Summary of HARRIS STRATEX NETWORKS, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which include, without limitation, statements about the market for our technology, our strategy and competition. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. For example, the words "believes", "anticipates", "plans", "expects", "intends" and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed below under the discussions of "Risk Factors" set forth in our annual report on Form 10-K filed with the Securities and Exchange Commission on September 25, 2008. All forward looking statements in this document are based on information available to us as of the date hereof and we assume no obligation to update any such forward-looking statements.
As previously announced on July 30, 2008, Harris Stratex Networks, Inc. and its Audit Committee concluded that our consolidated financial statements for the fiscal years ended June 29, 2007, June 30, 2006 and July 1, 2005 and for the first three quarters of the fiscal year ended June 27, 2008 would be restated for the correction of errors contained in those consolidated financial statements. The effect of these restatement items reduced shareholders' equity cumulatively by $11.0 million as of September 28, 2007. Previously reported net loss was decreased by $0.6 million for the quarter ended September 28, 2007. The restatement had no impact on our net cash flows from operations, financing activities or investing activities. To correct these errors, on September 25, 2008, we filed amended quarterly reports on Form 10-Q/A for the first three quarters of fiscal 2008 and an amended annual report on Form 10-K/A for fiscal year 2007. The financial statements for the first quarter of fiscal 2008 included in this report are from the amended quarterly report on Form 10-Q/A filed with the SEC on September 25, 2008. Overview
The following Management's Discussion and Analysis of Financial Condition and Results of Operations, which is sometimes referred to in this Quarterly Report on Form 10-Q as the MD&A, is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to our condensed consolidated financial statements and related notes presented under Item 1, Financial Statements of this report. As of September 26, 2008, Harris Corporation ("Harris") owned 100% of our Class B common stock representing approximately 56% of our total voting shares.
The following is a list of the sections of the MD&A, together with the perspective of our management on the contents of these sections of the MD&A, which is intended to make reading these pages more productive:
• Business Considerations - a general description of our businesses; the drivers of these businesses and our strategy for achieving value and key indicators that are relevant to us in the microwave communications industry.

• Operations Review - an analysis of our consolidated results of operations and of the results in each of its three operating segments, to the extent the operating segment results are helpful to gaining an understanding of our business as a whole.

• Liquidity, Capital Resources and Financial Strategies - an analysis of cash flows, contractual obligations, off-balance sheet arrangements, commercial commitments, financial risk management, impact of foreign exchange and impact of inflation.

• Critical Accounting Policies and Estimates - a discussion of accounting policies and estimates that require the most judgment and a discussion of accounting pronouncements that have been issued but not yet implemented by us and their potential impact.

Business Considerations
We are a leading independent wireless networks solutions provider, focused on delivering 1) microwave digital radio and other communications products, systems and professional services for private network operators and mobile telecommunications providers; and 2) turnkey end-to-end network management and service assurance solutions for broadband and converged networks. Our three segments serve markets for microwave products and services in North America Microwave, International Microwave and network management software solutions worldwide, which we refer to as Network Operations. All of our revenue, income and cash flow are derived from the sale of these products, systems, software and services. We generally sell directly to the end customer. However, to extend our global footprint and maximize our penetration in certain markets, we sometimes sell through agents, resellers and/or distributors, particularly in international markets.

Table of Contents

Drivers of Harris Stratex Businesses and Strategy for Achieving Value We currently focus on these key drivers:
• Achieving profitable revenue growth in all segments;

• Focusing on operating efficiencies and cost reductions; and

• Maintaining an efficient capital structure.

Achieving Profitable Revenue Growth in All Segments We are a global provider of wireless transmission networks solutions. We focus on capitalizing on our strength in the North American market by continuing to seek to win opportunities with wireless telecommunications providers as well as federal, state and other private network operators. We expect our growth opportunities to come from network and capacity expansion and the evolution to IP networking in both the public and private segments. Other growth drivers include the emerging triple-play services (voice, data and video) market in the public sector, the trend towards network hardening and interoperability for public safety and disaster response agencies and the FCC directive to relocate frequency bands in the 2 GHz range to open up spectrum for advanced wireless services. Wireless transmission systems are particularly well-suited to meet the increasing demand for high-reliability, high-bandwidth networks that are more secure and better protected against natural and man-made disasters.
We focus on increasing our international revenue by offering innovative new products and expanding regional sales channels to capture greenfield network opportunities. We also focus on two major evolutionary trends in the global communications market by 1) penetrating large regional mobile telecom operators to participate in network expansion and new third-generation ("3G") network opportunities; and 2) enabling the migration to IP networking in both the public and private segments by providing both IP-enabled and IP-centric wireless transmission solutions.
Through our Network Operations segment, we offer a broad range of engineering and other professional services for network planning, systems architecture design and project management as a global competitive advantage. We will expand our Network Operations offerings in microwave and non-microwave opportunities to create a differentiator for our total solutions offerings. Focusing on Operating Efficiencies and Cost Reductions The principal focus areas for operating efficiencies and cost management are:
1) reducing procurement costs through an emphasis on coordinated supply chain management; 2) reducing product costs through dedicated value engineering resources focused on product value engineering; 3) improving manufacturing efficiencies across all segments; and 4) optimizing facility utilization. Maintaining an Efficient Capital Structure Our capital structure is intended to optimize our cost of capital. We believe a strong capital position, access to key financial markets, ability to raise funds at a low effective cost and overall low cost of borrowing provide a competitive advantage. We had $96.9 million in cash, cash equivalents, short-term investments and available for sale securities as of September 26, 2008.
Key Indicators
We believe our drivers, when fully implemented, will improve key performance indicators such as: net income, revenue, gross margin, gross margin percentage, selling and administrative expenses as a percentage of revenue and cash flow from operations.

Table of Contents

Quarter Ended September 26, 2008 compared with Quarter Ended September 28, 2007 Revenue and Net Income (Loss)

                                     Quarter Ended                         Percentage
                      September 26, 2008       September 28, 2007      Increase/(Decrease)
                                       (In millions, except percentages)
 Revenue               $         195.8         $        172.3                        13.6 %
 Net income (loss)     $           5.6         $         (0.2 )                       N/M
 % of revenue                      2.9 %                 (0.1 )%

N/M = Not statistically meaningful

Our revenue in the first quarter of fiscal 2009 was $195.8 million, an increase of $23.5 million or 13.6%, compared with the first quarter of fiscal 2008. This increase resulted from growth in Africa as customers there continued to expand their network infrastructures and in Latin America and Asia Pacific where our Eclipse Intelligent Node unit system solution is gaining acceptance in 3G network rollouts.
Due to the economic slowdown and the tightening of credit among lending institutions, there is a possibility that customers may decrease their overall spending allocated for network expansion. Some customers may delay or eliminate spending for our products and services in North America and elsewhere.
Our net income in the first quarter of fiscal 2009 was $5.6 million compared with a net loss of $0.2 million in the first quarter of fiscal 2008. The net income in the first quarters of fiscal 2009 and 2008 included the following purchase accounting adjustments and other expenses related to the acquisition and integration of Stratex and share-based compensation expense:

                                                                    First           First
                                                                   Fiscal           Fiscal
                                                                   Quarter         Quarter
                                                                    2009             2008
                                                                        (In millions)
Cost of integration activities undertaken in connection with
the merger                                                        $       -        $    3.6
Amortization of the fair value adjustments related to fixed
assets and inventory                                                    0.6             0.7
Amortization of developed technology                                    1.8             1.8
Amortization of trade names, customer relationships and
non-competition agreements and backlog                                  1.4             1.8
Restructuring charges                                                   3.3             4.0
Share-based compensation expense                                        1.1             2.4

                                                                  $     8.2        $   14.3

During the first quarter of fiscal 2009, we implemented a new restructuring plan (the "Fiscal 2009 Plan") to reduce our workforce in Canada, Brazil and the U.S. During the first quarter of fiscal 2009, our restructuring charges totaled $3.3 million consisting of:
• Severance, retention and related charges associated with reduction in force activities totaling $3.4 million (Fiscal 2009 Plan).
• Impairment of fixed assets (non-cash charges) totaling $0.5 million at our Canadian location (Fiscal 2009 Plan).
• Adjustments to the restructuring liability under our 2007 restructuring plans (the "Fiscal 2007 Plans") for changes in estimates related to sub-tenant activity at our U.S. ($0.3 million) and Canadian locations ($0.3 million). We estimate that we will record an additional $1.1 million in restructuring charges under the Fiscal 2009 Plan during fiscal 2009. Additionally, we expect to have further restructuring plans during fiscal 2009. During the first quarter of fiscal 2008, we recorded an additional $4.0 million of restructuring charges in connection with the implementation of our Fiscal 2007 Plans. These first quarter fiscal 2008 restructuring charges consisted of:
• Severance, retention and related charges associated with reduction in force activities totaling $2.3 million ($2.9 million in first quarter fiscal 2008 charges, less $0.6 million for a reduction in the restructuring liability previously recorded for Canada and France).
• Lease impairment charges totaling $0.8 million from implementation of Fiscal 2007 Plans and changes in estimates related to

Table of Contents

sub-tenant activity at our U.S. and Canadian locations.
• Impairment of fixed assets and leasehold improvements totaling $0.9 million at our Canadian location.

   Gross Margin

                                                                          Quarter Ended                              Percentage
                                                          September 26, 2008         September 28, 2007         Increase/(Decrease)
                                                                              (In millions, except percentages)
Revenue                                                    $          195.8           $          172.3                        13.6 %
Cost of product sales and services                                   (137.6 )                   (125.3 )                       9.8 %
Gross margin                                               $           58.2           $           47.0                        23.8 %
% of revenue                                                           29.7 %                     27.3 %

N/M = Not statistically meaningful

Gross margin in the first quarter of fiscal 2009 was $58.2 million, or 29.7% of revenue, compared with $47.0 million, or 27.3% of revenue in the first quarter of fiscal 2008. Gross margin in the first quarter of fiscal 2009 was reduced by $1.8 million for amortization of developed technology and $0.2 million for amortization of the fair value of adjustments for fixed assets acquired from Stratex. Gross margin in the first quarter of fiscal 2008 was reduced by an $0.2 million write-off of a portion of the fair value adjustments related to fixed assets, $1.8 million for amortization of developed technology and $0.6 million of integration costs.
Gross margin and gross margin percentage increased during the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 due to higher revenue and an improved product mix in our International Microwave segment.

   Research and Development Expenses

                                                                          Quarter Ended                             Percentage
                                                          September 26, 2008         September 28, 2007         Increase/(Decrease)
                                                                              (In millions, except percentages)
Revenue                                                    $         195.8            $         172.3                        13.6 %
Research and development expenses                          $          10.2            $          12.4                       (17.7 )%
% of revenue                                                           5.2 %                      7.2 %

Research and development ("R&D") expenses were $10.2 million in the first quarter of fiscal 2009 compared with $12.4 million in the first quarter of fiscal 2008. As a percentage of revenue, these expenses decreased from 7.2% in the first quarter of fiscal 2008 to 5.2% in the first quarter of fiscal 2009 due to higher revenue and a decrease in spending. The majority of the decrease in spending in the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 was primarily attributable to the reduction in workforce implemented in our restructuring plans during fiscal 2008 and the first quarter of fiscal 2009.

Table of Contents

   Selling and Administrative Expenses

                                                                          Quarter Ended                              Percentage
                                                          September 26, 2008         September 28, 2007         Increase/(Decrease)
                                                                              (In millions, except percentages)
Revenue                                                    $         195.8            $         172.3                         13.6 %
Selling and administrative expenses                        $          36.5            $          28.8                         26.7 %
% of revenue                                                          18.6 %                     16.7 %

Selling and administrative ("S&A") expenses in the first quarter of fiscal 2009 increased to $36.5 million from $28.8 million in the first quarter of fiscal 2008. As a percentage of revenue, these expenses increased to 18.6% of revenue in the first quarter of fiscal 2009 from 16.7% of revenue in the first quarter of fiscal 2008. S&A expenses increased by $7.7 million or 26.7% in the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008 primarily due to the following:
• Sales incentive costs increased by $1.0 million due to an increase in expected commission rates under our sales compensation plan and slightly higher orders.
• Compensation costs increased by $0.6 million resulting from opening new international sales offices.
• Compensation costs increased by $0.9 million due to increased staff levels in finance and growth in our Singapore office.
• Increase of $2.5 million in outside audit, accounting, legal and consulting services to complete the fiscal 2008 audit, including first year SOX requirements, to complete the restatement of our financial statements and for other legal expenses primarily related to patents.
• Increase in information technology expenses of $1.0 million due to consolidation of global information technology infrastructure and associated services.

   Income Taxes

                                                                          Quarter Ended                              Percentage
                                                          September 26, 2008         September 28, 2007         Increase/(Decrease)
                                                                              (In millions, except percentages)
Income before income taxes                                    $         6.5            $         0.0                         N/M
Provision for income taxes                                    $         0.9            $         0.2                         N/M
% of income before income taxes                                        13.8 %                    N/M

N/M = Not statistically meaningful

The provision for income taxes for the first quarters of fiscal 2009 and 2008 reflect our pre-tax income based on our estimated annual effective tax rate. The variation between the provision for income taxes and income taxes at the statutory rate of 35% is primarily due to the consolidation of our foreign operations, which are subject to income taxes at lower statutory rates.

Table of Contents

Related Party Transactions with Harris Harris provides information services, human resources, financial shared services, facilities, legal support and supply chain management services to us. On January 26, 2007, we entered into a Transition Services Agreement with Harris to provide for certain services. These services also are charged to us based primarily on actual usage and include database management, supply chain operating systems, eBusiness services, sales and service, financial systems, back office material resource planning support, HR systems, internal and information systems shared services support, network management and help desk support, and server administration and support. During the quarters ended September 26, 2008 and September 28, 2007, Harris charged us $1.5 million and $1.7 million for these services.
We have sales to, and purchases from, other Harris entities from time to time. These purchases and sales are recorded at market price. Our sales to Harris entities were $0.9 million and $1.2 million for the quarters ended September 26, 2008 and September 28, 2007. We also recognized costs associated with related party purchases from Harris of $1.3 million and $0.3 million for the quarters ended September 26, 2008 and September 28, 2007.
The unpaid amounts billed from Harris are included within "Due to Harris Corporation" on our Condensed Consolidated Balance Sheets. Additionally, we have other receivables and payables in the normal course of business with Harris. These amounts are netted within "Due to Harris Corporation" on our Condensed Consolidated Balance Sheets. Total receivables from Harris were $2.9 million and $4.0 million as of September 26, 2008 and June 27, 2008. Total payables to Harris were $13.9 million and $20.8 million as of September 26, 2008 and June 27, 2008.
Prior to January 26, 2007, the date of our merger with Stratex Networks, Inc., we used certain assets in Canada owned by Harris that were not contributed to us as part of the merger. We continue to use these assets in our business and we entered into a 5-year lease agreement to accommodate this use. This agreement is a capital lease under generally accepted accounting principles. As of September 26, 2008, our lease obligation to Harris was $2.6 million of which $1.4 million is a current liability and the related asset amount, net of accumulated amortization of $2.5 million, is included in property, plant and equipment. Quarterly lease payments are due to Harris based on the amount of 103% of Harris' annual depreciation calculated in accordance with U.S. generally accepted accounting principles.
During the first quarter of fiscal 2008, we recognized an impairment charge of $1.3 million on a portion of these assets which is included in our restructuring charges. We also recognized an increase of $0.4 million to the lease obligation balance during the first quarter of fiscal 2008 from a recapitalization under the lease terms, primarily because of the impairment charge and a rescheduling of the lease payments. During the first quarter of fiscal 2008, we paid Harris $2.0 million under this capital lease obligation resulting from the $1.3 million impairment discussed above and the lease payments. Our amortization expense on this capital lease was $0.4 million and $0.4 million during the first quarters of fiscal 2009 and 2008.

Discussion of Business Segments
   North America Microwave Segment

                                                                          Quarter Ended                              Percentage
                                                          September 26, 2008         September 28, 2007         Increase/(Decrease)
                                                                              (In millions, except percentages)
Revenue                                                    $         61.5            $        56.6                           8.7 %
Segment operating income (loss)                            $          1.7            $        (0.3 )                         N/M
% of revenue                                                          2.8 %                   (0.5 )%

N/M = Not statistically meaningful

North America Microwave segment revenue increased by $4.9 million, or 8.7%, in the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008. Revenue drivers in the North America Microwave segment included customer demand for increased bandwidth, footprint expansion and the relocation of advanced wireless services to the 2 gigahertz spectrum by mobile operators.

Table of Contents

The North America Microwave first quarter fiscal 2009 operating income reflected deductions for the following amounts related to the acquisition of Stratex: $0.2 million for amortization of the fair value adjustments for fixed assets, $0.4 million for amortization of developed technology, trade names and customer relationships and $2.7 million of restructuring charges. The total of such charges was less for this segment than in the first quarter of fiscal 2008.
The operating loss for this segment in the first quarter of fiscal 2008 included the following amounts related to the acquisition of Stratex: a $0.2 million write-off of a portion of the fair value adjustments for fixed assets, $0.6 million for amortization of developed technology, tradenames, customer relationships and non-compete agreements, and $5.6 million of charges related principally to restructuring and integration activities undertaken in connection with the merger.
The North America Microwave segment operating results also included $0.8 million in share-based compensation expense during the first quarter of fiscal 2009 compared with $2.3 million in the first quarter of fiscal 2008.

   International Microwave Segment

                                                                           Quarter Ended                              Percentage
                                                          September 26, 2008          September 28, 2007         Increase/(Decrease)
                                                                               (In millions, except percentages)
Revenue                                                    $         130.9            $        109.2                           19.9 %
Segment operating income (loss)                            $           5.8            $         (0.5 )                          N/M
% of revenue                                                           4.4 %                    (0.5 )%

N/M = Not statistically meaningful

International Microwave segment revenue increased by $21.7 million or 19.9% in the first quarter of fiscal 2009 compared with the first quarter of fiscal 2008. This increase resulted from growth in Africa for network infrastructure expansion and in Latin America and Asia Pacific where sales of Eclipse systems increased due to customers' 3G network rollouts.
Our International Microwave segment had operating income of $5.8 million in the first quarter of fiscal 2009 compared with an operating loss of $0.5 million in the first quarter of fiscal 2008. The improvement in operating income resulted primarily from an increase in revenue when compared with the first . . .