise has enabled several special applications of our equipment including:

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GSM on Wheels. An entire GSM network, or just a GSM base station system ("BSS") packaged into a small van or truck, allowing an operator to provide primary coverage in the case of natural disasters or temporary, supplemental or primary coverage for events where current coverage is inadequate.



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GSM on a ship. This GSM network provides roaming coverage on cruise ships and ferries worldwide, allowing passengers to send and receive calls while at sea.

Primary Objectives of the GSM Wireless Service Provider

        To better serve their existing user base and to gain market share, wireless service providers are focused on the following primary objectives:

        Cost-Effective Network Deployment.    The deployment of traditional wireless networks requires significant capital expenditures. A typical wireless network consists of a mobile switching center ("MSC") to route voice and data signals to their correct destinations, multiple base station controllers ("BSCs") to aggregate and manage voice and data signals between the switch and the base transceiver station ("BTS") and many base transceiver stations to transmit and receive voice and data signals over radio frequencies. Wireless networks are typically designed to support large user bases. Service providers need cost-effective ways to address smaller user bases. As service providers face increasing price competition, they will depend on communications equipment providers for cost-effective and technologically advanced infrastructure systems.

        Extension of Coverage.    In the past, wireless networks have been deployed primarily in urban centers and other heavy usage areas. Increasing demand for improved service over wider geographic areas has prompted wireless service providers to accelerate the expansion of their networks. In addition, wireless service providers are deploying networks in locations where service has previously been inadequate or prohibitively expensive to provide.

        Improved Quality of Service.    Currently, wireless networks in metropolitan areas are prone to a lower quality of service when heavy usage causes capacity limits to be exceeded. Furthermore, wireless service in buildings, tunnels and subways is often interrupted or unavailable. Similarly, wireless services in remote areas are often limited due to the lack of a fully-developed wireless infrastructure. Improving

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the quality of wireless service involves increasing network capacity and capabilities to address current network constraints.

        Value-Added Services.    The extreme competition faced by wireless service providers requires them to offer differentiated, value-added services including the ability to roam across regional, national and international boundaries without an interruption in service, access to high-speed data transmission and other features such as voicemail and caller ID. In order to address increasing competitive pressures, wireless service providers must use flexible systems that enable them to deploy numerous services in a timely and cost-efficient manner.

        As wireless service providers seek to achieve these objectives in an extremely competitive market, they will increasingly require communications equipment providers to develop wireless network solutions that enable the flexible, cost-effective delivery of value-added services and that are capable of being easily adapted to the 3G wireless standard.

Broadband Wireless Networks

        In this last year broadband wireless market has taken a dramatic turn, with consolidation of standards, a reduction in the number of players and sharpened criteria for selection by fewer service providers in this market space. There is rapid convergence towards 802.11 standards, continuing improvement in quality and cost reduction. Wi-fi technologies now allow a wireless service provider to connect point-to-point or point-to-multi-point for distances of 10 miles or more. OFDM improves non-line of sight connections. Maturity in standards allow suppliers to inter-operate across different vendors' networks. There is a wide adoption of 802.11b, and standardization using the Internet Protocol ("IP"), spanning from the lower unlicensed bands of 2.4, 5.8Mhz, up to the higher capacity 25Ghz frequency bands.

        Broadband wireless as an access service suffered a dramatic downturn due to the collapse of the ISP providers, and the glut of fiber and DSL competing for services to the end customers. Broadband wireless access remains a viable and economic solution for regions that have not been built out with fiber optics or provisioned with quality DSL.

        Broadband wireless, however, as a transport for high speed back haul transmission, remains attractive for many cellular operators and data service providers who use the higher performance broadband wireless (45Mbits to 155Mbits/OC3) products as an aggregation and transport vehicle for bundled traffic to a central gateway. interWAVE has focused its broadband product line on this market. Optimizing the technologies to deliver cost effective, high performance point to point 16 QUAM CX radio, with an all-outdoor ATM switch to support mesh networks that can be conveniently connected to provide a reliable wireless network capable of supporting redundancy and congestion control.

GSM Solutions

        Our systems offer a number of important advantages to GSM service providers, including:

Compact, Flexible and Modular

        Our WAVEXpress® products provide a comprehensive set of GSM network capabilities. We believe that we provide the only commercially available system that supports an entire GSM network within a single enclosure approximately the size of a personal computer tower. The patented WAVEXpress® system can serve as a base station, base station controller, switch or any combination of these functions depending on our system's hardware and software configuration. The WAVEXpress® product is modular, using only four hardware modules, which enable the system to be updated and enhanced by simply exchanging specific hardware modules and upgrading software. Our compact and modular system enables wireless service providers to implement wireless office networks, to fill in

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coverage blind spots, to increase capacity in heavy usage areas and to provide service to previously unserved areas.

Cost-Effective Network Deployment and Operation

        Our compact, flexible systems enable us to be a price leader, reducing both initial and incremental capital expenditures for network deployment by wireless service providers. The flexible nature of our products enables wireless service providers to rapidly add capacity to their networks. In addition, because there are only four main WAVEXpress® hardware modules, the result is reduced maintenance and training costs, and reduced in capital necessary to maintain spare parts in inventory. Furthermore, we have a patented switching technology that allows the network to determine whether a call should be directed to its destination by the local network or by a central office. This proprietary switching capability allows a wireless service provider to reduce its dependence on central office switching equipment and increase network efficiency, resulting in lower operating costs. It also helps to provide feature transparency between the local network and central office, by-passing support of unsupported features to the central office switch. This further reduces the capital cost of our solution.

Interoperability with Existing GSM Networks

        We maintain strict adherence to GSM standards to ensure that our systems are compatible with other communications equipment providers' products. We have proven our systems' interoperability in live networks with equipment from all major communications equipment providers, including Alcatel, Ericsson, Lucent, Nokia, Nortel Networks and Siemens. Our systems are also compatible with existing private telephone systems. Interoperability enables wireless service providers to upgrade their existing systems without having to replace their entire network, facilitating the introduction of new capabilities and services in a timely and cost-effective manner. We plan to maintain our systems' interoperability despite changes to software, equipment configuration, network design and upgrades to the various network standards.

Rapid Time-to-Market for New, Value-Added Services

        Service providers using our wireless network systems can achieve rapid time-to-market for new services, which they can offer to new and existing users. Our flexible design enables the system to be readily upgraded through simple hardware additions and software reconfigurations. These features allow service providers to decrease the implementation time required to offer new services to customers.

        Our WAVEView™ products also allow for the control of all functions and components of the network through a single management system. This enables service providers to customize and expand service offerings to users without deploying additional systems that require incremental training and testing. Our systems provide small, scalable and low-cost alternatives to expensive digital communications infrastructure equipment.

Broadband Solutions

        Our line of broadband wireless network systems include point-to-multipoint and point-to-point wireless products that connect end-users to the Internet and public and private communication networks. Our systems allow a service provider to offer high-speed network access to the end-user as a cost-effective alternative to wired services. These systems assure service providers quick time-to-market by permitting rapid installation of complete high-speed communication networks. In addition, we design our systems to be compliant with domestic and international standards.

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Rapid Installation

        Our systems are shipped off-the-shelf and are easy to install. Our license-exempt products do not require frequency coordination or licensing, eliminating many of the time-consuming processes required in planning, coordinating and installing traditional radio technology. License-exempt operation permits rapid installation to meet customer demand for broadband wireless access.

Scalability

        Our systems are scalable. As more users are added to a point to multipoint network, a central base station that may have initially been equipped with a single transmitter can be easily upgraded to accommodate up to ten transmitters.

Router-based Wireless Networks

        We use a router-based architecture for our WAVENET ACCESS wireless systems, versus many of our competitors who use bridge-based architectures. The advantages of routing systems include scalability, control and security. Unlike bridge-based systems where IP traffic is bridged to all network nodes, in a router-based system, Internet Protocol ("IP") traffic is routed to desired locations eliminating excess broadcast traffic. By reducing the excess broadcast traffic, our router-based systems greatly improve the bandwidth efficiency of our networks in comparison to systems that do not have internal router capability.

Remote Management

        Our standard network management applications include a simple network management protocol and a secure Web-based browser interface. These interfaces allow the system to be managed and administered remotely through the Internet.

Network Compatibility

        Our wireless systems provide built-in routing and support industry standard protocols that allow data to be transported at carrier-quality standards. Our systems address a broad range of applications in different markets.

Product Lines

        Our Products are split into two distinct product lines:

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GSM infrastructure. The WAVEXpress® product suite delivers a comprehensive set of wireless network capabilities, which are based on the GSM standard.



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Broadband wireless. The WAVENet product line provides a complete suite of broadband wireless access systems that delivers point-to-multipoint and point-to-point services.

GSM Infrastructure

        The switching products are delivered on the WAVEXpress® platform and the WAVELoop™ platform. Both platforms support the same base transceiver station ("BTS") products and are fully interoperable.

WAVEXpress®

        Our core WAVEXpress® product can house any combination of our switch, our base station controller and our base station in a single compact enclosure. The WAVEXpress® system is approximately the size of a personal computer tower and weighs less than 50 pounds. Our

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WAVEXpress product line represented 65%, 69% and 96% of our net revenues for fiscal years ending June 30, 2002, 2001 and 2000, respectively.

        WAVEXchange™.    The WAVEXchange™ is a family of switches. A low end, WAVEXchange-I is based on the WAVEXpress platform, with common hardware as the base station and the base station controller, supports up to 8,000 subscribers. The high end version, WAVEXchange-II, delivered in June 2002, is capable of supporting up to 200,000 subscribers, and is based on the WAVETransit platform hardware. The WAVEXchange software, implemented on either platform, is a wireless switch that routes calls, directs data packets, performs as a signaling gateway, and is designed to allow the network to process calls regionally, thereby reducing operating costs. The small size and configurability of the WAVEXchange™-I enables wireless service providers to deploy value-added services rapidly in a small town or village. The WAVEXchange™-I and II both can be integrated with existing private telephone networks and connected to a mobile switch over standard mobile message protocol interface, thus supporting roaming, hand-overs, and billing. The patented WAVEXchange™ is the only GSM switch on the market that can act either as a base station controller extension of a central switch or as a local switch, on a call-by-call basis. Recent addition of GPRS in the latest release of the switch software allows the WAVEXchange switches to provide functions as a mobile media gateway supplemented by our new GSN product that directs traffic on to the Internet.

        WAVEXpress/BSC.    The WAVEXpress/BSC is a compact base station controller that aggregates and manages the communications between the WAVEXpress/BTS and the central switching equipment or a local WAVEXchange switch. The wall-mountable WAVEXpress/BSC, one of the smallest GSM base station controllers on the market, connects to any main switching center supporting the GSM standard. The WAVEXpress BSC supports transcoder requirements for GPRS and can be configured onto the WAVEXchange platform or the BTS platform for the WAVEXpress family.

        WAVEXpress/BTS.    The WAVEXpress/BTS is a base transceiver station, which accommodates up to three radios providing up to 22 simultaneous communication channels, and six radios if used with the newly released single slot GPRS radio cards. Versions of the WAVEXpress/BTS are available in all GSM frequency bands: 900 Mhz and 1800 Mhz for Europe and Asia and 850MHz and 1900 Mhz for the Americas.

        UltraWAVE/BSC.    The UltraWAVE/BSC provides the same functionality as the WAVEXpress BSC except that it is in an extended back plane configuration, doubling the number of slots of WAVEXpress platform, where the TRX capacity has been increased to 80 TRXs in the initial release, with further capacity increases planned.

        UltraWAVE/BTS.    The UltraWAVE/BTS supports 6 TRXs, sectorized as 2 by 2 by 2 in its initial release, and will support up to 12 TRXs, using the new single slot radios, by the end of December 2002. The 12 TRXs can be sectorized into 4 by 4 by 4.

        WAVEXpress/BS Plus™.    The WAVEXpress/BS Plus™ combines the functions of a base station controller and base transceiver station in a single product. A WAVEXpress/BS Plus can support up to three external WAVEXpress/BTS base stations to serve up to 2,400 users. We began shipping the BS Plus product in March 2000.

        WAVEXpress/TurboMAX™.    The WAVEXpress/TurboMAX™ is a high power, 25 watts macro network product for the community market. TurboMAX offers wireless community network service providers a cost-effective, easy-to-install macro network solution with interWAVE's current WAVEXpress footprint. We began shipping the TurboMAX™ in October 2000. Designed as an integral part of interWAVE's suite of wireless network products, TurboMAX shares a common hardware platform with increased power and receives sensitivity that seamlessly interoperates with all other major

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wireless networks. TurboMAX uses 40-watt power amplifiers per transceiver with a unique, patented thermal technology developed initially for military applications.

        Network In A Box.    The Network In A Box (NIB) offers the ability to support a complete GSM network by integrating the switch (WAVEXchange), base station controller (BSC) and base transceiver station (BTS) in a single WAVEXpress unit. The NIB is designed for rapid deployment and provides easy network expansion as usage and coverage requirements increase. Ideally suited for wireless office networks, the NIB can support a stand-alone GSM network or it can integrate with most private telephone networks to provide wireless GSM interoperability with a corporate wireline network. We have a patented switching technology that allows a single NIB to act as a wireless extension to a private telephone network and as an extension to a public wireless network on a call-by-call basis. In remote and rural communities, the NIB enables rapid deployment of GSM capabilities. Since a high percentage of calls stay within the local network, transmission costs associated with dependence on a central switch are minimized. Coverage and capacity can be increased quickly and easily by adding WAVEXpress/BTS and WAVEXpress/BSC units to the network. The NIB can also serve as a cost-efficient GSM starter network allowing wireless service providers to match their infrastructure expenditures to usage growth. We began shipping the NIB in August 1998.

        WAVEGSN.    The WAVEGSN can be configured as either a combined GGSN/SGSN for small cost effective GPRS deployments or as standalone network elements for higher GPRS capacity. The primary function of the Serving GPRS Service Node (SGSN) is to handle mobility management for the attached GPRS mobile terminals. It also manages the interactions with the GSM circuit-switched network elements (HLR/VLR) and the Short Messaging infrastructure. The Gateway GPRS Support Node (GGSN) is primarily a router. In the packet data network, it is the entity that knows how to route packets to a GPRS mobile terminal. For packets sent by the mobile terminal, the GGSN is the 'point of entry' into the packet data network. A GPRS network may comprise a single GGSN but multiple SGSNs. We began trials of the WAVEGSN in January 2002.

        IPWAVE™.    The IPWAVE™ is a compact, fully functional single TRX BTS intended for in-building deployment in both public and enterprise GSM networks. It can be connected to a WAVEXpress BSC or NIB via an IP network. We began trials of the IPWAVE in June 2001.

        WAVELoop™.    The WAVELoop™ is a high capacity WLL switch designed specifically for the China markets. It supports GSM radio interfaces as well as the associated services in a GSM environment, as well as prepaid services, short messaging and a voice mail system.

        WAVETransit™.    The WAVETransit™ is a high capacity E1 transport based switch platform with standard interfaces. It is designed to provide a complete solution for interconnectivity between GSM mobile and landline networks. The WAVEtransit connects the networks of interWAVE WXC/BSC/BTS clusters with the PSTN. The WAVEtransit Network performs trunk routing, dialed number grooming, multi-protocol switching, voice prompting and prepaid service provisioning.

        WAVEXchange II.    The WAVEXchange II (WXC II) System is a High Capacity HLR/VLR/MSC platform, which supports up to 100,000 subscribers. The WXC II consists of a Central Switching Unit (MSC), with up to 256 E1 interfaces and a number real time operating system servers which provide the HLR, AuC, SMS, Pre-Paid and OMC functionality. The WXC II comes equipped with a Voice Prompt System (VPS) and built in Echo cancellation. The WXC II may be co-located with a WAVEXpress BSC and TurboMAX BTSs or may operate from a central site communicating with remote BSS elements over the standard A interface. The WXC II complies with the ETSI SS7, MAP, ISUP and CAMEL Phase II standards, which permits interoperability with the current WAVEXChange platform and other vendor's MSC, HLR, SMS and SCF products. The WXC II System provides a standard and cost effective platform for GSM macro network deployments and Wireless Local Loop (WLL) services.

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        WAVEView™.    The WAVEView™ is an operations and management control (OMC) system for wireless service network components. Our system architecture simplifies the process of deploying new network components, allowing the user to manage all aspects of wireless user profiles. The WAVEView also allows wireless service providers to monitor network faults in real-time and includes a comprehensive help function that guides users through management tasks. We began shipping WAVEView in May 1998.

Broadband Wireless

        We manufacture broadband wireless systems that provide both point-to-multipoint and point-to-point services. Our systems provide IP and clear channel mode transport via wireless broadband service for high-speed network access. These systems are designed as an alternative to copper-based DSL or cable- based broadband technologies and allow a service provider to rapidly install high-speed access throughout a service area. Our technology enables service providers to respond quickly to meet the demand for high-speed network access, and allows businesses to build high-performance wireless networks to supplement wired offerings from service providers.

WAVENET LINK™ CX

        The WAVENET LINK™ CX is a cost-effective product capable of transporting up to 50 Mbps over a distance of up to 10 miles. The radio is mounted outdoors, close to the antenna, to minimize transmission losses, and is connected to the user's local access network or in-building distribution system. The product can be configured for Ethernet transport at 45 Mb/s or as a traditional telco microwave link for DS3 (45 Mb/s) or E3 (34 Mb/s). We have engaged with a partner to distribute an indoor unit for the Link CX radio which will provide up to 28 T1 or 16 E1 tributaries per radio. This combined offering will be very competitive in the mobile telephony infrastructure market.

WAVENET LINK™ 4X

        The WAVENET LINK™ 4X provides a cost-effective solution for access requirements as well as cellular base station connectivity with capacities of up to 4 x 2.048 Mbps. This system features an embedded simple network management protocol. The indoor unit, or IDU, provides all user interfaces including 2.048 Mbps ports, simple network management protocol access and external alarm input.

StreamNet™ ATM Switching

        The Streamnet™ 1200 is a fully functioned ATM switch configured in an environmentally hardened enclosure. In conjunction with the CX radio it provides a cost effective solution for outdoor ATM switching services in the local loop markets. We believe that communication companies will adopt wireless solutions as a more cost-effective method than wired solutions to meet this demand since it allows them to deploy broadband Internet access services more rapidly than would be possible if they had to lease copper wire from the local telephone company. Streamnet 1200™ was first shipped in February 2002.

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NetManager

        The NetManager platform is being developed to support both the element and network management of all our ATM and link products on a scalable carrier class platform.

Product Summary

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Applications of Our Network Systems

GSM Applications

        Our network systems allow wireless service providers to expand capacity and coverage on a permanent or emergency basis, to operate wireless office networks and to provide service to remote and rural areas. The following case studies show how our network solutions have been implemented to create value for wireless service providers:

Community Networks

Broadband Applications

        Non-movable, or fixed, broadband wireless access technology can solve many of the problems imposed by wired networks. Broadband wireless technology enables rapid implementation of high-speed network access in a cost-effective manner relative to wired networks. A broadband wireless network is often the best option for high-speed communication in remote areas and in many developing countries due to the lack of an existing wired infrastructure. In these regions, wireless technologies provide clear

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advantages over wired networks, including lower cost, faster installation, greater flexibility and increased reliability. Broadband wireless technologies are classified as either point-to-point or point-to-multipoint.

Point-To-Point

        A point-to-point wireless system connects two locations, using two identical pieces of equipment. Each piece of equipment is first connected to an end-user's or service provider's network by a cable and a connector and then connected by an antenna cable to an antenna that is usually mounted on a rooftop or tower. The two antennas are then aimed at one another to create a wireless connection.

Point-To-Multipoint

        A point-to-multipoint wireless system connects multiple facilities within a relatively small geographic location to a central hub. Point-to-multipoint wireless technology is used to transport data traffic from one location to many locations, typically to interconnect a large number of facilities in a relatively small geographic area. Point-to-multipoint wireless technology overcomes the limitations of point-to-point technology by designating a single radio transceiver as the central base station. The base station uses a radio protocol to control and manage end-user devices so that data is transmitted and received among multiple locations with minimal interference.

Customers

        We have developed relationships with communications equipment providers, systems integrators and wireless service providers. The following table identifies our customers, the applications of our products and the intended end users of communications networks employing our products. For the fiscal year ended June 30, 2002, approximately 25% of our revenue was derived from sales to affiliates

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of Hutchison. The selected customers listed below each represented less than 10% of our revenues for the fiscal year ended June 30, 2002.

Sales and Marketing

        We market and sell our solutions around the world through our direct sales force and others utilizing a multi-tiered sales strategy which includes selling to wireless service providers, to communications equipment providers, and to systems integrators that integrate our systems with the products of other companies.

We currently have live GSM systems which are deployed in:

Australia, Benin, Central African Republic, China, Coco Islands, U.S. Naval Base Guantanamo Bay Cuba, Democratic Republic of Congo, France, Greece, Guam, Kenya, Kosovo, Mauritania, Micronesia, Paraguay, Phillipines, Somalia, Sri Lanka, Turkey, UAE, United Kingdom and the United States.

We also have trial systems that are deployed in:

Australia, China, France, Indonesia, Senegal, South Africa, Thailand and the United States.

We have live broadband networks in:

Argentina, Australia, Bangladesh, Barbados, Belize, Benin, Botswana, Brazil, Burkina Faso, Cameroon, Canada, Central African Republic, China, Chile, Colombia, Congo, Costa Rica, Curacao, Ecuador, El Salvador, France, Ghana, Greece, Guinea, Guyana, Honduras, Hong Kong, India, Indonesia, Ivory Coast, Jamaica, Korea, Lebanon, Malaysia, Mexico, Nepal, Nicaragua, Niger, Nigeria, Paraguay, Peru, Philippines, Poland, Puerto Rico, Romania, Russia, Saudi Arabia, South Africa, Sweden, Taiwan, Tanzania, Uganda, the United States, Uruguay and Venezuela.

        Information regarding segment information and geographic information for the last three fiscal years is provided in the consolidated financial statements for the fiscal years ended June 30, 2002, 2001 and 2000. See "Notes to consolidated financial statements, Note 17—Segment Information."

Communications Equipment Providers

        Eastern Communications Co., Ltd. ("Eastcom").    Eastcom is a publicly listed company on the Shanghai Stock Exchange and is one of the leading providers of telecommunications equipment for cellular networks and handsets throughout China. Originally started in the 1950s as a manufacturing facility of the then Ministry of Posts & Telecommunications, Eastcom has since incorporated under its current name and operates as an independent entity. interWAVE has an OEM Agreement with

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Eastcom with a value of up to $25 million for BSS extension equipment during the first year. We also have close discussions with Eastcom to set up a manufacturing program in China to support the Chinese market. As of June 30, 2002, Eastcom owns 10.32% of our fully diluted shares.

        Telos Technology Inc.    Telos is a Canadian switch developer and integrator supplying rural networks within the US and internationally. We have partnered with Telos in the deployment of networks worldwide.

Distributors and VARs

        interWAVE's broadband network products included the following channels: systems integrators and distributors, value added resellers, telephone operating companies and Internet and communication service providers. These include YDI in the US, Duxbury in Africa, KF Technologia and Digitel in Brazil, Coasin in Chile, Dateline in Russia, Keppel in Malaysia, and PT Alvarid Mass in Indonesia.

Direct Sales

        We established a direct sales presence in Hong Kong in late 1995 and in Paris in mid-1996. We have established a five-year cooperation agreement with Telstra, headquartered in Australia. Nortel discontinued distribution of our products in June 2002. We have a multi-year cooperation agreement with France Telecom, headquartered in Paris, where we assess the opportunities with France Telecom and determine suitability of products and technologies. Through wireless service providers, such as Hutchison Telecommunications (Hong Kong), a unit of Hutchison Whampoa, FSM Telecom, Safaricom, NationLink, Lanka Cellular Services Limited, and Comunicaciones Personales, S.A., we have deployed our network solutions in Hong Kong, Federated States of Micronesia, Kenya, Somalia, Sri Lanka and Paraguay, respectively.

        In fiscal 2002, Hutchinson, and affiliates, FSM Telecom and Safaricom comprised 25%, 8% and 5% of our revenues, respectively.

        Hutchison Telecommunications Group.    We began deploying our products in Hong Kong with Hutchison Telecommunications Group in 1997. In December 1999, we executed a contract with an affiliate of Hutchison to deploy our products in Sri Lanka. In June 2001, we executed a contract with Comunicaciones Personales, S.A., an affiliate of Hutchison Telecommunications Group, to deploy a nationwide GSM network in Paraguay. In addition, Holodeck Limited, an affiliate of Hutchison and a wholly-owned subsidiary of Hutchison Whampoa owns 2.6 million shares, or 4.46%, of our outstanding shares as of June 30, 2002.

        In connection with our contract with an affiliate of Hutchison to sell our products in Sri Lanka, we entered into an exclusivity agreement in which we agreed not to sell our WAVEXchange™ and WAVExpress® products to any party in Sri Lanka other than Hutchison's affiliate for a period of three years. This period will be extended two years if at the end of the three year period Hutchison's affiliate has ordered equipment in the aggregate value of $15 million.

Customer Support—Customer Advocacy/Engineering Services

        We complement our products with a worldwide service organization that provides product support, network and radio system design, turnkey installation, maintenance and field engineering. Our support organization provides pre-sales, installation and post-sales support to wireless service providers who have purchased systems directly from us. Our distributors are typically responsible for installation, maintenance and support services to their customers. We offer 24-hour telephone support 7 days a week to both service providers who have purchased systems directly from our distributors and us. We offer an ongoing maintenance program for our products, consisting of product enhancements, product updates and technical support. System operators may renew maintenance and support on an annual basis by paying a maintenance fee. We also provide extensive support to communication equipment

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providers and systems integrators through product training, 24-hour help-desk support and emergency problem resolution. In addition, we work closely with our customers' first-line support organizations to insure that they have the necessary skills and specific product knowledge to assist their customers with installation, management and other network support requirements.

Research and Development

        Our engineering development team resides in three locations. The main engineering organization is in Menlo Park, California, where hardware, firmware, and the core radio software and systems engineering are done. Over the last year, we reduced our engineering group in California and moved all of our switch software development to Shenzhen in P.R. China, where one-third of our engineering headcount is located. The management system software group and the documentation group reside in Tralee, Ireland.

        In the last fiscal year, the major products that were being developed or delivered were:

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GPRS for the GSM product line

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High capacity WAVEXchange switch supporting over 100,000 subscribers

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Supplementary network service software supporting Intelligent Network Pre-paid system, SMS and authentication center

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UltraWAVE product line supporting initially 6 radios, and can be upgraded to support 12 radios sectorized as four by four by four

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Outdoor base station system, weatherized to with stand -44 degrees Centigrade to 55 degrees Centigrade

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High speed point to point 45Mbit radios in the unlicensed band of 5.3Mhz and 5.8Mhz

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New cost reduced radios to be delivered fourth quarter calendar year 2002, that support high performance GPRS for 850Mhz, 900Mhz, 1800Mhz and 1900Mhz

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Continued cost reduction of high power base stations to achieve lower cost through re-engineering of power amplifiers with alternative suppliers

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Exploratory work in WCDMA

        We believe the company's success depends on its ability to continue to develop more cost effective products through technology innovation and introduce new capabilities and features for existing products. Our engineering development expenditures totaled approximately $19.8 million, $30.5 million and $18.1 million for fiscal years 2002, 2001 and 2000, respectively. In the interest of reducing the cost of research and development, we made a concerted effort to reduce research and development headcount in the U.S., and increased engineering staff in Shenzhen, P.R. China and Tralee, Ireland. Our Colorado Springs facility was closed in July 2002. As of June 30, 2002, engineering development staff consisted of 133 full-time or contracted employees.

Proprietary Rights

        Our success and ability to compete depends in part upon our proprietary technology. We rely on a combination of patent, copyright and trade secret laws as well as non-disclosure agreements to protect our proprietary technology. We currently hold 24 United States patents and have 28 United States patent applications pending. We have filed many of these patent applications in a number of other countries, so that we have a total of 43 issued and 75 patents pending worldwide. We cannot be certain that patents will be issued with respect to pending or future patent applications or that our patents will be upheld as valid or will be sufficient to prevent the development of competitive products. We seek to protect our intellectual property rights by limiting access to the distribution of our software, documentation and other proprietary information. In addition, we have entered into confidentiality

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agreements with our employees and certain customers, vendors and strategic partners. Despite these efforts, it may be possible for unauthorized third parties to copy certain portions of our products, to design around our patents, or to reverse- engineer or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop substantially equivalent or superseding proprietary technology, or that equivalent products will not be marketed in competition with our products, thereby substantially reducing the value of our proprietary rights. We are also subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others. In this regard, there can be no assurance that third parties will not assert infringement claims in the future with respect to our current or future products or that any such claims will not require us to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of such claims.

        No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. In addition, the laws of some countries do not protect our proprietary rights to the same extent as do the laws of the United States. Accordingly, we may not be able to protect our proprietary rights against unauthorized third party copying or use, which could significantly harm our business.

        In June 2001, we settled the case of interWAVE Communications International Ltd. v. JetCell Corp., which alleged JetCell's misappropriation of trade secrets and patent infringement, and entered into a limited patent cross license with Cisco Systems, Inc., which acquired