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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 28, 2002
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 000-30993

PROXIM CORPORATION

935 Stewart Drive
Sunnyvale, California 94085
(408) 731-2700
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

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  [   ]

The number of shares outstanding of the Company’s Class A common stock, par value $.01 per share, as of August 12, 2002 was 119,623,635. No shares of the Company’s Class B common stock, par value $.01 per share, are outstanding.

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TABLE OF CONTENTS

				Page
PART I		FINANCIAL INFORMATION
Item 1		Financial Statements
		Condensed Consolidated Balance Sheets at June 28, 2002 and December 31, 2001			3
		Condensed Consolidated Statements of Operations for the three months and six months ended June 28, 2002 and June 29, 2001			4
		Condensed Consolidated Statements of Cash Flows for the three months and six months ended June 28, 2002 and June 29, 2001			5
		Notes to Condensed Consolidated Financial Statements			6
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3		Quantitative and Qualitative Disclosures About Market Risk			40
PART II		OTHER INFORMATION
Item 1		Legal Proceedings			40
Item 4		Submission of Matters to a vote of Security Holders			41
Item 6		Exhibits and Reports on Form 8-K			42
		Signature			44

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROXIM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PROXIM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PROXIM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PROXIM CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — The Company

     Proxim Corporation (the “Company”) is the company created by the merger of Proxim, Inc. and Western Multiplex Corporation on March 26, 2002. The first six months of 2002 results include the financial results of the former Western Multiplex Corporation for the period from January 1, 2002 to June 28, 2002, and the results of the former Proxim, Inc. for the period from March 27, 2002 to June 28, 2002, in accordance with accounting principles generally accepted in the United States of America. The Company was founded in 1979 in Sunnyvale, California, as a vendor of radio components and related services. In 1992, the Company changed its strategy, and became a designer and manufacturer of broadband wireless systems and launched its Lynx broadband wireless systems. These point-to-point systems are primarily used by wireless operators to connect their base stations to other base stations and to existing wire line networks. In 1999, the Company introduced its Tsunami point-to-point broadband wireless systems, which primarily enable service providers, businesses and other enterprises to expand or establish private networks by bridging Internet traffic among multiple facilities. Based on the Company’s core technologies and the technology acquired through its purchase of WirelessHome Corporation (“WirelessHome”) in March 2001, the Company has developed point-to-multipoint systems designed to enable service providers, businesses and other enterprises to connect multiple facilities within a geographic area to a central hub. The Company began shipping its first generation of these products at the end of the fourth quarter of 2001. In March 2002, the Company merged with Proxim, Inc. located in Sunnyvale, California which designs, manufactures and markets high performance wireless local area networking, or LAN, and building-to-building network products based on radio frequency, or RF, technology.

Basis of Presentation

     The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of June 28, 2002, condensed consolidated statements of operations for the three and six months ended June 28, 2002 and June 29, 2001 and condensed consolidated statements of cash flows for the six months ended June 28, 2002 and June 29, 2001 are unaudited, but include all adjustments (consisting of normal recurring adjustments) which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

     The balance sheet at December 31, 2001 has been derived from audited financial statements. Certain information and footnote information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Principles of Consolidation

     The consolidated financial statements include the accounts of Proxim Corporation and all of its subsidiaries. The financial condition and results of operations for the three and six months ended June 28, 2002 and June 29, 2001 include the results of acquired subsidiaries from their effective dates. All significant intercompany transactions and balances are eliminated in consolidation.

Note 2 — Summary of Significant Accounting Policies

     The preparation of financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity, revenues, cost of revenue and expenses, charges and related disclosure of contingent assets and

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liabilities. On an on-going basis, the Company evaluates its estimates, including those related to customer programs and incentives, product returns, bad debts, inventories, investments, intangible assets, income taxes, financing operations, warranty obligations, excess component order cancellation costs, restructuring, long-term service contracts and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     The Company records estimated reductions to revenue for customer programs and incentive offerings including special pricing agreements, price protection, promotions, historical returns for sales of its wide area network (“WAN”) products, the inventory levels at distributors and other volume-based incentives. If market conditions were to decline, the Company may take actions to increase customer incentive offerings possibly resulting in an incremental reduction of revenue at the time the incentive is offered. Revenue generated from the LAN product line is deferred until shipments to end customers by the distributors.

     The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

     The Company provides for the estimated cost of product warranties at the time revenue is recognized. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company’s warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from the Company’s estimates, revisions to the estimated warranty liability would be required.

     The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumption about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

     The Company holds minority interest investments in companies having operations or technology in areas within its strategic focus, one of which is publicly traded and has highly volatile share prices. The Company records an investment impairment charge when it believes an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of an investee could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.

     The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would decrease income in the period such determination was made.

Note 3 — Business Combinations

Acquisition of nBand Communications, Inc.

     On April 18, 2002, the Company acquired nBand Communication, Inc. (“nBand”), a California corporation. nBand is a startup developer of advanced application specific integrated circuits (ASIC’s) designs that the Company intends to use in the development of next generation ASIC’s. The purchase price was $1.2 million and comprised of $550,000 in cash, 180,144 shares of Class A common stock valued at approximately $450,000 and transaction expenses of approximately $200,000. In the second quarter of 2002, the Company assigned the entire purchase price of $1.2 million to purchased in-process research and development (“IPR&D”) as the acquired technology had not reached technological feasibility.

Merger with Proxim, Inc.

     On March 26, 2002, the merger between Western Multiplex Corporation and Proxim Inc. was completed, resulting in Proxim Corporation as the combined company. The combined company provides broadband, or high speed, wireless access products to

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service providers, businesses and other enterprises as well as high performance wireless LAN products based on RF technology. Total consideration of $172.6 million for the acquisition comprised of:

	•		59,506,503 shares of Class A common stock valued at approximately $133.3 million;
	•		options and warrants having an assumed value of approximately $25.3 million; and
	•		transaction expenses of approximately $14.0 million.

     The total purchase price was allocated to the tangible and identifiable intangible assets, goodwill acquired and liabilities assumed on the basis of their relative fair values as follows (in thousands):

     The liabilities assumed consist principally of accounts payable, accrued compensation and benefits and other current liabilities.

     The core and developed technology acquired include 900MHz, RangeLAN, Harmony, 802.11a and Skyline products for the Enterprise/Commercial markets; Symphony HomeRF, HomeRF 2.0 and Netline products for the Home/SOHO markets; and Stratum and Stratum MP products for the building-to-building markets. These products have already achieved technological feasibility in the marketplace. The fair value assigned to the core technology and developed technology totaled $18.0 million and $12.0 million respectively, and is being amortized over the expected life of its cash flows.

     As of the valuation date, it was assumed that there was some value attributable to patents and patent applications of Proxim, Inc. The Company assumed that the patents and patent applications will continue to be used but will be phased out over time as new technology is developed. To value the patents and patent applications, we utilized the relief from royalty methodology. The relief from royalty methodology assumes that the value of the asset equals the amount a third party would pay to use the asset and capitalize on the related benefits of the asset. Therefore, a revenue stream for the asset is estimated, and then an estimated royalty rate is applied to the forecasted revenue to estimate the pre-tax income associated with the asset. The pre-tax income is then tax-affected to estimate the after-tax net income associated with the asset. Finally, the after tax net income is discounted to the present value using an appropriate rate of return that considers both the risk of the asset and the associated cash flow estimates. The resulting cash flows were then discounted back to their present value using a discount rate of 25%. The fair value assigned to the patents totaled $3.2 million and is being amortized over the expected life of its cash flows.

     IPR&D consisted of 802.11a and HomeRF 2.0 wireless networking products under development, which had not yet reached technological feasibility and had no alternative future use as of the date of acquisition. As of the valuation date, Proxim, Inc. was developing 802.11a wireless LAN adapter in PCI and Mini PCI form factors and a connectorized access point as well as a HomeRF 2.0 voice data module, voice data gateway and voice data gateway and answer machine. These products are under development and require additional software development including NT 4.0 and Macintosh drivers along with additional functional testing. The value of the IPR&D was determined by estimating the net cash flows from potential sales of the products resulting from completion of this project, reduced by the portion of net cash flows from the revenue attributable to core and developed technology. The resulting cash flows were then discounted back to their present value using a discount rate of 30%. The fair value assigned to the IPR&D totaled $4.5 million and was expensed at the time of the acquisition.

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     Core technology, developed technology and patents are being amortized on a straight-line basis over the following estimated periods of benefit:

Acquisition of WirelessHome

     On March 22, 2001, the Company acquired WirelessHome located in Long Beach, California in a cash and stock transaction. WirelessHome is a development stage company that designs and develops point-to-multipoint systems. The acquisition was accounted for as a purchase. The Company acquired WirelessHome for a total consideration of $28.2 million comprised of:

	•		1,649,324 shares of Class A common stock valued at $12.1 million;
	•		$10.5 million in cash;
	•		options and warrants having an assumed value of $0.7 million;
	•		a stock price protection contingent consideration valued at $2.5 million; and
	•		transaction expenses of $2.4 million.

     As part of the transaction the Company assumed $2.0 million of net liabilities, which consisted of $0.4 million of current assets, $0.9 million of other assets and $3.3 million of current liabilities. In March 2001, the Company issued an initial consideration of $23.0 million. As a result, the Company recorded the initial purchase price allocation as follows: $24.7 million to goodwill and $0.3 million to deferred compensation.

     The initial purchase price, as well as the initial allocation, were subject to adjustments upon WirelessHome meeting certain development milestones and other considerations as defined in the agreement to acquire WirelessHome.

     On October 7, 2001, WirelessHome met the development milestones in accordance with the acquisition agreement. This resulted in additional purchase consideration of $5.2 million. We then evaluated and recorded the final purchase price and stock compensation expense arising from the achievement of those milestones. The total purchase price allocation, which consisted of $28.2 million of purchase price and $2.0 million of net liabilities assumed, was as follows: $1.0 million to assembled workforce, $6.4 million to in-process research and development, $22.5 million to goodwill, and $0.3 million to deferred compensation. In addition, we recorded $2.2 million of stock compensation expense as a result of releasing and issuing 558,950 shares, which were previously held in escrow, to individuals who were directly involved in the completion of the development milestones.

     The purchase price allocation and intangible assets valuation were based on management’s estimates of the after-tax net cash flows and gave consideration to the following: (i) the employment of a fair market value premise excluding any consideration specific to the Company which could result in estimates of investment value for the subject assets; (ii) comprehensive due diligence concerning all potential intangible assets including trademarks, tradename, patents, copyrights, non-compete agreements, assembled work force, customer relationships and sales channel; and (iii) the value of existing technology was specifically addressed, with a view toward ensuring that the relative allocations to existing technology and in-process research and development were consistent with the relative contributions of each final product.

     In making its purchase price allocation, management considered present value calculations of income, an analysis of project accomplishments and remaining outstanding items and an assessment of overall contributions, as well as project risks. The value assigned to purchased in-process technology was determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting net cash flows from the projects, and discounting the net cash flows to their present value. The revenue projection used to value the in-process research and development was based on estimates of relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by the Company and its competitors. The resulting net cash flows from such projects are based on management’s estimates of cost of revenue, operating expenses, and income taxes from such projects.

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Acquisition of Ubiquity Communication, Inc.

     On March 24, 2000, we acquired Ubiquity Communication, Inc. (“Ubiquity”), located in Petaluma, California. Through the acquisition, we acquired technology for use in the development of our point-to-multipoint systems. At the time of the acquisition, Ubiquity had seven employees, including six engineers. In connection with the acquisition, we issued 692,772 shares of our Class A common stock to its former owners and reserved 137,727 shares of our Class A common stock for issuance upon the exercise of the Ubiquity options we assumed. The value of the consideration paid for the acquisition of Ubiquity was $6.4 million. We accounted for the transaction using the purchase method of accounting. In March 2001, the Ubiquity operations were closed due to the acquisition of WirelessHome.

Pro Forma Financial Information

     The following table represents unaudited pro forma financial information for the three and six months ended June 28, 2002 and June 29, 2001 had Proxim Corporation, Proxim, Inc., WirelessHome and nBand been combined as of January 1, 2001. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have resulted had Proxim Corporation, Proxim, Inc. and WirelessHome been a combined company during the specified periods. The pro forma results include the effects of the amortization of identifiable intangible assets and goodwill and adjustments to the income tax provision or benefits. The pro forma combined results exclude the $4.5 million, $6.4 million and $1.2 million charges for acquired in-process technology from Proxim, Inc., WirelessHome and nBand, acquisitions, respectively (in thousands except per share amounts).

Goodwill and Other Intangible Assets

     In July 2001, the Financial Accounting Standards Board, or FASB, issued, Statement of Financial Accounting Standards, or SFAS, No.’s 141 and 142, “Business Combinations” and “Goodwill and Other Intangibles”, respectively. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, effective January 1, 2002, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Additionally, an acquired intangible asset should be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the acquirer’s intent to do so. The Company adopted these new statements to account for the merger with Proxim, Inc and the acquisition of nBand.

     Goodwill represents the excess of cost over the fair market value of net assets acquired. Goodwill pushed down from the 1995 acquisition of the Company by GTI totals $22.0 million. Prior to December 31, 2001 this goodwill was amortized on a straight-line basis over its estimated useful life of 30 years, or $0.7 million per year. As a result of the Company’s adoption of SFAS 142, as of January 1, 2002, the Company no longer amortizes goodwill.

     Goodwill and other intangible assets related to the acquisition of Ubiquity totaled $6.8 million. In March 2001, the Company recorded an impairment of the Ubiquity goodwill and other intangible assets of $4.3 million as a result of closing the Ubiquity operations. The amount of the charge equals the unamortized amount of these intangible assets as of the date of closure of the Ubiquity operations as no future benefit is anticipated, since Ubiquity was replaced by WirelessHome as the developer of point-to-multipoint systems. The Ubiquity intangible asset of $229,000 is being amortized on a straight-line basis over its estimated useful life of three years, or $76,000, per year.

     Goodwill related to the acquisition of WirelessHome totaled $24.7 million. Prior to December 31, 2001 this goodwill was amortized on a straight-line basis over its estimated useful life of 5 years. As a result of the Company’s adoption of SFAS 142, as of January 1, 2002, the Company no longer amortizes goodwill. This goodwill was subject to subsequent adjustments upon WirelessHome meeting certain development milestones and other considerations. After WirelessHome met those development milestones, the goodwill was adjusted to $22.5 million in the fourth quarter of 2001.

     Goodwill related to the merger with Proxim, Inc. totaled $77.2 million.

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     Core technology, developed technology and patents related to the merger with Proxim, Inc. totaled $18.0 million, $12.0 million and $3.2 million respectively, and are being amortized on a straight-line basis over an estimated useful life of 5 years, 3 years and 5 years, respectively.

     The Company assesses long-lived assets for impairment under SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.” Under those rules, the Company reviews long-lived assets and certain identifiable intangibles to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates any possible impairment of long-lived assets using estimates of undiscounted future cash flows. If an impairment loss is to be recognized, it is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Management evaluates the fair value of its long-lived assets and intangibles using primarily the estimated discounted future cash flows method. Management uses other alternative valuation techniques whenever the estimated discounted future cash flows method is not applicable.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Asset.” SFAS No. 144 clarifies and further defines the provisions of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” SFAS No. 144 does not apply to goodwill and other intangible assets that are not amortized. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 in the year ending December 31, 2002. The effect of adopting this statement did not have a material effect on the Company’s condensed consolidated financial statements.

     Goodwill and other intangible assets, net, consist of the following (in thousands):

Purchased In-Process Research and Development

     Purchased in-process research and development consist primarily of acquired technology that has not reached technological feasibility.

     The amount expensed to purchased in-process research and development in the second quarter of 2002 related to technology for next generation ASICs acquired in the nBand acquisition. The amount expensed to purchased in-process research and development in the first quarter of 2002 related to 802.11a and HomeRF 2.0 wireless networking products acquired in relations to the Proxim, Inc. merger.

     The following table summarizes the key assumptions underlying the valuation for the Company’s purchase acquisition completed in the six months ended June 28, 2002 and June 29, 2001 (in thousands):

     The Company does not expect to achieve a material amount of expense reductions or synergies as a result of integrating the acquired in-process technology. Therefore, the valuation assumptions do not include any anticipated synergies or cost saving

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associated with the transaction. The Company expects that products incorporating the acquired technology will be completed and begin to generate cash flows between six to nine months after integration. Actual results have been consistent in all material respects, with its assumptions at the time of acquisitions.

     Development of this technology remains a significant risk due to the remaining effort to achieve technological feasibility, rapidly changing customer markets, uncertain standards for new products, and significant competitive threats. The nature of the efforts to develop the acquired technology into commercially viable products consists principally of developing a new operating system, developing a new processor and interface, planning and testing activities necessary to determine that the product can meet market expectations, including functionality and technical requirements. Failure to bring these products to market in a timely manner could result in a loss of market share, or a lost opportunity to capitalize on emerging markets, and could have a material adverse impact on the value of assets acquired.

Note 4 — Balance Sheet Components

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Note 5 — Revenue Information and Concentration of Credit Risks:

     The Company’s products are grouped into two product lines: Wide Area Network, or WAN, product line, and; Local Area Network, or LAN, product line. The WAN product line includes point-to-point Lynx, Tsunami and Stratum products and point-to-multipoint Tsunami and Stratum products. The LAN product line includes 900 MHz, RangeLAN, Harmony, 802.11b, 802.11a and Skyline products for the Enterprise/Commercial markets; and Symphony HomeRF and HomeRF 2.0 products and Netline products for the Home/SOHO markets. Prior to the merger the Company did not have a LAN product line. Historical LAN revenue prior to March 26, 2002 of the former Proxim, Inc. are not reported in the table below. Revenue information by product line is as follows (in thousands):

     The Company sells its products worldwide through a direct sales force, independent distributors, and value-added resellers. It currently operates in two geographic regions: North America and International. Revenue outside of the United States are primarily export sales denominated in United States dollars. Disaggregated financial information regarding the Company’s revenue by geographic region is as follows (in thousands):

     One customer accounted for 29.0% of total revenue for the first six months of 2002, and three customers accounted for 27.9%, 12.7% and 10.2% of total revenue in the first six months of 2001.

Note 6 — Restructuring Charges

     The Company accounts for restructuring charges under the provisions of Emerging Issues Task Force (“EITF”) No. 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” and Staff Accounting Bulletin (“SAB”) No. 100 regarding the accounting for and disclosure of certain expenses commonly reported in connection with exit activities and business combinations.

     During 2001, the Company recorded $1.8 million of restructuring charges related to the closure of its former Ubiquity operations and employee severance. The charges include $1.6 million of cash provisions, which include severance of $1.4 million for 26 employees and $0.2 million for future lease commitments and exit costs related to the Petaluma office facility. The charge also includes $0.2 million of non-cash provisions primarily related to fixed assets and other assets that will no longer be used at the facility.

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     As a result of the merger with Proxim, Inc. during the three months ended June 28, 2002, the Company recorded $3.6 million of restructuring charges related to closure of certain facilities and severance pay. The charges include $3.3 million of cash provisions, which include severance of $2.4 million for 56 employees and $0.9 million for future lease commitments and exit costs related to the closure of two facilities. The charge also includes $245,000 related to fixed assets that will no longer be used at the facilities. For the six months ended June 28, 2002, the Company recorded $51.6 million restructuring charges, including a $48.0 million restructuring charge in the first quarter of 2002, related to closure of certain facilities, discontinued product lines and severance pay. The charges include $41.5 million of cash provisions, which include severance of $3.8 million for 61 employees, $32.7 million for future lease commitments and exit costs related to the closure of four facilities and $5.0 million related to purchase order commitments. The charge also includes $10.1 million of non-cash provisions of which $7.7 million relates to an additional reserve for excess and obsolete inventory on hand and $2.4 million relates to fixed assets that will no longer be used at the facilities.

     Included in the restructuring charge during the six months ended June 28, 2002 was an increase in the reserve for excess and obsolete inventory of $7.7 million and purchase commitments of $5.0 million. Inventory purchases and commitments are based upon future sales forecast. To mitigate the component supply constraints that have existed in the past, the Company built inventory levels for certain components with long lead times and entered into longer-term commitments for certain components. The excess inventory charges were due to the following factors:

	•		A sudden and significant decrease in demand for certain Lynx and Tsunami license-exempt point-to-point products;
	•		Notification from customers that they would not be ordering as much as they had previously indicated;
	•		Management’s strategy to discontinue the Lynx and Tsunami point-to-point licensed products in order to concentrate on the license-exempt products; and
	•		Management’s strategy to discontinue certain Lynx and Tsunami License-exempt products in order to concentrate on selling next generation Lynx and Tsunami License-exempt products.

     Due to these factors inventory levels exceeded the Company’s requirements based on current 12-month sales forecasts. The additional excess and obsolete inventory charge was calculated based on the inventory levels in excess of 12-month demand for each specific product family. The Company does not currently anticipate that the excess inventory subject to this reserve will be used at a later date based on our current 12-month demand forecast. The Company uses a 12-month demand forecast because the wireless communications industry is characterized by rapid technological changes such that if the Company has not sold a product after a 12-month period it is unlikely that the product will be sold. The following is a summary of the movements in the reserve for excess and obsolete inventory during the period ended June 28, 2002:

     The following table summarizes the restructuring activity in 2001 and the first six months of 2002 (in thousands):

Note 7 — Income Taxes

     The income tax provision for the six months ended June 28, 2002 is primarily due to establishing a valuation allowance to offset deferred tax assets brought forward from December 31, 2001. As a result of the losses incurred, there is significant uncertainty

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