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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2004

or

For the transition period from              to            .

Commission File Number (000-25865)

Copper Mountain Networks, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(Registrant’s Telephone Number, Including Area Code) (858) 410-7100

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

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

Common Stock, $.001 par value

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.  x    Yes  ¨    No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  x    Yes  ¨    No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2004 was approximately $86,536,378 (based on the closing price for shares of the registrant’s common stock as reported by the Nasdaq National Market for the last trading day prior to that date). Shares of common stock held by each officer, director and holder of 20% or more of the outstanding common stock have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the registrant’s Common Stock, $.001 par value, as of January 31, 2005 was 7,863,751.

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COPPER MOUNTAIN NETWORKS, INC.

FORM 10-K

For the Year Ended December 31, 2004

INDEX

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PART I

Item 1.    Business

Forward Looking Statements

This document contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.

Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the caption “Risk Factors” included herein.

Overview

We were founded in 1996 as a provider of high-speed digital subscriber line, or DSL, based communications products. We have developed and sold a broad set of products to enable efficient and scalable deployment of advanced voice, video, and data services over existing network infrastructure. In January 2005 we announced that, after an extensive evaluation of strategic alternatives, we had initiated actions to lay off most of our remaining employees by March 22, 2005, retaining a limited team of employees to provide customer support and handle matters related to the ongoing exploration of strategic alternatives.

On February 11, 2005 we announced that we had signed a definitive merger agreement with Tut Systems, Inc. of Lake Oswego, OR. Under this agreement, Tut Systems will acquire all of our outstanding shares of common stock in a stock-for-stock transaction valued at approximately $10.0 million. Upon closing, Tut Systems will issue approximately 2.5 million shares of its common stock to our stockholders. Subject to approval of the transaction by the stockholders of Copper Mountain and to other customary closing conditions, the transaction is expected to close in the second quarter of 2005.

We expect that our business activities in the future will be severely limited as we conserve our resources and prepare for the consummation of the merger with Tut Systems. We cannot assure you that the merger with Tut Systems or any other transaction will be approved and consummated. If the merger with Tut Systems is not consummated, and we are unable to secure an alternative sale of our business, we will most likely cease our business operations entirely and pursue a liquidation, which may be effected through a bankruptcy filing.

We make available free of charge on or through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. Our Internet address is http://www.coppermountain.com. The information contained in, or that can be accessed through, our website is not part of this Annual Report on Form 10-K.

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Industry Background

DSL technology was initially developed in the early 1990s as a means to deliver video signals over the existing copper telephone wire infrastructure. While the technology worked, the economics of DSL service deployment were not attractive, and thus little deployment was funded.

In the mid-1990s, the wide spread adoption and growth of the Internet and the passage of the Telecommunications Act of 1996 increased the adoption of DSL technology, which offered higher speed access to the Internet for consumers and businesses, at lower cost than other access technology alternatives. As a result, in the late 1990s many companies began to build extensive networks using DSL technologies. Beginning in late 2000, however, many of these companies found it difficult to obtain capital to continue building their networks, resulting in a wave of bankruptcies and consolidations. The few companies that have remained have generally reduced their capital expenditures for networking equipment and focused on achieving profitability for their existing networks.

Our Products

We have developed a range of intelligent broadband access products to enable efficient and scalable deployment of advanced voice, video and data services over existing network infrastructure while reducing both capital and operational costs. Our three principal products are:

All of our products feature high degrees of network and service intelligence, to enhance network scalability and to enable new advanced services to be efficiently delivered over broadband access networks.

Currently, our revenue is generated primarily from sales of and service on our CopperEdge 200 DSL concentrators and the related wide area network modules and line modules. Historically, sales of and service on our CopperEdge 200 DSL concentrators and the related wide area network modules and line modules accounted for 2%, 6% and 17% of our total revenues for the fiscal years ended December 31, 2002, 2003 and 2004. Additionally, we license the CopperView software, although revenues from this product have not been material. While we have generated some revenue from sales of our VantEdge product, we do not expect to generate material revenues from the sale of the VantEdge product line in the future.

VantEdge Access BRAS

We designed our VantEdge product to play an important role in the evolution of the DSL access networks of large, facilities-based service providers. We intend for the VantEdge Access BRAS to be deployed in major central offices, where broadband services fan-out to hundreds or thousands of subscribers over individual subscriber circuits, and where subscriber traffic can first be effectively aggregated, managed and concentrated before traveling over inter-office trunks further into the service provider’s network. By using the VantEdge product to aggregate traffic from existing DSL access multiplexers, a service provider should be able to leverage its existing access network investment and much more cost-effectively scale its network and add new advanced services immediately and in the future.

The VantEdge’s multi-layer service intelligence enables it to act upon subscriber traffic at multiple network layers: IP, PPP, ATM, DSL. The VantEdge also performs multiple types of IP and PPP layer aggregation of

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subscriber traffic, so that aggregated “service tunnels” can be sent out of the central office and further into the service provider’s network. This can dramatically simplify the process of provisioning subscriber services, extend the useful life of existing ATM switches, and reduce the service provider’s overall capital expenditures by eliminating the need for dedicated subscriber aggregation equipment further back in the network. The VantEdge will also perform multi-layer traffic management on all of a subscriber’s services simultaneously, so that higher priority services, whether they be IP or non-IP services, receive preference over lower-priority services. With its sophisticated subscriber traffic management features and its support for features needed by new advanced IP and non-IP services, the VantEdge is designed to cost-effectively enable service providers to offer more sophisticated data, switched voice, and streaming audio/video services over their broadband access networks.

The VantEdge builds upon our years of experience in building intelligent, carrier-class networking equipment as well as the intellectual property base we have built up over time. Much of the VantEdge’s software base was based on the feature-rich software of the CopperEdge product family.

CopperEdge 200 DSL Concentrators

The CopperEdge 200 DSL concentrator, or CE 200, connects up to 192 subscribers and provides these subscribers with a variety of services, including Internet access, VPN access, Frame Relay, ATM cell relay, voice over DSL, and voice over IP. The CE200 is a carrier-class platform designed specifically for telephone company central office environments, and meets or exceeds industry standards and applicable regulatory requirements. The CE200 can also be deployed within multi-tenant buildings. The CE200 consists of a modular chassis containing power supplies, control system, wide area network interface modules and subscriber line cards.

CopperView Network Management Tools

The CopperView suite of network management tools enables a service provider to effectively manage the intelligent edge of its broadband access network. CopperView directly communicates with and manages the VantEdge and CopperEdge product lines as well as a wide range of CPE devices. CopperView also contains interfaces to allow the service provider’s other network management and operations support systems to control and manage all of our products in the network, thereby enabling end-to-end service provisioning and management of the entire broadband access network. CopperView has been successfully integrated with multiple network software systems used by various service providers. CopperView has also managed networks consisting of thousands of CopperEdge DSL Concentrators, and hundreds of thousands of individual subscriber devices. The CopperView suite consists of multiple components:

Customers

In 2004, sales to our three largest customers, Versatel, Florida Digital, and MPower, accounted for approximately 18%, 15%, and 12%, respectively, of our revenue. While the level of sales to any specific customer is anticipated to vary from period to period, we expect that we will continue to have significant customer concentration for the foreseeable future. Following the announcement in January 2005 of the significant reduction in the number of our employees, all members of our sales team have resigned or been terminated. As a result, we expect our future revenue, if any, to decline below historic levels and we do not expect to gain any significant new customers.

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Customer Service and Support

Following the reduction in the number of our employees that we announced in January, we have retained a small number of employees to provide continuing service and support to our existing customers. The majority of our service and support activities are related to installation support and network configuration issues. These services are provided by telephone and directly at customer installations with resources from our customer support group currently based in San Diego, California. To date, our revenues from on-site installation and technical assistance have not been significant.

We provide technical support for our hardware products, which generally have a standard warranty of 12 months, both directly and through our selected service subcontractors. We also have a variety of post-warranty hardware, software maintenance and support programs.

Research and Development

During the pendency of the acquisition by Tut Systems, we have maintained a limited number of engineers and related resources to continue research and development activities related to our products and those of Tut Systems. If the merger with Tut Systems is not completed, we anticipate that we will eliminate our research and development activities entirely as we pursue a liquidation of our business.

Competition

The telecommunications equipment industry is highly competitive. We compete directly with Cisco Systems, Lucent Technologies, Alcatel S.A., Juniper Networks, and Redback Networks, among others.

The principal competitive factors in our market include:

Manufacturing

Our manufacturing operations consist primarily of supporting materials planning and procurement, final assembly, testing and quality control. We use several independent suppliers to provide certain printed circuit boards, chassis and subassemblies. We subcontract substantially all of our manufacturing to one company, Plexus Corporation, located in Nampa, Idaho.

Our manufacturing process enables us to configure our products to meet a wide variety of individual customer requirements. We have achieved ISO 9001 registration for quality assurance in design, sale, production, installation and service.

We use a combination of standard parts and components, which are generally available from more than one vendor, and three key components that are purchased from sole or single source vendors for which alternative sources are not currently available: two semiconductor chips and a system control module. If supply of these key

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components should cease, we would no longer be able to sell or service our products. While we work closely with some well-established vendors, we have no supply commitments from our vendors and we generally purchase components on a purchase order basis, as opposed to entering into long term procurement agreements with vendors. To date, we have generally been able to obtain adequate supplies in a timely manner from vendors or, when necessary, to meet production needs from alternative vendors. We believe that, in most cases, alternative supplies of standard parts and components can be identified if current vendors are unable to fulfill our needs.

Intellectual Property

We rely on a combination of copyright, trademark, trade secret and other intellectual property law, nondisclosure agreements and other protective measures to protect our proprietary rights. We also utilize unpatented proprietary know-how and trade secrets and employ various methods to protect our trade secrets and know-how. Although we employ a variety of intellectual property in the development and manufacturing of our products, we believe that none of such intellectual property is individually critical to our current operations. Taken as a whole, we believe our intellectual property rights are significant and that the loss of all or a substantial portion of such rights could have a material adverse effect on our results of operations. There can be no assurance that our intellectual property protection measures will be sufficient to prevent misappropriation of our technology. In addition, the laws of many foreign countries do not protect our intellectual properties to the same extent as the laws of the United States.

Sales and Marketing and Research and Development

Following the reduction in the number of our employees that we announced in January 2005, we no longer maintain active sales and marketing functions, and we expect to substantially reduce or eliminate our research and development function in the near future. Since December 31, 2004 all members of our sales team have resigned or been terminated.

Employees

As of December 31, 2004 we employed 94 employees, including 20 in sales, marketing and customer support, 6 in manufacturing, 57 in engineering, and 11 in finance, human resources, information systems and administration, and three of these employees were located outside of the United States. We currently have 62 employees, all of whom are located in the United States. If the merger with Tut Systems is not consummated, we will complete the reduction in the number of our employees that we announced in January 2005 and would expect to have fewer than ten employees remaining. None of our employees is represented by collective bargaining agreements, and management considers relations with employees to be good.

Risk Factors

You should carefully consider the following risk factors and the other information included before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you may lose part or all of your investment.

If the merger with Tut Systems is not completed, it is likely that we will file for or be forced into bankruptcy by our creditors and no assets may be available for distribution to our stockholders.

In our Quarterly Report on Form 10-Q for the third quarter of 2004 we announced that we believed that we would have sufficient funds to continue our operations through the second quarter of 2005. As a result of the reduction in the number of our employees and corresponding curtailing of our business operations we announced in January 2005, we currently believe that we have sufficient cash and cash equivalents to fund our limited remaining operations for at least the next 6 months.

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If the merger with Tut Systems is not completed in that time or at all, we expect that we will have to cease our operations and liquidate our business. In that event, we believe that it is likely that we will file for or be forced to resort to bankruptcy protection. If we were to file for bankruptcy protection, it is extremely unlikely that we would be able to pay, or provide for the payment of, all of our liabilities and obligations, and, therefore, there would be no assets available for distribution to our stockholders. The precise nature, amount and timing of any distribution to our stockholders would depend on and could be delayed by, among other things, sales of our non-cash assets and claim settlements with creditors for direct and contingent liabilities and would take up to three years to complete.

Even if our stockholders approve the merger, the merger may not be completed and it is likely that we could be required to file for or be forced to resort to bankruptcy protection.

The completion of the merger is subject to numerous conditions. Even if stockholders holding a majority of the outstanding shares of our common stock vote to approve the merger, we cannot guarantee that the merger will be completed. If it is not completed, we would likely not be able to sell our assets or business to another buyer on terms as favorable as those provided in the merger agreement, or at all, which would mean that it is likely that we could be required to file for or be forced to resort to bankruptcy protection.

Failure to complete the merger could cause our stock price to decline.

If the merger with Tut Systems is not completed, our stock price may decline due to any or all of the following potential consequences:

In addition, if the merger is not completed, our stock price may decline to the extent that the current market price of our common stock reflects a market assumption that the merger will be completed.

We believe that the price of our common stock is based in large part on the price of Tut Systems common stock; the price of Tut Systems common stock may be affected by factors different from those affecting the price of our common stock.

If the merger with Tut Systems is completed, the holders of our common stock will become holders of Tut Systems common stock. In addition, prior to the completion of the merger and unless the merger agreement with Tut Systems is terminated, we believe that the price of our common stock will be determined in part by the expectation that the merger will be completed and that our stockholders will become stockholders of Tut Systems and that the price of our common stock will be affected by the price of Tut Systems common stock.

Tut Systems’ current operations differ somewhat from our operations, and Tut Systems’ results of operations and the price of Tut Systems common stock may be affected by factors different from those that affect our results of operations and the price of our common stock before the merger. Such factors include Tut Systems’ actual results of operations and investor expectations in regard to those results of operations.

If the merger with Tut Systems is not completed, we expect that our stock will be delisted from the Nasdaq National Market.

If the merger with Tut Systems is not completed, we expect that we will be unable to satisfy the requirements for continued listing of our common stock on the Nasdaq National Market. The rules of the Nasdaq

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National Market require that companies listed on the Nasdaq National Market continue to have an operating business. If the merger with Tut Systems is not completed, we believe that it is likely that we will cease our business operations and file for or be forced to resort to bankruptcy protection. If Nasdaq delists our common stock from the Nasdaq National Market, the ability of our stockholders to buy and sell shares will be materially impaired, and the trading price of our common stock may be materially impaired.

Our directors and officers have interests in the merger besides those of a stockholder.

Our directors and officers have various interests in the merger besides being our stockholders. These interests include the agreement by Tut Systems to continue to indemnify and insure our directors and officers for various claims. In addition, three of our executive officers have entered into agreements providing for bonuses to be paid in connection with the consummation of the merger with Tut Systems (see “Retention Agreements” in Item 11 of this Annual Report).

Our existing customers have delayed and/or stopped placing orders for our products and may continue to do so indefinitely.

If the merger with Tut Systems is not completed, the amount of funds we will have available for payment of our liabilities and obligations and for distribution to our stockholders will be dependant in part upon whether our existing customers continue to place orders for our products and services. Our existing customers have delayed and/or stopped placing orders and in the future may cancel, delay or stop placing orders for many reasons, including:

As a result of the combination of these reasons, we expect that future sales, if any, to our existing customers will be substantially less than historical sales.

We may not succeed in reducing our expenses to the extent we expect or deem necessary

If the merger with Tut Systems is not completed, the amount of funds we will have available for payment of our liabilities and obligations and for distribution to our stockholders will be dependant in part upon the extent to which we are able to reduce our expenses. The reduction in our workforce, announced in January 2005, and corresponding scaling back of our operations will take several weeks to complete, and may not result in the savings that we expect. Moreover, many of our remaining expenses are fixed and cannot easily be reduced. We may also become subject to unplanned expense, whether as a result of the resolution of existing litigation or new claims related to intellectual property or defects in our products. Any of these unexpected expenses could further reduce any assets availble to our creditors and stockholders in the event that the merger with Tut Systems is not completed.

We have been named as a defendant in securities class action litigation that could result in substantial costs and divert management’s attention and resources

In December 2001, we and certain of our officers and directors were named as defendants in a class action shareholder complaint filed in the United States District Court for the Southern District of New York, now

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captioned In re Copper Mountain Networks, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-10943. In the amended complaint, the plaintiffs allege that we, certain of our officers and directors and the underwriters of our initial public offering (“IPO”) violated section 11 of the Securities Act of 1933 based on allegations that our IPO registration statement and prospectus failed to disclose material facts regarding the compensation to be received by, and the stock allocation practices of, the IPO underwriters. The amended complaint also contains a claim for violation of section 10(b) of the Securities Exchange Act of 1934 based on allegations that this omission constituted deceit on investors. The plaintiffs seek unspecified monetary damages and other relief. Similar complaints, collectively referred to here as the “IPO Lawsuits,” were filed in the same court against hundreds of other public companies (“Issuers”) who conducted IPOs between 1998 and 2000.

On August 8, 2001, the IPO Lawsuits were consolidated for pretrial purposes before United States Judge Shira Scheindlin of the Southern District of New York. On July 15, 2002, the we joined in a global motion to dismiss the IPO Lawsuits filed by all of the Issuers (among others). On October 9, 2002, the Court entered an order dismissing our named officers and directors from the IPO Lawsuits without prejudice, pursuant to an agreement tolling the statute of limitations with respect to these officers and directors until September 30, 2003. On February 19, 2003, the Court issued a decision denying the motion to dismiss the Section 11 claims against us and almost all of the Issuers, and denying the motion to dismiss the Section 10(b) claims against us and many of the other issuers.

In June 2003, the Issuers reached a tentative settlement agreement with the plaintiffs that would, among other things, result in the dismissal with prejudice of all claims against the Issuers and their officers and directors in the IPO Lawsuits. In addition, the tentative settlement guarantees that, in the event that the Plaintiffs recover less than $1 billion in settlement or judgment against the Underwriter defendants in the IPO Lawsuits, the Plaintiffs will be entitled to recover the difference between the actual recovery and $1 billion from the insurers for the Issuers. In September 2003, in connection with the tentative settlement, those officers and directors who had entered tolling agreements (described above) agreed to extend those agreements so that they would not expire prior to any settlement being finalized. In June 2004, the Company executed a final settlement agreement with the plaintiffs. On February 15, 2005, the Court issued a decision certifying a class action for settlement purposes, and granting preliminary approval of the settlement subject to modification of certain bar orders contemplated by the settlement. In addition, the settlement is still subject to statutory notice requirements as well as final judicial approval.

No assurances can be made that we will be successful in settling or defending against these claims. If we are not successful in settling or defending against these claims, we could be forced to make significant payments to our stockholders and their lawyers, and such payments could have a material adverse effect on our business, financial condition and results of operations if not covered by our insurance carrier. Even if such claims are not successful, the litigation could result in substantial costs and divert management’s attention and resources, which could adversely affect our business, results of operations and financial position.

Claims against us alleging our infringement of a third party’s intellectual property could result in significant expense to us and result in our loss of significant rights.

The telecommunications industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement. From time to time, third parties may assert patent, copyright, trademark and other intellectual property rights to technologies that are important to our business. Any claims asserting that our products infringe or may infringe proprietary rights of third parties, if determined adversely to us, could have a material adverse effect on our business, financial condition or results of operations. In addition, in our agreements, we agree to indemnify our customers for any expenses or liabilities resulting from claimed infringements of patents, trademarks or copyrights of third parties. As the number of entrants in our market increases and the functionality of our products is enhanced and overlaps with the products of other companies, we may become subject to claims of infringement or misappropriation of the intellectual property rights of others. Any claims, with or without merit, could be time-consuming, result in costly litigation, divert the

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efforts of our technical and management personnel, cause product shipment delays or require us to enter into royalty or licensing agreements, any of which could have a material adverse effect upon our operating results. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all. Legal action claiming patent infringement may be commenced against us. We cannot assure you that we would prevail in such litigation given the complex technical issues and inherent uncertainties in patent litigation. In the event a claim against us was successful and we could not obtain a license to the relevant technology on acceptable terms or license a substitute technology or redesign our products to avoid infringement, our business, financial condition and results of operations would be materially adversely affected.

If our products contain defects, we may be subject to significant liability claims from our customers, distribution partners and the end-users of our products and incur significant unexpected expenses and lost sales

Our products have in the past contained, and may in the future contain, undetected or unresolved errors when first introduced or as new versions are released. Despite extensive testing, errors, defects or failures may be found in our current or future products or enhancements after commencement of commercial shipments. If this happens, we may experience delay in or loss of market acceptance and sales, product returns, diversion of development resources, injury to our reputation or increased service and warranty costs, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, because our products are designed to provide critical communications services, we may receive significant liability claims. We attempt to include in our agreements with customers and distribution partners provisions intended to limit our exposure to liability claims. Our customers and distribution partners may not be willing to agree to such provisions, and in any event such provisions may not be effective in any or all cases or under any or all scenarios, and they may not preclude all potential claims resulting from a defect in one of our products or from a defect related to the installation or operation of one of our products. Although we maintain product liability insurance covering certain damages arising from implementation and use of our products, our insurance may not cover any claims sought against us. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. As a result, any such claims, whether or not successful could seriously damage our reputation and our business.

Certain provisions in our corporate charter and bylaws may discourage take-over attempts and thus depress the market price of our stock.

Provisions in our certificate of incorporation, as amended and restated, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include:

Each of these provisions could discourage potential take-over attempts and could adversely affect the market price of our common stock.

Item 2.    Properties

We previously leased approximately 21,874 square feet of space in Palo Alto, California, which lease was terminated effective February 28, 2005. In addition, we previously leased approximately 126,000 square feet of

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space in San Diego, California, which lease was terminated effective January 31, 2005. We also previously leased 21,195 square feet of space in Fremont, California, which lease expired on February 16, 2005. We currently lease approximately 12,650 square feet in San Diego, California on a month-to-month basis. We believe that our facilities currently are adequate to meet our requirements.

Item 3.    Legal Proceedings

In December 2001, the Company and certain of its officers and directors were named as defendants in a class action shareholder complaint filed in the United States District Court for the Southern District of New York, now captioned In re Copper Mountain Networks, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-10943. In the amended complaint, the plaintiffs allege that the Company, certain of its officers and directors and the underwriters of its initial public offering (“IPO”) violated Section 11 of the Securities Act of 1933 based on allegations that the Company’s IPO registration statement and prospectus failed to disclose material facts regarding the compensation to be received by, and the stock allocation practices of, the IPO underwriters. The amended complaint also contains a claim for violation of section 10(b) of the Securities Exchange Act of 1934 based on allegations that this omission constituted deceit on investors. The plaintiffs seek unspecified monetary damages and other relief. Similar complaints, collectively referred to here as the “IPO Lawsuits,” were filed in the same court against hundreds of other public companies (“Issuers”) who conducted IPOs between 1998 and 2000.

On August 8, 2001, the IPO Lawsuits were consolidated for pretrial purposes before United States Judge Shira Scheindlin of the Southern District of New York. On July 15, 2002, the Company joined in a global motion to dismiss the IPO Cases filed by all of the Issuers (among others). On October 9, 2002, the Court entered an order dismissing the Company’s named officers and directors from the IPO Lawsuits without prejudice, pursuant to an agreement tolling the statute of limitations with respect to these officers and directors until September 30, 2003. On February 19, 2003, the Court issued a decision denying the motion to dismiss the Section 11 claims against the Company and almost all of the Issuers, and denying the motion to dismiss the Section 10(b) claims against the Company and many of the other issuers.

In June 2003, Issuers reached a tentative settlement agreement with the plantiffs that would, among other things, result in the dismissal with prejudice of all claims against the Issuers and their officers and directors in the IPO Lawsuits. In addition, the tentative settlement guarantees that, in the event that the Plaintiffs recover less than $1 billion in settlement or judgment against the Underwriter defendants in the IPO Lawsuits, the Plaintiffs will be entitled to recover the difference between the actual recovery and $1 billion from the insurers for the Issuers. In September 2003, in connection with the tentative settlement, those officers and directors who had entered tolling agreements (described above) agreed to extend those agreements so that they would not expire prior to any settlement being finalized. In June 2004, the Company executed a final settlement agreement with the plaintiffs. On February 15, 2005, the Court issued a decision certifying a class action for settlement purposes, and granting preliminary approval of the settlement subject to modification of certain bar orders contemplated by the settlement. In addition, the settlement is still subject to statutory notice requirements as well as final judicial approval.

The Company is party to other legal proceedings and claims in the ordinary course of business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, management is unable to ascertain the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance, or the financial impact with respect to these matters as of December 31, 2004. However, management believes that the final resolution of these matters, individually and in the aggregate, will not have a material adverse impact upon the Company’s financial position, results of operations or cash flows.

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

No matters were submitted to a vote of security holders during the quarter ended December 31, 2004.

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PART II

Our Common Stock is traded on the Nasdaq National Market under the symbol “CMTN.” Our Common Stock was initially offered to the public on May 13, 1999 at $105.00 per share. The following table sets forth the range of high and low closing sales prices on the Nasdaq National Market of our Common Stock for the periods indicated, as reported by Nasdaq. All per share prices have been adjusted for a 2 for 1 stock dividend, which was effective December 10, 1999 and a 1 for 10 reverse stock split, which was effective July 17, 2002. Such quotations represent inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions.

To date, we have neither declared nor paid any cash dividends on the Common Stock. We currently intend to retain all future earnings, if any, for use in the operation and development of our business and, therefore, do not expect to declare or pay any cash dividends on our Common Stock in the foreseeable future. As of February 3, 2005, there were 459 holders of record of our Common Stock.

Certain information with regard to our equity compensation plans is set forth in Item 12 of this Annual Report on Form 10-K under the heading “Equity Compensation Plan Information.”

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Item 6.    Selected Financial Data

In the table below, we provide you with our summary historical financial data. We have prepared this information using our financial statements for the years ended December 31, 2004, 2003, 2002, 2001, and 2000. When you read this selected historical financial data, it is important that you read the historical financial statements and related notes as well as the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K. Historical results are not necessarily indicative of future results. Amounts below are in thousands, except per share data.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We were founded in 1996 as a provider of high-speed digital subscriber line, or DSL, based communications products. We have developed and sold a broad set of products to enable efficient and scalable deployment of advanced voice, video, and data services over existing network infrastructure.

In January 2005 we announced that, after an extensive evaluation of strategic alternatives, we had initiated actions to lay off most of our remaining employees by March 22, 2005, retaining a limited team of employees to provide customer support and handle matters related to the ongoing exploration of strategic alternatives.

On February 11, 2005 we announced that we had signed a definitive merger agreement with Tut Systems, Inc. Under this agreement, Tut Systems will acquire all of our outstanding shares of common stock in a stock-for-stock transaction valued at approximately $10.0 million. Upon closing, Tut Systems will issue approximately 2.5 million shares of its common stock to our stockholders. Subject to approval of the transaction by the stockholders of Copper Mountain and to other customary closing conditions, the transaction is expected to close in the second quarter of 2005.

We expect that our business activities in the future will be severely limited as we conserve our resources and prepare for the consummation of the merger with Tut Systems. We cannot assure you that the merger with Tut Systems or any other transaction will be approved and consummated. If the merger with Tut Systems is not consummated, and assuming that we are unable to secure an alternative sale of our business, we will most likely cease our business operations entirely and pursue a liquidation, which may be effected through a bankruptcy filing.

Currently, our revenue is generated primarily from sales of and service on our CopperEdge 200 DSL concentrators, or CE200, and the related wide area network (WAN) modules and line modules, as well as from CE200 system software upgrade licenses. Additionally, we license network management software, which provides monitoring and management capabilities for the CE200, revenues from which have not been material to date.

For the year ended December 31, 2004, sales to our three largest customers accounted for approximately 45% of our revenue, of which sales to Versatel, Florida Digital, and MPower accounted for approximately 18%, 15%, and 12% of our revenue, respectively. While the level of sales to any specific customer is anticipated to vary from period to period, we expect that we will continue to have significant customer concentration for the foreseeable future. Our customers’ buying patterns are unpredictable. Future sales, if any, to the significant customers mentioned above are likely to be substantially less than historical sales. The loss of any one of our major customers or the delay of significant orders from such customers, even if only temporary, could, among other things, reduce or delay our net revenue.

We sell our products directly to telecommunications service providers and through distributors. We generally recognize revenue from product sales upon shipment if collection of the resulting receivable is probable and product returns are reasonably estimated. No revenue is recognized on products shipped on a trial

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basis. Estimated sales returns, based on historical experience by product, are recorded at the time the product revenue is recognized. To date, significant revenues generated from international sources are entirely comprised of sales to Versatel.

Our gross margin has been affected by many factors, including competitive pricing pressures, fluctuations in manufacturing volumes, costs of components and sub-assemblies, costs from our contract manufacturers, the mix of products or system configurations sold and the volume and timing of sales of follow-on line cards for systems shipped in prior periods. As of December 31, 2004, we had a substantial amount of fully reserved finished goods and component inventory for our CE200 product line. Our reserve had been established based on our projection, which indicated certain inventories would not be used or would be sold below their original cost. In the future, we could utilize fully reserved components to complete product, which could result in higher gross margins. The gross margin realized will be highly dependent upon our cost to complete the units, including the cost of additional components and costs from our contract manufacturers for assembly, and our ability to sustain pricing at current levels, which may prove to be difficult given the severe pricing pressures that we are currently experiencing. In addition, our overall gross margin realized on sales of our products may fluctuate widely and will be highly dependent upon sales mix, utilization of fully reserved inventory, if any, and the prices at which our customers are willing to purchase our products.

We outsource most of our manufacturing and supply chain management operations, and we conduct manufacturing engineering, quality assurance, program management, documentation control and product repairs at our facility in San Diego, California. Accordingly, a significant portion of our cost of revenue during the periods presented consists of payments to our contract manufacturers, which in 2004 was principally with Plexus Corporation. We selected our manufacturing partner with the goal of ensuring a reliable supply of high quality finished products and of lowering per unit product costs as a result of manufacturing economies of scale. However, we cannot assure you that we will achieve or maintain the volumes required to realize these economies of scale or when or if such cost reductions will occur. The failure to obtain such cost reductions could materially adversely affect our gross margins and operating results.

During the years ended December 31, 2004, 2003, and 2002 we recorded (credits)/charges to cost of revenue for inventory on hand and on order totaling $2.6 million, $0.2 million, and ($14.9) million, respectively. The $14.9 million credit taken in 2002 was related to a reduction in adverse purchase commitments taken in prior periods. The amounts of the charges were determined based on estimates of the amounts we were committed to purchase and the anticipated demand for our products at the time the charges were taken. Actual results could differ from our estimates. Our customers buying patterns are unpredictable. Accordingly, actual demand for our products could be materially less or more than our estimates. The ultimate amount of inventory purchase commitments and the ultimate amount of excess inventory cost incurred could differ materially from our estimates as a result of these uncertainties.

Research and development expenses consist primarily of salaries and related personnel expenses, consultant fees and prototype expenses related to the design, development and testing of our products and enhancement of our network management software.

Sales and marketing expenses consist of salaries, commissions and related expenses for personnel engaged in marketing, sales and field service support functions, as well as trade shows and promotional expenses.

General and administrative expenses consist primarily of salaries and related expenses for executive, finance, human resources, management information systems and administrative personnel, recruiting expenses, professional fees, bad debt expenses and other general corporate expenses.

We currently have employee stock option programs and restricted stock programs that required us to record deferred compensation and recognize compensation expense. We expect that the total amount of compensation expense that will be recognized under these programs will vary from period to period and the ultimate amount of compensation expense that will be recognized is not currently determinable. During the third quarter of 2003

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deferred compensation was recorded in conjunction with a grant of restricted stock to two executive officers. During 2004 deferred compensation was recorded in conjunction with a grant of restricted stock to our employees. The deferred compensation is being amortized to expense in accordance with FASB Interpretations No. 28 and No. 44 over the vesting period of the individual options and restricted stock. As of December 31, 2004 approximately $2.5 million of deferred stock compensation remains to be amortized.

As of December 31, 2004 approximately 838,000 shares of restricted stock remain outstanding and unvested. 84,000 restricted shares vest in full in May 2005, and 224,000 shares vest over a two year period beginning in July 2005. The vesting of the remaining 530,000 shares of the restricted stock has been deferred by certain executive officers; at least 316,250 of these restricted shares will vest in full on the first market trading day upon which the executive officer may sell the Company’s common stock under the regulations of the U.S. Securities Exchange Commission Rule 10b-5 and in accordance with the Company’s Insider Trading Policy; the remainder of these restricted shares vest quarterly thereafter and vest in full on the earlier of (a) the occurrence of a Change In Control as such term is defined in the associated stock grant documents, or (b) in June 2007. The shares are restricted as to sale or transfer until vesting.

During the year ended December 31, 2002, we received approximately $2.8 million in lease payments related to a sales-type lease that had been fully reserved and recorded those payments as a reduction of bad debt expense within general and administrative expenses. During the year ended December 31, 2003, we received approximately $2.6 million as a settlement of all remaining amounts due under this lease agreement, which is included as a reduction to general and administrative expenses. During the year ended December 31, 2004, we terminated a long-term operating lease for the Company’s San Diego facility that resulted in the release of approximately $1.3 million of restructuring accruals recognized in prior periods.

We have had three restructurings since March 2001. These restructurings involved re-sizing our business to reflect current and expected business conditions. As a result of the adoption of these restructurings, we recorded total charges of approximately $21.7 million. These charges primarily relate to: consolidation of our continuing operations resulting in impairment of assets; anticipated losses on disposition of assets and excess lease costs; and the elimination of job responsibilities, resulting in costs incurred for employee severance.

Details of the restructuring charges are as follows (in 000s):

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Examples include estimated restructuring costs, excess inventory and adverse purchase commitments, provisions for returns, bad debts, warranty costs, and the ultimate realizability of investments and the ultimate outcome of litigation. Actual results could differ from those estimates.

We have several critical accounting policies that are both important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Typically, the circumstances that make these judgments complex and difficult have to do with making estimates about the effect of matters that are inherently uncertain. Our critical accounting policies are as follows:

As discussed under “Warranty Reserves” in Note 1 of the notes to the financial statements, we provide limited warranties on certain of our products, typically for periods of up to one year. We recognize warranty reserves when products are shipped based upon an estimate of total warranty costs, and such reserves are included in accrued liabilities. The estimate of such costs is based upon historical and anticipated requirements.

As discussed under “Inventory” in Note 1 of the notes to the financial statements, inventory is stated at the lower of cost, principally standard costs, which approximates actual costs on a first-in, first-out basis, or market. We estimate the market value of our inventory based upon anticipated future demand for our products.

As discussed under “Revenue Recognition” in Note 1 of the notes to the financial statements, revenue is recognized when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable and; (iv) collectibility is reasonably assured. Sales returns are estimated based on historical experience and management’s expectations and are recorded at the time product revenue is recognized. Annual service and support arrangements can be purchased by customers for products no longer under warranty and are generally billed quarterly. Revenue from service and support arrangements is recognized ratably as services are performed. We may extend limited stock rotation, product return and price protection rights to certain distributors and resellers.

Results of Operations

The following table sets forth, as a percentage of total revenues, certain income data for the periods indicated.

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Years Ended December 31, 2003 and 2004

Net Revenue.    Our revenue decreased from $14.0 million in 2003 to $7.8 million in 2004. This decrease was primarily due to lower sales of our CE200 products and related software. Sales to our two largest customers, Versatel and Mpower, decreased from $5.8 million and $2.3 million, respectively, for the year ended December 31, 2003 to $1.4 million and $0.9 million, respectively, for the year ended December 31, 2004.

Gross Margin.    Our gross margin decreased from $9.0 million or 64.8% in 2003 to $2.2 million or 27.7% in 2004. The decrease in gross margin, relative to the prior year, occurred primarily due to the decrease in sales volumes and a decrease in sales of inventory that had previously been written down. During 2003 and 2004 reserves released from the sale of previously written down inventory totaled $11.2 million and $0.9 million, respectively.

Research and Development.    Our research and development expenses increased from $12.9 million in 2003 to $13.0 million in 2004. This increase was primarily the result of higher consulting costs related to the development of our VantEdge product line, which was partially offset by lower employee compensation costs as a result of lower headcount. In addition, higher research and development material costs were offset by lower depreciation costs. Research and development expenses as a percentage of net revenue increased as a result of lower sales in 2004.

Sales and Marketing.    Our sales and marketing expenses decreased from $6.7 million in 2003 to $4.8 million in 2004. This decrease was primarily the result of a $1.1 million decrease in compensation costs related to sales commissions and incentive based bonuses. In addition, depreciation and costs associated with demo equipment decreased by $0.4 million. The increase in sales and marketing expense as a percentage of net revenue from 47.9% in 2003 to 60.9% in 2004 was the result of the decrease in our net revenue during 2004 offset by a decrease in expenses as noted above.

General and Administrative.    Our general and administrative expenses increased from $4.3 million in 2003 to $6.0 million in 2004. The increase was primarily the result of a credit of $3.4 million for the recovery of bad debt recognized in 2003 which was partially offset by a decrease of $1.3 million in incentive based compensation and a $0.6 million decrease in depreciation expense in 2004. Incentive based compensation decreased as a result of the Company not meeting certain financial goals. Depreciation decreased as a result of lower purchases of equipment. General and administrative expenses as a percentage of net revenue increased from 30.6% in 2003 to 76.9% in 2004. This increase as a percentage of sales was primarily the result of lower sales volumes in 2004.

Interest and Other Income.    Interest and other income decreased from $0.3 million in 2003 to $0.2 million in 2004. This decrease reflects a decrease in interest income generated from lower average cash balances and investments in marketable securities in 2004.

Income Taxes.    Our effective income tax rate was zero for 2003 and 2004.

Years Ended December 31, 2002 and 2003

Net Revenue.    Our revenue increased from $12.9 million in 2002 to $14.0 million in 2003. This increase was due to higher sales of our CE200 products and related software. Sales to our two largest customers, Versatel and Mpower, increased from $3.4 million and $2.0 million, respectively, for the year ended December 31, 2002 to $5.8 million and $2.3 million, respectively, for the year ended December 31, 2003.

Gross Margin.    Our gross margin decreased from $18.4 million or 141.8% in 2002 to $9.0 million or 64.8% in 2003. The decrease in gross margin, relative to the prior year, occurred primarily due to the recognition of a gain of $14.9 million in 2002 related to a reduction in purchase commitments previously charged to cost of revenue in 2001. During 2002 and 2003 we sold inventory that had previously been written down by $8.4 million and $11.2 million respectively.

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Research and Development.    Our research and development expenses decreased from $21.8 million in 2002 to $12.9 million in 2003. This decrease was primarily the result of lower compensation costs as a result of lower headcount, lower depreciation related to fixed assets, and lower spending on prototype equipment, consultants and other outside services. Research and development expenses as a percentage of net revenue decreased as a result of flat sales and decreasing costs during 2003.

Sales and Marketing.    Our sales and marketing expenses decreased from $7.0 million in 2002 to $6.7 million in 2003. This decrease was primarily the result of a decrease in travel and depreciation expense, which was partially offset by an increase in consultant costs and other outside services expenses. The decrease in sales and marketing expense, as a percentage of net revenue, from 54.0% in 2002 to 47.9% in 2003 was the result of a decrease in costs as noted combined with the increase in our net revenue during 2003.

General and Administrative.    Our general and administrative expenses decreased from $5.3 million in 2002 to $4.3 million in 2003. This decrease was primarily the result of a decrease in depreciation expense as a result of lower equipment purchases, reduced facility lease costs as a result of increased sub-lease receipts, and reduced legal costs, partially offset by higher compensation expenses. Included in general and administrative expenses for the year ended December 31, 2003 and 2002, is a credit related to the recovery of bad debt in the amount of $3.4 million and $3.5 million, respectively. General and administrative expenses as a percentage of net revenue decreased from 40.9% in 2002 to 30.6% in 2003. This decrease as a percentage of sales was primarily the result of the items mentioned above.

Interest and Other Income.    Interest and other income decreased from $2.1 million in 2002 to $0.3 million in 2003. This decrease reflects a decrease in interest income generated from lower average cash balances and investments in marketable securities in 2003 and decreased average yields on such investments.

Income Taxes.    Our effective income tax rate was zero for 2002 and 2003.

Liquidity and Capital Resources

Currently, we are not generating sufficient revenue to fund our operations. We expect our operating losses and net operating cash outflows to continue. On March 7, 2001, August 2, 2001, and July 11, 2002, we announced that we had adopted business plans to re-size our business to reflect current and expected business conditions. In January 2005 we announced that, after an extensive evaluation of strategic alternatives, we had initiated actions to lay off most of our remaining employees by March 22, 2005, retaining a limited team of less than ten employees to provide customer support and handle matters related to the ongoing exploration of strategic alternatives. In light of the pending acquisition by Tut Systems, however, we have elected to also maintain a limited number of engineering employees to continue development of our products.

At December 31, 2004, we had cash and cash equivalents of $10.2 million and short-term marketable investments of $2.2 million.

In the year ended December 31, 2004, we required approximately $4.7 to $5.9 million in cash per quarter to fund our operations. In our Quarterly Report on Form 10-Q for the third quarter of 2004 we announced that we believed that we would have sufficient funds to continue our operations through the second quarter of 2005. As a result of the reduction in the number of our employees and corresponding curtailing of our business operations we announced in January 2005, we currently believe that we have sufficient cash and cash equivalents to fund our limited remaining operations for at least the next 6 months from date of filing.

We cannot assure you that the merger with Tut Systems or any other transaction will be approved and consummated in that time. If the merger with Tut Systems is not completed in that time or at all, we will have to further reduce our expenses, seek additional financing and/or seek an alternative sale of our business. We expect that such additional financing would not be available, that that the probablility that we would find an alternative

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sale of our business is low, and that we would be required to cease our operations and liquidate our business. In that event, we believe that it is likely that we would file for or be forced to resort to bankruptcy protection. If we were to file for bankruptcy protection, it is extremely unlikely that we would be able to pay, or provide for the payment of, all of our liabilities and obligations, and, therefore, there would be no assets available for distribution to our stockholders.

These estimates reflect various assumptions, including the assumption that sales of our existing products will decrease sharply from 2004, that testing, continued development and commercialization of our new VantEdge product will be curtailed and that we will not incur significant additional expense related to litigation. Any of these assumptions may prove to be incorrect.

Cash used in operating activities for the years ended December 31, 2004, 2003, and 2002 was $20.4, $14.0 million, and $28.5 million, respectively. The increase in cash used in operating activities for the year ended December 31, 2004 compared to the prior year was primarily the result of a $6.9 million decrease in the gross margin generated in 2004 and the recovery of bad debt in the prior year of $3.4 million, offset by a decrease in cash operating expenses and timing differences in the payment of certain liabilities. The decrease in cash used by operating activities for the year ended December 31, 2003 compared to the prior year was primarily the result of a decrease in research and development and to a lesser extent a decrease in general and administrative expenses.

Cash provided by investing activities for the years ended December 31, 2004, 2003 and 2002 was $6.9 million, $4.1 million, and $30.8 million, respectively. The increase in cash provided by investing activities for the year ended December 31, 2004 compared to the prior period was primarily the result of an increase in net maturities of marketable investments. The decrease in cash provided by investing activities for the year ended December 31, 2003 compared to the prior period was primarily the result of decreased net maturities of marketable investments

Cash provided (used in) financing activities for the years ended December 31, 2004, 2003, and 2002 was $10.6 million, ($3.1) million, and ($2.9) million, respectively. The increase in cash provided by financing activities for the year ended December 31, 2004 compared to the prior year was primarily due to the company completing the sale 1,250,000 shares of common stock for net proceeds of $10.6 million in a private placement during 2004 and a $3.2 million decrease in cash used to repay equipment loans. The increase in cash used in financing activities for the year ended December 31, 2003 compared to the prior year was primarily due to an increase in cash used to repay equipment loans.

Contractual Obligations

At December 31, 2004, our contractual obligations consist entirely of operating lease obligations. Future payments under these contracts consist of the following at December 31, 2004 (in thousands):

In 2005 we entered into retention agreements with the Chief Executive Officer, Chief Financial Officer and the Vice President of Worldwide Sales. Pursuant to these agreements we agreed to pay retention bonuses equal to three (3) months of base salary payable on the earlier of (a) July 15, 2005; or (b) upon closing of the sale of our company. If their employment with us is terminated for any reason other than cause prior to payment of the retention bonus, the retention bonus must be paid immediately upon termination, provided a standard release is signed. Pursuant to the Chief Executive Officer and Chief Financial Officer retention agreements, we also agreed to pay to each of them a $75,000 transaction completion bonus, payable immediately upon closing of the sale of our company. Mr. Skurla’s employment was terminated on March 1, 2005, he has signed the standard release, and the retention bonus payment of $43,750 has been paid. Total remaining payments under these agreements would equal $275,000.

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Since December 31, 2004 we have terminated or restructured several of our contractual obligations. As a result, future payments under contractual obligations consist of the following at February 28, 2005 (in thousands):

We are also involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, in our opinion, is expected to have a material adverse effect on our financial position, results of operations, cash flows or our ability to conduct business.

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

We are exposed to changes in interest rates primarily from our investments in certain held-to-maturity securities. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of interest sensitive financial instruments at December 31, 2004.

Item 8.    Financial Statements

Our financial statements at December 31, 2004, 2003 and 2002, and for each of the three years in the period ended December 31, 2004 are included in this Annual Report on Form 10-K on pages F-1 through F-22.

The following tables present unaudited quarterly financial information, for the eight quarters ended December 31, 2004. We believe this information reflects all adjustments (consisting only of normal recurring adjustments, except as noted in the footnotes below) that we consider necessary for a fair presentation of such information in accordance with generally accepted accounting principles. The results for any quarter are not necessarily indicative of results for any future period. (in thousands, except per share data):

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Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.    Controls and Procedures

Evaluation of disclosure controls and procedures.    Management has established disclosure controls and procedures to ensure that material information relating to the company and its consolidated subsidiaries is made known to the officers who certify the company’s financial reports and to other members of senior management and the Board of Directors. In designing and evaluating these controls and procedures, management recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives and necessarily applies judgment in evaluating the cost-benefit relationship of other possible controls and procedures.

Based on their evaluation as of December 31, 2004, the principal executive officer and principal financial officer of the company have concluded that the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective, at the reasonable assurance level, to ensure that the information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms.

Management’s Report on Internal Control over Financial Reporting.    Company management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of company management, including the principal executive officer and principal financial officer, the company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the company’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that the company’s internal control over financial reporting was effective as of December 31, 2004. Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report, which is included herein.

Attestation Report of the Registered Public Accounting Firm.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Copper Mountain Networks, Inc:

We have audited management’s assessment, included in the accompanying Management’s Report of Internal Control over Financial Reporting, that Copper Mountain Networks, Inc. (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements and financial statement schedule as of and for the year ended December 31, 2004 of the Company and our report dated March 11, 2005 expressed an unqualified opinion on those

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financial statements and financial statement schedule and included an explanatory paragraph relating to the Company’s ability to continue as a going concern.

DELOITTE & TOUCHE LLP

San Diego, California

March 11, 2005

Changes in internal controls.    There has been no change in our internal control over financial reporting during the fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

None

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PART III

Item 10.    Directors and Executive Officers of the Registrant

The following table sets forth information about our directors and executive officers and their ages as of February 28, 2005:

Richard S. Gilbert has served as Chief Executive Officer of Copper Mountain since April 1998, as a director of Copper Mountain since August 1998 and as Chairman of the Board of Directors since February 2001. From July 1992 to April 1998, he worked for ADC Telecommunications Inc., most recently as Senior Vice President and, concurrently, as President and General Manager of its subsidiary, ADC Kentrox, a provider of high-speed access equipment for global networks. Mr. Gilbert holds an MS in Computer Science from Stanford University and a BA in Mathematics from the University of California at Berkeley.

Tench Coxe has served as a director of Copper Mountain since March 1996. Mr. Coxe joined Sutter Hill Ventures, a venture capital firm, in October 1987 and is currently a Managing Director of the General Partner of Sutter Hill Ventures. Mr. Coxe currently serves as a director of eLoyalty Corporation and NVIDIA Corporation and several privately-held companies. Mr. Coxe holds an MBA from Harvard University and a BA in Economics from Dartmouth College.

Roger L. Evans has served as a director of Copper Mountain since March 1996. Mr. Evans joined Greylock Partners, a venture capital firm, in 1989 and has served as a General Partner of the firm since 1991. Mr. Evans is a director of RightNow Technologies and several privately-held companies. Mr. Evans holds an MA in Economics from King’s College, Cambridge.

Joseph D. Markee is currently the Chief Executive Officer and President of Figure 8 Wireless, Inc., a low data rate wireless software Company. Mr. Markee currently serves as a director of Dot Hill Systems and Metalink, LTD. Mr. Markee co-founded Copper Mountain in March 1996 and served as Chairman of the Board of Directors from inception to February 2001 and as General Manager, Public Networks Business Unit from March 2000 to March 2001. From Copper Mountain’s inception in March 1996 to April 1998, he served as its President and Chief Executive Officer. From inception to February 1999, he served as Secretary and from December 1998 to March 2001 he served as Chief Technical Officer of Copper Mountain. In June 1987, he co-founded Primary Access, a remote access server company acquired by 3Com Corporation. From June 1987 to January 1996, he served as Vice President of Operations and Vice President of Support of 3Com Primary Access. Mr. Markee holds a BS in Electrical Engineering from the University of California at Davis.

Raymond V. Thomas has served as a director of Copper Mountain since March 1999. From February 1995 to January 2000, Mr. Thomas served as Vice President, Finance and Chief Financial Officer of HNC Software Inc., a software company, and as secretary of HNC Software from May 1995 to January 2000. From May 1993 to February 1995, he served as Executive Vice President and Chief Financial Officer of Golden Systems Inc., a power supply manufacturer, and from September 1994 to February 1995 he also served as Chief Operating Officer of Golden Systems. Mr. Thomas holds a BS degree in industrial management from Purdue University.

Joseph R. Zell has served as a director of Copper Mountain since July 2001. Mr. Zell is currently a General Partner with Grotech Capital Group, a private equity firm. From April 2000 to April 2001, Mr. Zell served as

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President, CEO and director of Convergent Communications. In April 2001, Convergent Communications filed for bankruptcy. From December 1991 to April 2000, Mr. Zell held a variety of senior management positions with US WEST Communications, the last four years as the president of the data networking division. Prior to US West, Mr. Zell worked in various sales and marketing positions for WilTel, United Technologies Communications, MCI Communications and Xerox Corporation. Mr. Zell currently serves on the board of directors of several privately-held companies. Mr. Zell holds a BS degree in Marketing from Southwest Missouri State University.

Michael O. Staiger has served as Chief Financial Officer and Secretary of Copper Mountain since March 2001, and as Executive Vice President since November 2002. From June 1998 to March 2001 he served as Vice President of Business Development of Copper Mountain. From June 1996 to June 1998, he held positions at Shiva Corporation, a provider of remote access solutions, serving most recently as Vice President of Business Development. From August 1993 until its acquisition by Shiva Corporation in June 1996, he served as a co-founder and Vice President of Business Development of Airsoft, Inc., a developer of remote access software. Mr. Staiger holds an MBA from the University of Chicago Graduate School of Business and a BA in English from the University of Michigan.

Independence of the Board of Directors

As required under the Nasdaq Stock Market listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by such company’s Board of Directors. Our Board of Directors consults with our outside counsel to ensure that our Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of the Nasdaq, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and us, our senior management and our independent auditors, our Board affirmatively has determined that all of our directors are independent directors within the meaning of the applicable Nasdaq listing standards, except for Mr. Gilbert, the Chief Executive Officer of the Company.

As required under Nasdaq listing standards, our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.

Information regarding the Board of Directors and its Committees

Our Board has six committees: an Audit Committee, a Compensation Committee, a Nominating Committee, a Non-Officer Stock Option Committee, a Financing Committee and a Special Litigation Committee. The following table provides membership and meeting information for fiscal 2004 for each of the Board committees:

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Below is a description of each committee of our Board of Directors. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. Our Board of Directors has determined that each member of the Audit, Compensation and Nominating Committees meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to us.

Audit Committee

The Audit Committee of the Board of Directors oversees our corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines and approves the engagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors; reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on our audit engagement team as required by law; confers with management and the independent auditors regarding the effectiveness of internal controls over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; reviews the financial statements to be included in our Annual Report on Form 10-K; and discusses with management and the independent auditors the results of the annual audit and the results of our quarterly financial statements. Three directors comprise the Audit Committee: Messrs. Coxe, Thomas, and Zell. The Audit Committee met four times and acted by unanimous written consent one time during the 2004 fiscal year.

Our Board of Directors annually reviews the Nasdaq listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing standards). Our Board of Directors has determined that Mr. Thomas qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. Our Board made a qualitative assessment of Mr. Thomas’s level of knowledge and experience based on a number of factors, including his formal education and experience as a chief financial officer for public reporting companies.

Stockholder Nominations of Directors

There have been no changes in the procedures by which our stockholders may recommend nominees to our board of directors since we described those procedures in our Proxy Statement relating to our 2004 Annual Meeting of Stockholders.

Code of Business Conduct and Ethics

We have adopted the Copper Mountain Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code of Business Conduct and Ethics is available on our website at www.coppermountain.com. If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a provision of the Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and our other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

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To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2004, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

Item 11.    Executive Compensation

Summary of Compensation

The following table shows for the fiscal years ended December 31, 2002, 2003 and 2004, compensation awarded or paid to, or earned by, our Chief Executive Officer and our two other executive officers at December 31, 2004, which we refer to in this Annual Report on Form 10-K as our Named Executive Officers:

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Stock Option Grants and Exercises

The following tables show for the fiscal year ended December 31, 2004, certain information regarding options exercised by, and held at year end by, our Named Executive Officers. There were no options or stock appreciation rights granted to our Named Executive Officers in the last fiscal year and no stock appreciation rights outstanding at December 31, 2004.

Aggregated Option Exercises in Last Fiscal Year, and Fiscal Year-end Values

Compensation of Directors

Our directors do not currently receive any cash compensation for services on the Board of Directors or any committee thereof, but directors may be reimbursed for certain expenses in connection with attendance at board of directors and committee meetings. All directors are eligible to participate in our 1996 Equity Incentive Plan. Non-employee directors are eligible to participate in our 1999 Non-Employee Directors’ Plan and our 1996 Equity Incentive Plan.

Each non-employee director receives stock option grants under the 1999 Non-Employee Directors’ Plan, which we refer to as the Directors’ Plan. Only non-employee directors or affiliates of such directors (as defined in the United States Internal Revenue Code) are eligible to receive options under the Directors’ Plan. Options granted under the Directors’ Plan are intended not to qualify as incentive stock options under the Internal Revenue Code.

Option grants under the Directors’ Plan are non-discretionary. On March 25, 1999, the effective date of the Directors’ Plan, each person who was then serving as a non-employee director was granted an initial grant to purchase six thousand (6,000) shares of our common stock. Each person who is elected or appointed as a non-employee director after March 25, 1999 shall also be automatically granted an initial grant to purchase six thousand (6,000) shares of our common stock. On the day of each annual meeting of our stockholders, each member of our Board of Directors who is not an employee of ours and has served as a non-employee director for at least six (6) months shall be granted an annual grant to purchase two thousand (2,000) shares of our common stock under the Directors’ Plan. No other options may be granted at any time under the Directors’ Plan. The exercise price of options granted under the Directors’ Plan is 100% of the fair market value, as determined by the closing sales price reported on the Nasdaq National Market on the date of grant, of the shares of our common stock subject to the option on the date of the option grant. Options are fully vested and exercisable on the date of grant. The term of options granted under the Directors’ Plan is five years. In the event of a merger of us with or into another corporation or a consolidation, acquisition of assets or other change-in-control transaction involving us, the surviving corporation or acquiring corporation is required to assume any options outstanding or substitute similar options for those outstanding. In the event the surviving corporation or acquiring corporation refuses to assume such options or to substitute similar options for those outstanding, then such options will be terminated if not exercised prior to such event.

We grant non-employee directors discretionary stock option grants as allowed under the 1996 Equity Incentive Plan. Currently, we plan to grant any person who is newly elected to the Board, in addition to the non-discretionary initial grant described above, an initial grant to purchase fifteen thousand (15,000) shares of our

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common stock. On the day of each annual meeting of our stockholder, in addition to the non-discretionary annual grant described above, each non-employee member of our Board of Directors may be granted an annual grant to purchase ten thousand (10,000) shares of our common stock.

During the last fiscal year, we granted options covering twelve thousand (12,000) shares to each non-employee director at an exercise price per share of $11.85. The fair market value of such common stock on the date of grant was $11.85 per share (based on the closing sales price reported on the Nasdaq National Market for the date of grant). As of February 28, 2005, options to purchase 6,350 shares had been exercised under the Directors’ Plan.

Employment, Severance And Change Of Control Agreements

On March 18, 1998, we entered into an employment agreement with Richard S. Gilbert, our Chief Executive Officer and Chairman of the Board. Pursuant to Mr. Gilbert’s employment agreement, we lent Mr. Gilbert $1 million pursuant to an interest-free promissory note for the purchase of his principal residence in California. The principal amount of such note was due on March 30, 2003. The note was secured by an option to purchase 105,929 shares of our common stock held by Mr. Gilbert and the shares of our common stock issuable to Mr. Gilbert upon exercise of such options. The note provided that Mr. Gilbert’s obligation to repay the note could be accelerated upon the occurrence of certain events, including the termination of Mr. Gilbert’s employment. Mr. Gilbert has repaid the loan in full.

In March 2001, our Board approved a retention bonus plan for Mr. Gilbert pursuant to which he would receive a guaranteed bonus of $500,000, if he remained employed with us on December 31, 2002. This bonus was paid in January 2003. In November 2002 the Compensation Committee of our Board approved fixed retention bonuses for the CEO and CFO, which provided that if the CEO and CFO were employed by us on December 15, 2003 they would receive bonuses totaling $500,000 and $200,000, respectively. Our Compensation Committee also approved fixed bonuses for the CEO and CFO which would be paid only if specific 2003 quarterly goals set by the Compensation Committee were met. These bonuses totaled $125,000 and $50,000 per quarter, for the CEO and CFO, respectively. Both the CEO and the CFO remained employed with us through December 15, 2003, and the Compensation Committee determined that the quarterly goals for each quarter of 2003 were met. Accordingly, all of the 2003 incentive bonuses described above were paid in full. In April 2004 the Compensation Committee of our Board approved fixed retention bonuses for the CEO and CFO, which provided that if the CEO and CFO were employed by us on December 15, 2004 they would receive bonuses totaling $200,000 and $100,000, respectively. Both the CEO and the CFO remained employed with us through December 15, 2004. Accordingly, the 2004 retention bonuses described above were paid in full.

All of the shares of common stock held by our Named Executive Officers that are subject to repurchase by us and each option to purchase common stock held by our Named Executive Officers are subject to the following accelerated vesting provisions:

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Retention Agreements

On February 10, 2005 we entered into a retention and incentive bonus agreement with Richard S. Gilbert, Chairman and Chief Executive Officer. Pursuant to this retention agreement, we agreed to pay Mr. Gilbert a retention bonus equal to three (3) months of his base salary. Mr. Gilbert’s current base salary is $300,000 per year. The retention bonus is payable on the earlier of (a) July 15, 2005; or (b) upon closing of the sale of our company. If Mr. Gilbert’s employment with us is terminated for any reason other than cause prior to payment of this retention bonus, the retention bonus must be paid immediately upon his termination, provided that he signs our standard release upon his termination. Pursuant to the retention agreement, we also agreed to pay Mr. Gilbert a $75,000 transaction completion bonus, payable immediately upon closing of the sale of our company.

On February 10, 2005 we entered into a retention and incentive bonus agreement with Michael O. Staiger, Executive Vice President and Chief Financial Officer. Pursuant to this retention agreement, we agreed to pay Mr. Staiger a retention bonus equal to three (3) months of his base salary. Mr. Staiger’s current base salary is $200,000 per year. The retention bonus is payable on the earlier of (a) July 15, 2005; or (b) upon closing of the sale of our company. If Mr. Staiger’s employment with us is terminated for any reason other than cause prior to payment of this retention bonus, the retention bonus must be paid immediately upon his termination, provided that he signs our standard release upon his termination. Pursuant to the retention agreement, we also agreed to pay Mr. Staiger a $75,000 transaction completion bonus, payable immediately upon closing of the sale of our company.

On February 10, 2005 we entered into a retention agreement with Mark Skurla, Vice President—Worldwide Sales. Pursuant to this retention agreement, we agreed to pay Mr. Skurla a retention bonus equal to three (3) months of his base salary. Mr. Skurla’s current base salary is $175,000 per year. The retention bonus is payable on the earlier of (a) July 15, 2005; or (b) upon closing of the sale of our company. The agreement provided that, if Mr. Skurla’s employment with us is terminated for any reason other than cause prior to payment of this retention bonus, the retention bonus must be paid immediately upon his termination, provided that he signs our standard release upon his termination. Mr. Skurla’s employment was terminated on March 1, 2005, he has signed the standard release, and the retention bonus payment of $43,750 has been paid.

Stock Vesting Deferral Agreements

On February 10, 2005 Richard Gilbert and Michael Staiger each agreed to defer vesting on all of their restricted stock (which otherwise would have begun vesting on February 15, 2005 and quarterly thereafter) until the earlier of (i) the first market trading day thereafter upon which he may sell our common stock without violating Rule 10b-5 of the Exchange Act or our Insider Trading Policy, or (ii) March 15 of his taxable year following the year of such vesting date.

Compensation Committee Interlocks and Insider Participation

The members of our Compensation Committee during 2004 were Tench Coxe and Roger Evans. During 2004, no executive officer served as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

The following table sets forth certain information regarding the ownership of our common stock as of February 28, 2005 by: (i) each director; (ii) each of the Named Executive Officers; (iii) all executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. Unless otherwise indicated in the table set forth below, each person or entity named below has an address in care of Copper Mountain at our principal executive offices.

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Except as indicated, and subject to community property laws where applicable, the persons named have sole voting and investment power with respect to all shares shown as beneficially owned by them, except for certain shares that are restricted as to sale or transfer beneficially owned by Messrs. Gilbert and Staiger. Percentage of beneficial ownership is based on 7,821,251 shares of our common stock outstanding as of February 28, 2005, adjusted as required by rules promulgated by the SEC.

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Equity Compensation Plan Information

The following table sets forth certain information, as of December 31, 2004, regarding our equity compensation plans.