Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2012 and 2013 Results
The following Management's Discussion and Analysis ("MD&A") is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes. In the discussion below, our fiscal year ended June 29, 2012 is referred to as "fiscal 2012" or "2012"; fiscal year ended July 1, 2011 as "fiscal 2011" or "2011" and fiscal year ended July 2, 2010 as "fiscal 2010" or "2010." We generate revenue by designing, developing, manufacturing and supporting a range of wireless networking products, solutions and services for mobile and fixed communications service providers, private network operators, government agencies, transportation and utility companies, public safety agencies and broadcast system operators across the globe. Our products include point-to-point (PTP) digital microwave transmission systems designed for first/last mile access, middle mile/backhaul, and long distance trunking applications. We also provide network management software solutions to enable operators to deploy, monitor and manage our systems, third party equipment such as antennas, routers, and multiplexers, necessary to build and deploy a wireless transmission network, and a full suite of turnkey support services.

We work continuously to improve our established brands and to create new products that meet our customers' evolving needs and preferences. Our fundamental business goal is to generate superior returns for our stockholders over the long term. We believe that increases in revenue, operating profits and earnings per share are the key measures of financial performance for our business.
Our strategic focus in the next fiscal year will be to continue to accelerate innovation and optimize our product portfolio, improve costs and operational efficiencies, grow our revenue and create a sustainable, profitable business model. To do this, we have examined our products, markets, facilities, development programs, and operational flows to ensure we are focused on what we do well and what will differentiate us in the future. We will continue working to streamline management processes to attain the efficiency levels required by the markets in which we do business.
Seasonality is a factor that impacts our business. Our fiscal third quarter revenue and orders have historically been lower than the revenue and orders in the immediately preceding second quarter because many of our customers utilize a significant portion of their capital budgets at the end of their fiscal year. The majority of our customers begin a new fiscal year on January 1, and capital expenditures tend to be lower in an organization's first quarter than in its fourth quarter. We anticipate that this seasonality will continue. The seasonality between the second quarter and third quarter may be affected by a variety of factors, including changes in the global economy and other factors. Please refer to the section entitled "Risk Factors" in Item 1A in this Annual Report on Form 10-K.

Operations Review
During fiscal 2012, we secured orders and expanded our footprint with our customers in the mobile operator market using our current technology and service capabilities. We believe that there is steady growth in this market and that it will continue growing over the long term as mobile operators build network capacity to address increasing demands for bandwidth, tempered by the global financial and economic environment. In order to significantly expand our mobile operator customer base and displace competitors we plan to bring our next generation of products to market in the next fiscal year. The signs of growth in non-mobile operator market segments exist today, mostly in North America, but increasingly in other parts of the world. Typical applications of our products are in utility and public safety networks where the emphasis is on quality, service, reliability and network security.
During September 2011, one of our contract manufacturers in Thailand was affected by flooding in that country. Our logistics and supply chain staff worked closely with that supplier and jointly were successful in mitigating and minimizing the delivery impact to our customers during the second and third quarters of fiscal 2012. We are now satisfied that this contract manufacturer has recovered from this event and that future deliveries to us will not be affected adversely as a result of the floods.
We completed the sale of our former WiMAX business to EION on September 2, 2011. The sale of the WiMAX business was part of our strategic plan to streamline our business and focus our time and resources on growing our core microwave business to better position us for long-term success. We worked with EION on the transition of the business which was completed during fiscal 2012. We began accounting for the WiMAX business as a discontinued operation in the third quarter of fiscal 2011. The discussions of our revenue, gross margin, operating expenses and income taxes have excluded the WiMAX business results, which are discussed separately under "Loss from Discontinued Operations" below. In the second quarter of fiscal 2012, we performed a goodwill impairment analysis due to a significant decline in our market capitalization, which was considered as a goodwill impairment indicator. Based on the results of the impairment analysis, we recorded a $5.6 million goodwill impairment charge in the second quarter of fiscal 2012 and no longer have any goodwill on our balance sheet.
During fiscal 2012, we continued restructuring activities to reduce our operational costs and have substantially completed our initiatives under the Fiscal 2011 Plan as of June 29, 2012. We intend to wind down certain remaining restructuring activities under the Fiscal 2011 Plan in fiscal 2013. In the fourth quarter of fiscal 2012, we re-evaluated our reportable segments primarily due to changes in our management, transition of our products to a common product platform across all geographies, streamlining of our business and substantial completion of our restructuring plan in fiscal 2012. The Chief Operating Decision Maker ("CODM"), which is our Chief Executive Officer, manages our business primarily by function globally and reviews financial information on a consolidated basis, accompanied by disaggregated information about revenues by geographic region, for purposes of allocating resources and evaluating financial performance. The profitability of our former geographic segments is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company. As such we

determined that we operate in one single reportable industry segment as of June 29, 2012. Prior years information has been recast to conform with the current reportable segment disclosure.
Revenue
We manage our sales activities primarily on a geographic basis in North America and three international geographic regions: Africa and Middle East, Europe and Russia, and Latin America and Asia Pacific. Beginning with the first quarter of fiscal 2012, in order to better align our internal reporting with the activities in our international business organizations, we changed our internal operational review of revenue by region by separating the Middle East region from Europe and Russia and grouping it with Africa. Revenue by region for fiscal 2011 and 2010 has been reclassified to reflect this change. Revenue by region for fiscal 2012, 2011 and 2010 and the related changes are shown in the table below:

                                Fiscal Year                          $ Change                     % Change
(In millions,
except percentages)    2012         2011         2010       2012 /2011     2011 /2010     2012 /2011    2011 /2010
North America       $  164.9     $  160.4     $  174.8     $      4.5     $     (14.4 )        2.8  %       (8.2 )%
International:
Africa and Middle
East                   147.7        143.6        162.8            4.1           (19.2 )        2.9  %      (11.8 )%
Europe and Russia       53.6         73.4         46.4          (19.8 )          27.0        (27.0 )%       58.2  %
Latin America and
Asia Pacific            77.8         74.7         81.5            3.1            (6.8 )        4.1  %       (8.3 )%
Total International    279.1        291.7        290.7          (12.6 )           1.0         (4.3 )%        0.3  %
Total Revenue       $  444.0     $  452.1     $  465.5     $     (8.1 )   $     (13.4 )       (1.8 )%       (2.9 )%

While revenue increased in North America in fiscal 2012 compared with fiscal 2011, we experienced a decrease in our international revenue. We saw improved sales with North American wireless network operators during the year compared to fiscal 2011. We attribute this to the ongoing buildout of LTE capable networks in the region. At the same time, business with utilities, state and local government private networks also remained strong in North America. We also saw growth in demand for our network services and support in the region. The decrease in the international revenue came from the absence of demand from customers in Russia who took substantial deliveries in fiscal 2011, along with the wind-down of equipment deliveries for a major project in the Middle East. Sales to wireless network operators remained strong, but varied by customer in the international markets. We saw better than expected sales in Asia Pacific and experienced substantially increased sales with our long-term customers in Africa, offsetting the reduced volume in the Middle East.
During fiscal 2012, the MTN Group in Africa accounted for 17% of our total revenue compared with 14% in fiscal 2011 and 17% in fiscal 2010. We have entered into separate and distinct contracts with MTN Group as well as separate arrangements with MTN Group subsidiaries. None of such contracts on an individual basis are material to our operations. The loss of all MTN Group business could adversely affect our results of operations, cash flows and financial position.
North America
Our revenue in North America increased $4.5 million, or 2.8%, in fiscal 2012 compared with fiscal 2011. We have seen substantial changes in product mix of our sales in this region from year to year. The bulk of our product revenue in North America now comes from our Eclipse product platform, whereas in the first half of fiscal 2011, our legacy products made up a significant portion of the region's sales. The revenue growth and product mix changes reflect continued success in transitioning our customer base to the new product platform as well as an increase in our services business from major customers in fiscal 2012. Our revenue in North America decreased by $14.4 million, or 8.2%, in fiscal 2011 compared with fiscal 2010. That decline was primarily attributable to reduced sales of our legacy product lines in the first half of fiscal 2011 when compared with the same period in fiscal 2010. Fiscal 2011 was a transition year for us as we completed the last deliveries of legacy products and our marketing and selling efforts were focused on our new product platform. Early in fiscal 2011 we experienced production issues which slowed the progress in transitioning sales to our new product platform. But by mid-year, we had overcome those issues and the new platform sales increased significantly from the first quarter to the fourth quarter of fiscal 2011.
International
Our international revenue declined $12.6 million, or 4.3%, in fiscal 2012 compared with fiscal 2011. Our business in Asia and Latin America showed improvement for fiscal 2012 from increased orders from network operators. However, our sales in

Europe and Russia were down from fiscal 2011 primarily due to the reduction of business with a major customer in Russia, that was offset in part by increased orders and sales to wireless network operators in other European countries. Africa continues to be our strongest international sector, where we continue to compete successfully for wireless infrastructure business of large network operators, particularly in West Africa.
Our international revenue increased by $1.0 million, or 0.3%, in fiscal 2011 compared with fiscal 2010. Revenue from sales to wireless operators in Russia and France were substantially improved in fiscal year 2011 over the previous year. Those gains were offset in part by declines in revenue from customers in Africa and the Asia Pacific regions. We experienced strong price competition in all regions during the year and attribute the decrease in revenue in Africa and the Asia Pacific regions to reduced prices, as unit volumes were steady or up from fiscal 2010.

Gross Margin

                                Fiscal Year                          $ Change                      % Change
(In millions,
except percentages)    2012         2011         2010       2012 /2011     2011 /2010      2012 /2011     2011 /2010
Revenue             $  444.0     $  452.1     $  465.5     $     (8.1 )   $     (13.4 )      (1.8 )%        (2.9 )%
Cost of revenue        312.3        324.0        332.7          (11.7 )          (8.7 )      (3.6 )%        (2.6 )%
Gross margin        $  131.7     $  128.1     $  132.8     $      3.6     $      (4.7 )       2.8  %        (3.5 )%
% of revenue            29.7 %       28.3 %       28.5 %

The general business trends of strong price competition for new business in all regions and major customer consolidations continue to put pressure on our gross margin.
Gross margin for fiscal 2012 increased $3.6 million, or 2.8%, compared with fiscal 2011. Gross margin as a percentage of revenue increased 1.4% compared with fiscal 2011. While gross margin was in line with expectations for the year, the year-over-year improvement was primarily due to the absence in the current year period of a $6.0 million one-time charge related to manufacturing overhead that we recorded in the first quarter of fiscal 2011 and the absence of large inventory write-downs which we incurred in fiscal 2011 as we transitioned out of the legacy products.
Prior to fiscal 2011, we capitalized most of the costs associated with our internal manufacturing operations as a component of the overall cost of product inventory. Beginning in the first quarter of fiscal 2011, we shifted the manufacturing of our products primarily to contract manufacturers and completed the transfer by the end of fiscal 2011. Accordingly, the costs associated with our internal operations organization are now expensed as incurred. Gross margin in fiscal 2011 was negatively affected by the immediate expensing of $6.0 million of such previously capitalized costs in the first quarter of fiscal 2011.
Exclusive of the net impact from these charges, the gross margin and gross margin as a percentage of revenue in fiscal 2012 were lower than fiscal 2011 due to competitive pricing pressures and a small shift in the mix of our business toward services, which caused a small decline in the fiscal 2012 gross margin rate. In the long run, we anticipate an improvement in gross margin as a percentage of revenue as a result of the transition to our next generation products.
Gross margin for fiscal 2011 decreased $4.7 million, or 3.5%, compared with fiscal 2010. Gross margin as a percentage of revenue also decreased 0.2% compared with fiscal 2010. The decrease was primarily due to the $6.0 million one-time charge related to manufacturing overhead and the large inventory write-downs incurred in fiscal 2011 as mentioned above, partially offset by a $6.5 million decrease in amortization of purchased technology due to lower intangible asset balances in fiscal 2011 resulting from a $49.5 million impairment of such assets in the fourth quarter of fiscal 2010. Research and Development Expenses

                                Fiscal Year                          $ Change                      % Change
(In millions,
except percentages)    2012         2011         2010       2012 /2011      2011 /2010     2012 /2011    2011 /2010
Research and
development
expenses            $   36.0     $   40.5     $   31.1     $     (4.5 )   $        9.4        (11.1 )%       30.2 %
% of revenue             8.1 %        9.0 %        6.7 %

Our research and development ("R&D") expenses declined $4.5 million, or 11.1%, in fiscal 2012 compared with fiscal 2011. As a percentage of revenue, R&D expenses also decreased to 8.1% in fiscal 2012 from 9.0% in fiscal 2011. The decrease in R&D expenses of $4.5 million, consisting mostly of personnel expenses, was primarily due to restructuring of our research and development workforce in prior years. In addition, share-based compensation expense in fiscal 2011 was higher by $1.0

million due to vesting of performance shares upon the achievement of new product development milestones in fiscal 2011. We continue to invest in new product features, new functionality and lower cost platforms that we believe will enable our product lines to retain their technology leads in a cost effective manner. Our R&D expenses increased $9.4 million in fiscal 2011 compared with fiscal 2010. As a percentage of revenue, R&D expenses also increased to 9.0% in fiscal 2011 from 6.7% in fiscal 2010. The increase in R&D expenses was primarily attributable to investments in new product innovation by increasing R&D headcount in our core business, and an increase in share-based compensation related to the vesting of performance shares upon the achievement of new product development milestones in fiscal 2011.
Selling and Administrative Expenses

                                 Fiscal Year                          $ Change                       % Change
(In millions, except
percentages)            2012         2011         2010       2012 / 2011     2011 / 2010     2012 / 2011    2011 /2010
Selling and
administrative
  expenses           $   98.9     $  104.0     $  134.7     $      (5.1 )   $     (30.7 )       (4.9 )%        (22.8 )%
% of revenue             22.3 %       23.0 %       28.9 %

Our selling and administrative expenses declined $5.1 million, or 4.9%, in fiscal 2012 compared with fiscal 2011. The decrease was due primarily to a $2.6 million reduction in sales and administrative compensation expenses and a $0.4 million decrease in facility expenses as a result of the restructuring programs we implemented over the past two years, a $2.0 million decrease in agent commission expenses driven by lower fee-based revenues, and a decrease of $1.1 million in expenses for information technology projects, partially offset by an increase of $1.3 million in share-based compensation. We will continue to seek ways to improve our operating efficiency in fiscal 2013.
Our selling and administrative expenses declined $30.7 million, or 22.8%, in fiscal 2011 compared with fiscal 2010. The significant decrease in fiscal 2011 was due primarily to reductions in compensation expenses resulting from the restructuring plan implemented in prior years and the sale of NetBoss assets, the absence of sales commissions incurred for a large contract with a customer in fiscal 2010, and absence of expenses related to rebranding and transitional costs incurred in fiscal 2010 due to corporate name change and costs to phase-out transitional services agreement with Harris. The following table summarizes the significant decreases to our selling and administrative expenses comparing fiscal 2011 with fiscal 2010:

                                                                             Amount
                                                                          (In millions)
Decrease in personnel expenses from reductions in force                  $       (10.9 )
Decrease in commissions paid to sales agents                                      (4.1 )
Decrease from lower expenses incurred on information technology projects          (3.9 )
Decrease in amortization of software costs                                        (2.9 )
Decrease due to lower expenses incurred as a result of sale of NetBoss
assets                                                                            (1.9 )
Decrease in executive severance for former CEO                                    (1.8 )
Decrease due to absence of rebranding and transitional costs incurred in
fiscal 2010                                                                       (1.3 )
Other, net                                                                        (3.9 )
                                                                         $       (30.7 )

Restructuring Charges
During the first quarter of fiscal 2011, we initiated a restructuring plan (the "Fiscal 2011 Plan") to reduce our operational costs. The Fiscal 2011 Plan was intended to bring our cost structure in line with the changing business environment of the worldwide microwave radio and telecommunication markets, primarily in North America, Europe and Asia. Activities under the Fiscal 2011 Plan included the downsizing or closures of our Morrisville, North Carolina, Canada and certain international field offices, and reductions in force to reduce our operating expenses.
Earlier in fiscal 2009, we commenced a restructuring plan (the "Fiscal 2009 Plan") to reduce our workforce in the U.S., France, Canada and other locations throughout the world and outsource our San Antonio manufacturing operations to a third party in Austin, Texas. The Fiscal 2009 Plan has been completed as of the end of fiscal 2011.
Our restructuring charges by plan for fiscal 2012, 2011 and 2010 are summarized in the table below:

                                   Fiscal Year                        $ Change                     % Change
(In millions, except
percentages)              2012        2011        2010       2012 /2011      2011 /2010    2012 /2011    2011 /2010
Restructuring           $   2.3     $  15.4     $   7.1     $     (13.1 )   $      8.3        (85.1 )%      116.9  %
By Plan:
  Fiscal 2011 Plan      $   2.3     $  12.7     $     -     $     (10.4 )   $     12.7        (81.9 )%        N/A

Restructuring charges declined significantly by $13.1 million in fiscal 2012 compared with fiscal 2011, and increased $8.3 million in fiscal 2011 compared with fiscal 2010. The changes were due to the completion of Fiscal 2009 Plan in fiscal 2011 and the fact that major restructuring activities under the Fiscal 2011 Plan, such as the downsizing of our Morrisville, North Carolina office, occurred in fiscal 2011. Our restructuring expenses consisted primarily of severance and related benefit charges, and to a lesser extent, facilities costs related to obligations under non-cancelable leases for facilities that we ceased to use.
As of June 29, 2012, we have substantially completed our initiatives under the Fiscal 2011 Plan and expect to wind down certain remaining restructuring activities under this plan in fiscal 2013.
Other Income (Loss), Interest Income and Interest Expense

                                       Fiscal Year
(In millions)                   2012       2011      2010
Loss on sale of NetBoss assets $   -     $ (4.6 )   $   -
Other income (loss), net        (0.6 )     (3.6 )     1.2
Interest income                  0.6        0.3       0.3
Interest expense                (1.3 )     (2.2 )    (2.2 )

During fiscal 2011, we incurred $4.6 million of loss on the sale of NetBoss assets. Other expenses for fiscal 2012 and 2011 consisted primarily of transactional tax assessments related to certain international entities. Other income for fiscal 2010 was related to a gain of $1.2 from final settlement of the Telsima acquisition purchase price during fiscal 2010.
Interest expense was primarily related to preference dividends on our $8.25 million redeemable preference shares and interest associated with borrowings, term loan and letters of credit under our credit facilities. The $8.25 million preference shares were redeemed at their carrying value on January 30, 2012, funded by a two-year term loan of $8.25 million under our credit facility at a fixed interest rate of 5% per annum.

Income Taxes

                                                  Fiscal Year                           $ Change
(In millions, except percentages)       2012          2011          2010       2012 /2011      2011 /2010
Loss from continuing operations
before income taxes                  $  (14.0 )    $  (44.7 )    $ (112.2 )   $      30.7     $      67.5
Provision for (benefit from) income
taxes                                $    1.5      $   14.1      $   (3.8 )   $     (12.6 )   $      17.9
% of loss from continuing operations
before income taxes                     (10.7 )%      (31.5 )%        3.4 %

The income tax expense from continuing operations for fiscal year 2012 was $1.5 million. The variation between our income tax expense from continuing operations and income tax benefit at the statutory rate of 35% on our pre-tax loss of $14.0 million was primarily attributable to losses in tax jurisdictions in which we cannot recognize a tax benefit. The tax expense for fiscal year 2012 of $1.5 million was primarily attributable to profitable foreign entities for which we have accrued income taxes.
The income tax expense from continuing operations for fiscal year 2011 was $14.1 million. The variation between our income tax expense from continuing operations of $14.1 million and income tax benefit at the statutory rate of 35% on our pre-tax loss of $44.7 million was primarily due to an $11.3 million increase in valuation allowance for Singapore deferred tax assets as of the beginning of fiscal 2011 and a $1.4 million foreign branch withholding tax accrual. The expense was partially offset by a valuation allowance release of $1.6 million on Mexico deferred tax assets as of the beginning of fiscal year 2011. The income tax benefit from continuing operations for fiscal 2010 was $3.8 million. The variation between our income

tax benefit from continuing operations and income tax benefit at the statutory rate of 35% on our pre-tax loss of $112.2 million million was primarily due to a $4.4 million one-time benefit recognized for U.S. federal income tax loss carryback under the Worker, Homeownership and Business Assistance Act of 2009. This benefit was partially offset by a full valuation allowance on all domestic deferred tax assets created in fiscal 2010. The effective tax rate for fiscal 2010 primarily reflected the benefits of earnings and losses of foreign subsidiaries taxed at lower rates and a dividend from a foreign subsidiary.

Loss from Discontinued Operations

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