UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

HARRIS STRATEX NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-5961564
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
637 Davis Drive
Morrisville, North Carolina		27560
(Address of principal executive offices)		(Zip Code)

Indicate by checkmark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

HARRIS STRATEX NETWORKS, INC.

FORM 10-Q/A

For the Quarter Ended September 28, 2007

INDEX

		Page
Part I. Financial Information:			4
Item 1. Financial Statements (Unaudited)			4
Condensed Consolidated Statements of Operations for the Quarters ended September 28, 2007 (Restated) and September 29, 2006 (Restated)			4
Condensed Consolidated Balance Sheets at September 28, 2007 (Restated) and June 29, 2007 (Restated)			5
Condensed Consolidated Statements of Cash Flows for the Quarters ended September 28, 2007 (Restated) and September 29, 2006 (Restated)			6
Notes to Condensed Consolidated Financial Statements (Unaudited) (Restated)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			40
Part II. Other Information:			41
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 6. Exhibits			41
Signature			42
Exhibit Index			43
EXHIBIT 15
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

This Quarterly Report on Form 10-Q/A contains trademarks of Harris Stratex Networks, Inc.

We have restated our unaudited condensed consolidated financial statements for the quarter ended September 28, 2007 and September 29, 2006 in this Amendment to Form 10-Q (the “Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the quarter ended September 28, 2007. This Form 10-Q/A also reflects the restatement of Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 4 “Controls and Procedures” for the quarter ended September 28, 2007 and September 29, 2006. The restatement also affects, and is reflected in, other items in this Form 10-Q/A.

Previously filed (i) interim consolidated financial statements for the quarter ended September 28, 2007 and September 29, 2006 (ii) the annual Consolidated financial statements for the fiscal years ended June 29, 2007, June 30, 2006, and July 1, 2005 included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2007 and (iii) related reports of its independent registered public accountants should no longer be relied upon.

Specifically, we have restated our unaudited condensed consolidated financial statements related to the following items:

§		Errors in project work in process inventory accounts within a cost accounting system at one location that resulted in project cost variances not being recorded to cost of sales in a timely manner.
§		Errors in the reconciliation of inventory and intercompany accounts receivable accounts which resulted in an overstatement of inventory and accounts receivable in prior years.
§		Errors in prior years’ product warranty liability accruals which resulted in the improper exclusion of costs associated with technical assistance service provided by the Company under its standard warranty policy.

The effect of these restatement items reduced stockholders’ equity cumulatively by $11.0 million as of September 28, 2007 and $11.6 million as of June 29, 2007. Net loss was decreased by $0.6 million for the quarter ended September 28, 2007 and income was increased by $0.7 million for the quarter ended September 29, 2006.

This restatement is more fully described in Part I herein under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note C “Restatement to Previously Issued Financial Statements” to such unaudited condensed consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

HARRIS STRATEX NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Quarter Ended
		September 28,				September 29,
		2007				2006
		(Restated)				(Restated)
		(In millions, except per share amounts)
Revenue from product sales and services:
Revenue from external product sales		$	148.6			$	81.9
Revenue from product sales with Harris Corporation			1.2				0.5
Total revenue from product sales			149.8				82.4
Revenue from services			22.5				11.2
Total revenue from product sales and services			172.3				93.6
Cost of product sales and services:
Cost of external product sales			(108.9	)			(51.9	)
Cost of product sales with Harris Corporation			(0.3	)			(0.3	)
Total cost of product sales			(109.2	)			(52.2	)
Cost of services			(13.7	)			(7.3	)
Cost of sales billed from Harris Corporation			(0.6	)			(2.6	)
Amortization of purchased technology			(1.8	)			—
Total cost of product sales and services			(125.3	)			(62.1	)
Gross margin			47.0				31.5
Research and development expenses			(12.4	)			(7.5	)
Selling and administrative expenses			(27.1	)			(14.8	)
Selling and administrative expenses with Harris Corporation			(1.7	)			(1.6	)
Total research, development, selling and administrative expenses			(41.2	)			(23.9	)
Amortization of identifiable intangible assets			(1.8	)			—
Restructuring charges			(4.0	)			—
Corporate allocations expense from Harris Corporation			—				(1.6	)
Operating income			—				6.0
Interest income			0.7				0.1
Interest expense			(0.7	)			(0.2	)
Income before provision for income taxes			—				5.9
Provision for income taxes			(0.2	)			(0.4	)
Net (loss) income		$	(0.2	)		$	5.5
Basic and diluted net loss per share		$	—				N/A
Basic and diluted weighted average shares outstanding			58.4				N/A

See accompanying Notes to Consolidated Financial Statements.

HARRIS STRATEX NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 28,				June 29,
		2007				2007
		(Restated)				(Restated)
		(In millions, except per
		share amounts)
Assets
Current Assets
Cash and cash equivalents		$	64.2			$	69.2
Short-term investments and available for sale securities			15.1				20.4
Receivables			197.0				183.1
Unbilled costs			48.6				36.9
Inventories			121.5				124.2
Deferred income taxes			5.0				4.1
Other current assets			20.7				21.7
Total current assets			472.1				459.6
Long-Term Assets
Property, plant and equipment			79.2				80.0
Goodwill			315.1				324.7
Identifiable intangible assets			141.0				144.5
Capitalized software			9.7				9.7
Non-current notes receivable			4.6				5.3
Non-current deferred income taxes			0.6				0.5
Other assets			1.9				1.2
Total long-term assets			552.1				565.9
Total assets		$	1,024.2			$	1,025.5
Liabilities and Shareholders’ Equity
Current Liabilities
Short-term debt		$	—			$	1.2
Current portion of long-term debt			9.2				10.7
Accounts payable			92.1				84.7
Compensation and benefits			12.4				11.5
Other accrued items			46.1				45.8
Advance payments and unearned income			22.3				22.3
Income taxes payable			5.5				6.8
Restructuring liabilities			10.7				10.8
Current portion of long-term capital lease obligation to Harris Corporation			2.5				3.1
Due to Harris Corporation			20.2				17.2
Total Current Liabilities			221.0				214.1
Long-Term Liabilities
Long-term debt			7.5				8.8
Long-term portion of capital lease obligation to Harris Corporation			1.4				2.8
Restructuring and other long-term liabilities			9.9				11.8
Redeemable preference shares			8.3				8.3
Warrants			3.4				3.9
Deferred income taxes			20.2				29.4
Total Liabilities			271.7				279.1
Commitments and contingencies
Shareholders’ Equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued			—				—
Common stock, Class A, $0.01 par value; 300,000,000 shares authorized; issued and outstanding 25,478,101 shares at September 28, 2007 and 25,400,856 shares at June 29, 2007			0.3				0.3
Common stock, Class B $0.01 par value; 100,000,000 shares authorized; issued and outstanding 32,913,377 shares at September 28, 2007 and June 29, 2007			0.3				0.3
Additional paid-in-capital			773.3				770.0
Accumulated deficit			(24.4	)			(24.2	)
Accumulated other comprehensive income			3.0				—
Total Shareholders’ Equity			752.5				746.4
Total Liabilities And Shareholders’ Equity		$	1,024.2			$	1,025.5

See accompanying Notes to Consolidated Financial Statements.

HARRIS STRATEX NETWORKS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

		Quarter Ended
		September 28,				September 29,
		2007				2006
		(Restated)				(Restated)
		(In millions)
Operating Activities
Net (loss) income		$	(0.2	)		$	5.5
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Amortization of identifiable intangible assets acquired in the Stratex acquisition			3.6				—
Depreciation and amortization of property, plant and equipment and capitalized software			5.3				3.3
Non-cash stock-based compensation expense			2.0				—
Increase in fair value of warrants			(0.5	)			—
Deferred income tax expense			0.2				—
Changes in operating assets and liabilities:
Receivables			(13.2	)			(1.7	)
Unbilled costs and inventories			(9.0	)			(1.6	)
Accounts payable and accrued expenses			8.6				(1.2	)
Advance payments and unearned income			—				4.0
Due to Harris Corporation			3.0				(9.5	)
Other			2.3				0.2
Net cash provided by (used in) operating activities			2.1				(1.0	)
Investing Activities
Purchases of short-term investments and available for sale securities			(4.0	)			—
Sales of short-term investments and available for sale securities			9.3				—
Additions of property, plant and equipment			(2.1	)			(0.2	)
Additions of capitalized software			(4.2	)			(1.1	)
Net cash used in investing activities			(1.0	)			(1.3	)
Financing Activities
Decrease in short-term debt			(1.2	)			(0.1	)
Payments on long-term debt			(2.8	)			—
Payments on long-term capital lease obligation to Harris Corporation			(2.0	)			—
Proceeds from exercise of former Stratex stock options			0.9				—
Net cash and other transfers from Harris Corporation prior to the Stratex acquisition			—				2.7
Net cash (used in) provided by financing activities			(5.1	)			2.6
Effect of exchange rate changes on cash and cash equivalents			(1.0	)			0.3
Net (decrease) increase in cash and cash equivalents			(5.0	)			0.6
Cash and cash equivalents, beginning of year			69.2				13.8
Cash and cash equivalents, end of quarter		$	64.2			$	14.4

See accompanying Notes to Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 2007
(Unaudited)

The accompanying condensed consolidated financial statements include the accounts of Harris Stratex Networks, Inc. and its wholly-owned and majority-owned subsidiaries (“we,” “us,” and “our”) and have been prepared by us, without an audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and changes in cash flows in conformity with U.S. generally accepted accounting principles. In the opinion of our management, such financial statements reflect all adjustments (consisting only of normal, recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods.

The results for the quarter ended September 28, 2007 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at June 29, 2007 has been derived from our audited financial statements but does not include all the information and footnotes required by generally accepted accounting principles in the United States for annual financial statements. We provide complete financial statements in our Annual Report on Form 10-K/A, which includes information and footnotes required by the rules and regulations of the SEC. The information included in this Quarterly Report on Form 10-Q/A should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the fiscal year ended June 29, 2007 (“Fiscal 2007 Form 10-K/A”).

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those results and estimates.

Prior to January 26, 2007, we were a division of Harris Corporation (“Harris”). For periods prior to January 26, 2007, our consolidated financial statements include the accounts of the MCD and Harris subsidiaries classified as part of MCD, our financial reporting predecessor entity. These financial statements have been determined to be the historical financial statements of Harris Stratex Networks, Inc. As used in these notes, the term “MCD” refers to the consolidated operations of the Microwave Communications Division of Harris.

For periods prior to January 26, 2007, our historical financial statements are presented on a carve-out basis and reflect the assets, liabilities, revenue and expenses that were directly attributable to MCD as it was operated within Harris. Our condensed consolidated statements of operations include all of the related costs of doing business, including an allocation of certain general corporate expenses of Harris, which were in support of MCD, including costs for finance, legal, treasury, purchasing, quality, environmental, safety, human resources, tax, audit and public relations departments and other corporate and infrastructure costs. We were allocated $1.6 million for these general corporate expenses from Harris during the quarter ended September 29, 2006. These costs represented approximately 9.9% of the total cost of these allocated services in the quarter ended September 29, 2006. These cost allocations were based primarily on a ratio of our revenue to total Harris revenue, multiplied by the total headquarters expense of Harris. The allocation of Harris overhead expenses to us concluded on January 26, 2007. We believe these allocations were made on a reasonable basis. Harris currently owns approximately 56% of our common stock.

On January 26, 2007, we acquired Stratex Networks, Inc. (“Stratex”). The results of operations and cash flows of Stratex were not included in any of our consolidated financial statements before January 26, 2007.

     Accounting for Uncertain Tax Positions

On June 30, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a “more-likely-than-not” threshold for the recognition and derecognition of tax positions, provides guidance on the accounting for interest and penalties relating to tax positions and requires that the

cumulative effect of applying the provisions of FIN 48 shall be reported as an adjustment to the opening balance in retained earnings (deficit) or other appropriate components of equity or net assets. Refer to “Note O — Income Taxes”, for additional information relating to our accounting for FIN 48 and income taxes.

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 and $11.6 million as of June 29, 2007. Previously reported net loss was decreased by $0.6 million for the quarter ended September 28, 2007 and income was increased by $0.7 million for the quarter ended September 29, 2006. The restatement had no impact on our net cash flows from operations, financing activities or investing activities. Details of the nature of the corrections are as follows:

Project costs are accumulated in work in process inventory accounts in our cost accounting systems. As products are shipped or otherwise meet our revenue recognition criteria, these project costs are recorded to cost of sales. Estimates may be required at the point of sale if certain costs have been incurred, but not yet invoiced to us. On a routine and periodic basis, we review the work in process balances related to these projects to ensure all appropriate costs have been recorded to cost of sales in a timely manner and in the period to which they relate.

During the fiscal year 2008, we determined that this review had not been performed in a manner sufficient to identify significant project cost variances remaining in certain inventory accounts, and that the resulting errors impacted prior quarters and prior years. To correct this error, we decreased work in process inventory compared to amounts previously recorded by $10.2 million and $9.6 million as of September 28, 2007 and June 29, 2007, respectively, increased cost of external product sales and services by $0.6 million for the quarter ended September 28, 2007 and decreased cost of external product sales and services by $0.6 million for the quarter ended September 29, 2006.

During the course of the year end close for the fiscal year ending June 27, 2008, we determined that certain account reconciliation adjustments recorded in the fourth quarter of fiscal 2008, which related primarily to inventory and intercompany accounts receivable accounts, should have been recorded in prior quarters or prior years. We determined that certain manual controls had not been performed for certain periods, resulting in accounting errors. More specifically, we identified errors in the work in process inventory balances resulting from incorrect account reconciliation processes. To correct this error, we recorded adjustments to decrease inventory compared to amounts previously recorded by $3.4 million and $1.9 million as of September 28, 2007 and June 29, 2007, respectively, increase cost of external product sales by $1.5 million for the quarter ended September 28, 2007, and decrease the cost of external product sales by $0.1 million for the quarter ended September 29, 2006.

We also identified errors in accounts receivable balances as a result of control deficiencies in the recording and elimination of intercompany transactions. To correct this error, we increased accounts receivable by $0.9 million for the quarter ended September 28, 2007 and decreased accounts receivable by $2.2 million at June 29, 2007, and increased selling and administrative expenses by $3.1 million for the quarter ended September 28, 2007.

Our liability for product warranties contains the estimated accrual for certain technical assistance services provided under our standard warranty policy. We determined that these costs had not been properly included in the warranty liability estimates in the balance sheet of Stratex at the date of acquisition. To correct this error, we recorded an adjustment to increase the warranty liability and increase goodwill related to the Stratex acquisition by $1.1 million at June 29, 2007.

Taking into consideration the restatement adjustments described above, we reassessed our income tax provision in accordance with Statement 109. As a result, we recorded an adjustment to decrease the deferred tax liability balance by $1.7 million and $2.1 million as of September 28, 2007 and June 29, 2007, respectively, and to decrease the income tax benefit by $0.4 million for the quarter ended September 28, 2007. For periods prior to January 26, 2007, income tax expense was determined as if MCD had been a stand-alone entity, although the actual tax liabilities and tax consequences applied only to Harris. Our income tax expense for those periods relates to income taxes paid or to be paid in foreign

jurisdictions for which net operating loss carryforwards were not available and domestic taxable income is deemed offset by tax loss carryforwards for which an income tax valuation allowance had been previously provided for in the financial statements. Thus, there was no change in our tax provision for periods prior to fiscal 2007.

The following tables present the impact of the restatement adjustments on our previously reported consolidated balance sheets as of September 28, 2007 and June 29, 2007, as well as the impact on our previously reported consolidated statements of operations and cash flows for the quarters ended September 28, 2007 and September 29, 2006.

QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		For the quarter ended September 28, 2007
		As Previously
		Reported				Adjustments				As Restated
		(In millions)
Revenue		$	172.3			$	—			$	172.3
Gross margin			49.1				(2.1	)			47.0
Loss from operations			(1.0	)			1.0				—
Net loss		$	(0.8	)		$	0.6			$	(0.2	)
Basic and diluted net loss per common share		$	(0.01	)		$	—			$	—

		For the quarter ended September 29, 2006
		As Previously
		Reported				Adjustments				As Restated
		(In millions)
Revenue		$	93.6			$	—			$	93.6
Gross margin			30.8				0.7				31.5
Income from operations			5.3				0.7				6.0
Net income		$	4.8			$	0.7			$	5.5
Basic and diluted net loss per common share			N/A				N/A				N/A

		As of September 28, 2007
		As Previously
		Reported				Adjustments				As Restated
						(In millions)
ASSETS
Current Assets
Cash and cash equivalents		$	64.2			$	—			$	64.2
Short-term investments and available for sale securities			15.1				—				15.1
Receivables			196.1				0.9				197.0
Unbilled costs			48.6				—				48.6
Inventories			135.1				(13.6	)			121.5
Deferred income taxes			5.0				—				5.0
Other current assets			20.7				—				20.7
Total current assets			484.8				(12.7	)			472.1
Long-Term Assets
Property, plant and equipment			79.2				—				79.2
Goodwill			314.0				1.1				315.1
Identifiable intangible assets			141.0				—				141.0
Other long-term assets			16.8				—				16.8
Total long-term assets			551.0				1.1				552.1
Total assets		$	1,035.8			$	(11.6	)		$	1,024.2
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term debt		$	—			$	—			$	—
Current portion of long-term debt			9.2				—				9.2
Accounts payable			92.1				—				92.1
Compensation and benefits			12.4				—				12.4
Other accrued items			45.0				1.1				46.1
Advance payments and unearned income			22.3				—				22.3
Income taxes payable			5.5				—				5.5
Restructuring liabilities			10.7				—				10.7
Current portion of long-term capital lease obligation to Harris Corporation			2.5				—				2.5
Due to Harris Corporation			20.2				—				20.2
Total current liabilities			219.9				1.1				221.0
Long-term Liabilities			52.4				(1.7	)			50.7
Total liabilities			272.3				(0.6	)			271.7
Total shareholders’ equity			763.5				(11.0	)			752.5
Total liabilities and shareholders’ equity		$	1,035.8			$	(11.6	)		$	1,024.2

		As of June 29, 2007
		As Previously
		Reported				Adjustments				As Restated
		(In millions)
ASSETS
Current Assets
Cash and cash equivalents		$	69.2			$	—			$	69.2
Short-term investments and available for sale securities			20.4				—				20.4
Receivables			185.3				(2.2	)			183.1
Unbilled costs			36.9				—				36.9
Inventories			135.7				(11.5	)			124.2
Deferred income taxes			4.1				—				4.1
Other current assets .			21.7				—				21.7
Total current assets			473.3				(13.7	)			459.6
Long-Term Assets
Property, plant and equipment			80.0				—				80.0
Goodwill			323.6				1.1				324.7
Identifiable intangible assets			144.5				—				144.5
Other long-term assets			16.7				—				16.7
Total long-term assets			564.8				1.1				565.9
Total assets		$	1,038.1			$	(12.6	)		$	1,025.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term debt		$	1.2			$	—			$	1.2
Current portion of long-term debt			10.7				—				10.7
Accounts payable			84.7				—				84.7
Compensation and benefits			11.5				—				11.5
Other accrued items			44.7				1.1				45.8
Advance payments and unearned income			22.3				—				22.3
Income taxes payable			6.8				—				6.8
Restructuring liabilities			10.8				—				10.8
Current portion of long-term capital lease obligation to Harris Corporation			3.1				—				3.1
Due to Harris Corporation			17.2				—				17.2
Total current liabilities			213.0				1.1				214.1
Long-term Liabilities			67.1				(2.1	)			65.0
Total Liabilities			280.1				(1.0	)			279.1
Total shareholders’ equity			758.0				(11.6	)			746.4
Total liabilities and shareholders’ equity		$	1,038.1			$	(12.6	)		$	1,025.5

		For the quarter ended
		September 28, 2007
		As
		Previously								As
		Reported				Adjustments				Restated
		(In millions)
Net loss		$	(0.8	)		$	0.6			$	(0.2	)
Net cash provided by operating activities			2.1				—				2.1
Amortization of identifiable intangible assets acquired in the Stratex acquisition			3.6				—				3.6
Depreciation and amortization of property, plant and equipment and capitalized software			5.3				—				5.3
Non-cash stock-based compensation expense			2.0				—				2.0
Increase in fair value of warrants			(0.5	)			—				(0.5	)
Deferred income tax expense			(0.2	)			0.4				0.2
Changes in operating assets and liabilities:
Receivables			(10.1	)			(3.1	)			(13.2	)
Unbilled costs and inventories			(11.0	)			2.0				(9.0	)
Accounts payable and accrued expenses			8.5				0.1				8.6
Advance payments and unearned income			—				—				—
Due to Harris Corporation			3.0				—				3.0
Other			2.3				—				2.3
Net cash used in investing activities			(1.0	)			—				(1.0	)
Net cash used in financing activities			(5.1	)			—				(5.1	)
Effect of exchange rate changes on cash and cash equivalents			(1.0	)			—				(1.0	)
Net decrease in cash and cash equivalents			(5.0	)			—				(5.0	)
Cash and cash equivalents, beginning of year		$	69.2				—			$	69.2
Cash and cash equivalents, end of year		$	64.2			$	—			$	64.2

		For the quarter ended
		September 29, 2006
		As
		Previously								As
		Reported				Adjustment				Restated
		(In millions)
Net income		$	4.8			$	0.7			$	5.5
Net cash used in operating activities			(1.0	)			—				(1.0	)
Amortization of identifiable intangible assets acquired in the Stratex acquisition			—				—				—
Depreciation and amortization of property, plant and equipment and capitalized software			3.3				—				3.3
Non-cash stock-based compensation expense			—				—				—
Increase in fair value of warrants			—				—				—
Deferred income tax expense			—				—				—
Changes in operating assets and liabilities:
Receivables			(1.6	)			(0.1	)			(1.7	)
Unbilled costs and inventories			(0.9	)			(0.7	)			(1.6	)
Accounts payable and accrued expenses			(1.3	)			0.1				(1.2	)
Advance payments and unearned income			4.0				—				4.0
Due to Harris Corporation			(9.5	)			—				(9.5	)
Other			0.2				—				0.2
Net cash used in investing activities			(1.3	)			—				(1.3	)
Net cash provided by financing activities			2.6				—				2.6
Effect of exchange rate changes on cash and cash equivalents			0.3				—				0.3
Net increase in cash and cash equivalents			0.6				—				0.6
Cash and cash equivalents, beginning of year		$	13.8				—			$	13.8
Cash and cash equivalents, end of year		$	14.4			$	—			$	14.4

Note D — Short-Term Investments and Available for Sale Securities

Short-term investments and available for sale securities as of September 28, 2007 consisted of the following:

		September 28, 2007
						Gross				Gross
						Unrealized				Unrealized				Market
		Cost				Gain				Loss				Value
		(In millions)
Corporate notes		$	11.0			$	—			$	—			$	11.0
Government notes			3.6				—				—				3.6
Auction rate securities			0.5				—				—				0.5
Total short-term investments and available for sale securities		$	15.1			$	—			$	—			$	15.1

With the exception of the auction rate securities, all of the Company’s short-term investments and available for sale securities have maturity dates of less than one year, with a weighted average maturity of 123 days. Our auction rate securities have maturities in perpetuity or extending through August 2038, with interest rates resetting generally every 28 days.

Note E — Accumulated Other Comprehensive Income (Loss) and Comprehensive Income (Restated)

The changes in components of our accumulated other comprehensive income (loss) during the quarters ended September 28, 2007 and September 29, 2006 were as follows:

										Short-Term
										Investments				Total
										and				Accumulated
		Foreign								Available				Other
		Currency				Hedging				for Sale				Comprehensive
		Translation				Derivatives				Securities				Income (Loss)
		(In millions)
Balance at June 29, 2007		$	—			$	—			$	—			$	—
Foreign currency translation			2.7				—				—				2.7
Net unrealized gain on hedging activities, net of $0 tax			—				0.3				—				0.3
Balance at September 28, 2007		$	2.7			$	0.3			$	—			$	3.0
Balance at June 30, 2006			(1.5	)			0.1				—				(1.4	)
Foreign currency translation			0.3				—				—				0.3
Net unrealized loss on hedging activities, net of $0 tax			—				(0.1	)			—				(0.1	)
Balance at September 29, 2006		$	(1.2	)		$	—			$	—			$	(1.2	)

Total comprehensive income for the quarters ended September 28, 2007 and September 29, 2006 was comprised of the following:

		September 28, 2007				September 29, 2006
		(Restated)				(Restated)
		(In millions)
Net (loss) income		$	(0.2	)		$	5.5
Other comprehensive income:
Foreign currency translation			2.7				0.3
Net unrealized gain (loss) on hedging activities			0.3				(0.1	)
Total comprehensive income		$	2.8			$	5.7

Note F — Receivables (Restated)

Our receivables are summarized below:

		As of				As of
		September 28, 2007				June 29, 2007
		(Restated)				(Restated)
		(In millions)
Accounts receivable		$	202.0			$	188.3
Notes receivable due within one year — net			3.4				3.3
			205.4				191.6
Less allowances for collection losses			(8.4	)			(8.5	)
		$	197.0			$	183.1

Note G — Inventories (Restated)

Our inventories are summarized below:

		As of				As of
		September 28, 2007				June 29, 2007
		(Restated)				(Restated)
		(In millions)
Finished products		$	50.6			$	52.9
Work in process			24.1				17.1
Raw materials and supplies			63.5				68.4
			138.2				138.4
Inventory reserves			(16.7	)			(14.2	)
		$	121.5			$	124.2

Note H — Property, Plant and Equipment

Our property, plant and equipment are summarized below:

		As of				As of
		September 28, 2007				June 29, 2007
		(In millions)
Land		$	1.3			$	1.3
Buildings			28.1				30.8
Software developed for internal use			6.7				3.0
Machinery and equipment			122.5				123.3
			158.6				158.4
Less allowances for depreciation and amortization			(79.4	)			(78.4	)
		$	79.2			$	80.0

Depreciation and amortization expense related to plant and equipment, including software amortization, was $4.6 million and $3.3 million during the quarters ended September 28, 2007 and September 29, 2006.

Note I — Credit Facility and Debt

Our debt consisted of the following at September 28, 2007 and June 29, 2007:

		As of				As of
		September 28, 2007				June 29, 2007
		(In millions)
Credit Facility with Bank:
Term Loan A		$	4.2			$	5.7
Term Loan B			12.5				13.8
Other short-term notes			—				1.2
Total			16.7				20.7
Less other short-term notes			—				(1.2	)
Less current portion			(9.2	)			(10.7	)
Long-term debt		$	7.5			$	8.8

As part of the Stratex acquisition, we assumed the existing credit facility of Stratex with a commercial bank (the “Credit Facility”). The Credit Facility allows for revolving credit borrowings of up to $50 million with available credit defined as $50 million less the outstanding balance of our term loans ($16.7 million as of September 28, 2007) and any usage under the revolving credit portion which includes our outstanding standby letters of credit ($6.7 million as of September 28, 2007). The Credit Facility is unsecured. The fair value of our debt approximates book values as of September 28, 2007.

Term Loan A of the Credit Facility requires monthly principal payments of $0.5 million plus interest at a fixed rate of 6.38% through May 2008. Term Loan B requires monthly principal payments of $0.4 million plus interest at a fixed rate of 7.25% through March 2010.

The credit facility agreement contains a minimum tangible net worth covenant and a liquidity ratio covenant. As of September 28, 2007, we were in compliance with these financial covenants.

As of September 28, 2007, our future principal payment obligations on long-term debt under the Credit Facility were as follows:

		Years Ending
		in June
		(In millions)
2008		$	7.9
2009			5.0
2010			3.8
Total		$	16.7

We have other uncommitted short-term lines of credit aggregating $11.2 million from various international banks, all of which was available on September 28, 2007. These lines provide for borrowings at various interest rates, typically may be terminated upon notice, may be used on such terms as mutually agreed to by the banks and us and are reviewed annually for renewal or modification.

We have accrued for the estimated cost to repair or replace products under warranty at the time of sale. Changes in warranty liability, which is included as a component of “Other accrued items” on the condensed consolidated balance sheets, during the quarters ended September 28, 2007 and September 29, 2006 were as follows:

		Quarter Ended
		September 28, 2007				September 29, 2006
		(Restated)				(Restated)
		(In millions)
Balance as of the beginning of the year		$	6.7			$	3.9
Warranty provision for revenue recorded during the quarter			1.9				0.5
Settlements made during the quarter			(2.2	)			(0.5	)
Balance as of the end of the quarter		$	6.4			$	3.9

As part of the Stratex acquisition, we assumed warrants to purchase shares of our Class A common stock. As of September 28, 2007, warrants to purchase 520,445 shares of our Class A common stock were outstanding. These warrants have an exercise price of $11.80 per common share and will expire on September 24, 2009. The per share fair value of each warrant was $6.53 and $7.43 on September 28, 2007 and June 29, 2007, respectively, determined based on the Black-Scholes-Merton model with the assumptions listed in the table below.

			September 28, 2007			June 29, 2007
Dividend yield			0	.0%			0	.0%
Expected volatility			39	.6%			43	.1%
Risk-free interest rate			4	.14%			4	.91%
Expected holding period			1	.00 year			1	.25 year

As a result of recording these outstanding warrants at fair value at September 28, 2007, we recorded the change in fair value during the quarter ended September 28, 2007 as a $0.5 million decrease to selling and administrative expenses on our condensed consolidated statements of operations. During the quarter ended September 28, 2007, there were no warrants exercised.

In order to improve operating efficiencies and create synergies through the consolidation of facilities, we implemented restructuring plans in fiscal 2007 to scale down our operations in Canada, France, the U.S. and Mexico. We began implementation of a plan in February 2007 to scale down operations in Montreal, Canada and, to a lesser extent, in the U.S. In the initial phase of this plan, notices were sent to approximately 200 employees in Montreal that their employment would be terminated between March 30, 2007 and December 31, 2007. We also began implementation of a plan in June 2007 to scale down operations in Paris, France and, to a lesser extent, Mexico City, Mexico. Notices were sent to 12 employees in Paris and 3 employees in Mexico City that their employment would be terminated by December 31, 2007.

In the first quarter of fiscal 2008, we recorded an additional $4.0 million of restructuring charges in connection with implementation of these fiscal 2007 plans. The cost of these plans as they relate to the reductions in force during the first quarter of fiscal 2007 consisted primarily of retention, severance and other benefits totaling $2.3 million. Also, during the first quarter of fiscal 2008, we commenced the exit of our facilities in Montreal and Redwood Shores, California. We recognized as part of restructuring expense approximately $1.8 million in Montreal relating to the write-off of fixed assets and leasehold improvements ($1.3 million), the impairment of a lease ($0.3 million) and inventory ($0.2 million). We also recognized the impairment of our lease in Redwood Shores ($0.5 million). These charges to restructuring in the first quarter of fiscal 2008 were partially offset by $0.3 million for the reduction in severance estimated to be paid in France and a $0.3 million reduction in the amount estimated to close out our restructuring liability in connection with our fiscal year 2006 restructuring plan to transfer our Montreal manufacturing activities to our San Antonio, Texas facility.

In the third quarter of fiscal 2007, in connection with the Stratex acquisition on January 26, 2007, we recognized $12.0 million of restructuring liabilities representing the fair value of Stratex restructuring liabilities incurred prior to, and not related to, the acquisition as summarized in the table below. These charges relate to building lease obligations at four of Stratex’s U.S. facilities. In the quarter ended September 28, 2007, we made payments of $0.7 million on these leases, which reduced the liability by $0.5 million, net of $0.2 million in interest expense. Also during the quarter ended September 28, 2007, new information became available with regard to our utilization of the space under these building lease obligations, and we reduced our restructuring liability by $1.4 million with an offsetting decrease to goodwill under purchase accounting.

The information in the following table summarizes our restructuring activity during the quarter ended September 28, 2007 and the remaining restructuring liability as of September 28, 2007.

		Severance				Facilities
		and				and
		Benefits				Other				Total
		(In millions)
Restructuring liability at June 29, 2007		$	7.8			$	10.8			$	18.6
Provision in the quarter ended September 28, 2007			2.3				2.3				4.6
Release of accrual to statement of operations in the quarter ended September 28, 2007			(0.6	)			—				(0.6	)
Amount credited to goodwill in the quarter ended September 28, 2007			—				(1.4	)			(1.4	)
Non-cash charges in the quarter ended September 28, 2007			—				(1.5	)			(1.5	)
Cash payments in the quarter ended September 28, 2007			(1.6	)			(1.3	)			(2.9	)
Restructuring liability at September 28, 2007		$	7.9			$	8.9			$	16.8
Current portion of restructuring liability at September 28, 2007		$	7.9			$	2.8				10.7
Long-term portion of restructuring liability at September 28, 2007			—				6.1				6.1
Total restructuring liability at September 28, 2007		$	7.9			$	8.9			$	16.8

Our fiscal year 2007 restructuring plans were expected to be fully implemented by December 31, 2007. The following table summarizes our costs incurred through September 28, 2007 and costs expected to be incurred for our fiscal 2007 restructuring plans:

						Total Costs
						Incurred During				Cumulative
						The				Costs Incurred								Total
		Total Costs				Quarter Ended				through				Estimated				Restructuring
		Incurred through				September 28,				September 28,				Additional Costs				Costs Expected
		June 29, 2007				2007				2007				to be Incurred				to be Incurred
		(In millions)
North America Microwave:
Severance and benefits		$	5.1			$	1.5			$	6.6			$	1.1			$	7.7
Facilities and other			—				2.3				2.3				2.7				5.0
Total North America Microwave		$	5.1			$	3.8			$	8.9			$	3.8			$	12.7
International Microwave:
Severance and benefits		$	4.2			$	0.2			$	4.4			$	—			$	4.4
Facilities and other			—				—				—				0.4				0.4
Total International Microwave		$	4.2			$	0.2			$	4.4			$	0.4			$	4.8
Totals		$	9.3			$	4.0			$	13.3			$	4.2			$	17.5

Note M — Share-Based Compensation

Compensation expense for share-based awards was $2.4 million and $0.4 million for the quarters ended September 28, 2007 and September 29, 2006. Amounts were included in our consolidated statements of operations as follows:

		Quarter Ended
		September 28, 2007				September 29, 2006
		(In millions)
Cost of product sales and services		$	0.2			$	—
Research and development expenses			0.5				—
Selling and administrative expenses			1.7				0.4
Total compensation expense		$	2.4			$	0.4

We did not grant any share-based awards during the quarter ended September 28, 2007. The share-based compensation expense recorded during the first quarter of fiscal 2008 related solely to recognition of costs associated with grants issued prior to June 29, 2007.

We issued 77,245 shares during the quarter ended September 28, 2007 upon the exercise of stock options.

Note N — Business Segments (Restated)

We are organized into three operating segments around the markets we serve: North America Microwave, International Microwave and Network Operations. The North America Microwave segment designs, manufactures, sells and services microwave radio products, primarily for cellular network providers and private network users within North America (U.S. and Canada). The International Microwave segment designs, manufactures, sells and services microwave radio products, primarily for cellular network providers and private network users outside of North America. The Network Operations segment develops, designs, produces, sells and services network management software systems, primarily for cellular network providers and private network users.

During the first quarter of fiscal 2008, we had one customer in Africa (Mobile Telephone Networks or MTN) that accounted for 11% of our total revenue.

Revenue and (loss) income before income taxes by segment are as follows:

		Quarter Ended
		September 28, 2007				September 29, 2006
		(Restated)				(Restated)
		(In millions)
Revenue
North America Microwave		$	56.6			$	49.9
International Microwave			109.2				39.3
Network Operations			6.5				4.4
Total Revenue		$	172.3			$	93.6
Income Before Income Taxes
Segment Operating (Loss) Income:
North America Microwave (1)		$	(0.3	)		$	3.7
International Microwave (2)			(0.5	)			3.6
Network Operations			0.8				0.3
Corporate allocations expense from Harris			—				(1.6	)
Net interest expense			—				(0.1	)
Income before income taxes		$	—			$	5.9

Note O — Income Taxes (Restated)

The income tax benefit for the current fiscal quarter reflects our pre-tax loss and was based on our estimated annual effective tax. The income tax provision for the quarter ended September 28, 2007 was $0.2 million. The variation between income taxes and income tax expense at the U.S. statutory rate of 35% is primarily due to the consolidation of our foreign operations, which are subject to income taxes at lower statutory rates.

The income tax provision on income from operations for the quarter ended September 29, 2006 was $0.4 million and is based upon an allocation of tax expense from Harris Corporation.

During the first quarter of fiscal 2008, we updated our purchase accounting adjustment under Statement of Financial Accounting Standards No. 141 for the fair value of deferred tax liabilities acquired in the Stratex acquisition, which resulted in a reduction to long-term deferred tax liabilities and goodwill of $9.5 million.

We adopted the provisions of FIN 48 on June 30, 2007. FIN 48 prescribes a comprehensive model for financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. As a result of adopting FIN 48, there was an insignificant decrease in our retained earnings and a corresponding increase in tax liabilities.

At June 30, 2007, we had a liability for unrecognized tax benefits of $28.1 million for various federal, foreign, and state income tax matters. The adoption of FIN 48 resulted in a reclassification of deferred tax asset items which included a full valuation allowance, as well as goodwill for appropriate balance sheet presentation. If the unrecognized tax benefits associated with these positions are ultimately recognized, they would not have a material impact on our effective tax rate or our financial position.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign, and state income tax expense. We accrued an insignificant amount at June 30, 2007 for the payment of any such interest. We recorded an insignificant amount for such interest in the quarter ended September 28, 2007. No penalties have been accrued.

We expect that the amount of unrecognized tax benefit may change in the next twelve months; however, it is not expected to have a significant impact on our results of operations, financial position or cash flows.

We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax jurisdictions include the U.S., Nigeria, Singapore, New Zealand, Poland, South Africa, France and the UK. The earliest years still open and subject to ongoing audits as of the date of adoption of FIN 48 for these jurisdictions are as follows: (i) United States (Federal/State)—2003/2002; (ii) Nigeria—2003; (iii) Singapore—2000; (iv) New Zealand—2003; (v) Poland—2003; (vi) South Africa—2001; (vii) France—2005; and (viii) UK—2006.

Harris provided information services, human resources, financial shared services, facilities, legal support and supply chain management services to us. Prior to the Stratex acquisition, the charges for these services were billed to us primarily based on actual usage. During the quarter ended September 29, 2006, Harris charged us $1.6 million for these services.

On January 26, 2007, we entered into a Transition Services Agreement with Harris to provide for certain services during the periods subsequent to the Stratex acquisition. 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 quarter ended September 28, 2007, Harris charged us $1.7 million for these services.

We have sales to, and purchases from, other Harris entities from time to time. Prior to January 26, 2007, the entity initiating the transaction sold to the other Harris entity at cost or transfer price, depending on jurisdiction. The entity making the sale to the end customer recorded the profit on the transaction above cost or transfer price, depending on jurisdiction. Subsequent to January 26, 2007, these purchases and sales are recorded at market price. Our sales to other Harris entities were $1.2 million and $0.5 million for the quarters ended September 28, 2007 and September 29, 2006. We also recognized costs associated with related party purchases from Harris of $0.6 million and $2.6 million for the quarters ended September 28, 2007 and September 29, 2006, respectively.

Harris was the primary source of our financing and equity activities through January 26, 2007, the date of the Stratex acquisition. During the quarter ended September 29, 2006, Harris’ net investment in us was increased by $2.7 million.

Additionally, through the date of the Stratex acquisition, Harris loaned cash to us to fund our international entities and, we distributed excess cash back to Harris. This arrangement ended on January 26, 2007. We recognized interest income and expense on these loans. The amount of interest income and expense for the quarter ended September 29, 2006 was not significant.

The amounts billed from Harris are included within “Due to Harris Corporation” on the 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 the condensed consolidated balance sheets. Total receivables from Harris were $2.0 million and $0.7 million at September 28, 2007 and June 29, 2007. Total payables to Harris were $22.2 million and $17.9 million at September 28, 2007 and June 29, 2007.

Prior to January 26, 2007, MCD used certain assets in Canada owned by Harris that were not contributed to us as part of the Combination Agreement. We continue to use these assets in our business and on January 26, 2007, we entered into a 5-year lease agreement to accommodate this use. This agreement is a capital lease under U.S. generally accepted accounting principles. At September 28, 2007, our lease obligation to Harris was $3.9 million and the related asset amount is included in our 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. We recognized an impairment charge of $1.3 million on a portion of these assets which is included in our restructuring charges during the first quarter of fiscal 2008. Additionally, our depreciation expense on this capital lease was $0.4 million in the first quarter of fiscal 2008.

Note Q — Legal Proceedings

On February 8, 2007, a court order was entered against Stratex do Brasil, a subsidiary of Harris Stratex Networks Operating Company, in Brazil, to enforce performance of an alleged agreement between the former Stratex Networks, Inc. entity and a supplier. We have not determined what, if any, liability this may result in, as the court did not award any damages. We have appealed the decision to enforce the alleged agreement, and do not expect this litigation to have a material adverse effect on our business, operating results or financial condition.

From time to time, the Company may be involved in various legal claims and litigation that arise in the normal course of its operations. While the results of such claims and litigation cannot be predicted with certainty, the Company currently believes that it is not a party to any litigation the final outcome of which is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, should the Company not prevail in any such litigation; it could have a materially adverse impact on the Company’s operating results, cash flows or financial position.

Report of Independent Registered Public Accounting Firm

We have reviewed the condensed consolidated balance sheet of Harris Stratex Networks, Inc. and subsidiaries as of September 28, 2007, the related condensed consolidated statements of operations for the quarters ended September 28, 2007 and September 29, 2006, and the condensed consolidated statements of cash flows for the quarters ended September 28, 2007 and September 29, 2006. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

As described in Note C to the condensed consolidated financial statements, the financial statements referred to above have been restated.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Harris Stratex Networks, Inc. and subsidiaries as of June 29, 2007, and the related consolidated statements of operations and cash flows for the year then ended, not presented herein, and in our report dated August 16, 2007 (except for Note D, as to which the date is September 12, 2008), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 29, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. As described in Note D to the consolidated financial statements, these financial statements have been restated.

/s/ Ernst & Young LLP

Raleigh, North Carolina
November 2, 2007, except for Note C,
as to which the date is September 12, 2008

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 August 27, 2007. 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 stockholders’ equity cumulatively by $11.0 million as of September 28, 2007 and $11.6 million as of June 29, 2007, respectively. Previously reported net loss was decreased by $0.6 million for the quarter ended September 28, 2007 and income was increased by $0.7 million for the quarter ended September 29, 2006. The restatement had no impact on our net cash flows from operations, financing activities or investing activities. Details of the nature of the corrections are as follows:

Inventory

Project costs are accumulated in work in process inventory accounts in our cost accounting systems. As products are shipped or otherwise meet our revenue recognition criteria, these project costs are recorded to cost of sales. Estimates may be required at the point of sale if certain costs have been incurred, but not yet invoiced to us. On a routine and periodic basis, we review the work in process balances related to these projects to ensure all appropriate costs have been recorded to cost of sales in a timely manner and in the period to which they relate.

During the fiscal year 2008, we determined that this review had not been performed in a manner sufficient to identify significant project cost variances remaining in certain inventory accounts, and that the resulting errors impacted prior quarters and prior years. To correct this error, we decreased work in process inventory compared to amounts previously recorded by $10.2 million and $9.6 million as of September 28, 2007 and June 29, 2007, respectively, and increased cost of external product sales and services by $0.6 million for the quarter ended September 28, 2007 and decreased cost of external product sales and services by $0.6 million for the quarter ended September 29, 2006.

Inventory and Intercompany Account Reconciliations

During the course of the year end close for the fiscal year ending June 27, 2008, we determined that certain account reconciliation adjustments recorded in the fourth quarter of fiscal 2008, which related primarily to inventory and intercompany accounts receivable accounts, should have been recorded in prior quarters or prior years. We determined that certain manual controls had not been performed for certain periods, resulting in accounting errors. More specifically, we identified errors in the work in process inventory balances resulting from incorrect account reconciliation processes. To correct this error, we recorded adjustments to decrease inventory compared to amounts previously recorded by $3.4 million and $1.9 million as of September 28, 2007 and June 29, 2007, respectively, and increased cost of external product sales by $1.5 million for the quarter ended September 28, 2007, and decreased the cost of external product sales by $0.1 million for the quarter ended September 29, 2006.

We also identified errors in accounts receivable balances as a result of control deficiencies in the recording and elimination of intercompany transactions. To correct this error, we increased accounts receivable by $0.9 million for the quarter ended September 28, 2007 and decreased accounts receivable by $2.2 million at June 29, 2007, and increased selling and administrative expenses by $3.1 million for the quarter ended September 28, 2007.

Warranty Liability

Our liability for product warranties contains the estimated accrual for certain technical assistance services provided under our standard warranty policy. We determined that these costs had not been properly included in the warranty liability estimates in the balance sheet of Stratex at the date of acquisition. To correct this error, we recorded an adjustment to increase the warranty liability and increase goodwill related to the Stratex acquisition by $1.1 million at June 29, 2007.

Taking into consideration the restatement adjustments described above, we reassessed our income tax provision in accordance with Statement 109. As a result, we recorded an adjustment to decrease the deferred tax liability balance by $1.7 million and $2.1 million as of September 28, 2007 and June 29, 2007, respectively, and to decrease the income tax benefit by $0.4 million for the quarter ended September 28, 2007. For periods prior to January 26, 2007, income tax expense has been determined as if MCD had been a stand-alone entity, although the actual tax liabilities and tax consequences applied only to Harris. Our income tax expense for those periods relates to income taxes paid or to be paid in foreign jurisdictions for which net operating loss carryforwards were not available and domestic taxable income is deemed offset by tax loss carryforwards for which an income tax valuation allowance had been previously provided for in the financial statements. Thus, there was no change in our tax provision for periods prior to fiscal 2007.

The following tables present the impact of the restatement adjustments on our previously reported consolidated balance sheets as of September 28, 2007 and June 29, 2007, as well as the impact on our previously reported consolidated statements of operations and cash flows for the quarter ended September 28, 2007 and September 29, 2006.

		For the quarter ended September 28, 2007
		As Previously
		Reported				Adjustments				As Restated
		(In millions)
Revenue		$	172.3			$	—			$	172.3
Gross margin			49.1				(2.1	)			47.0
Loss from operations			(1.0	)			1.0				—
Net loss		$	(0.8	)		$	0.6			$	(0.2	)
Basic and diluted net loss per common share		$	(0.01	)		$	—			$	—