As filed with the Securities and Exchange Commission on January 24, 2007

Registration No. 333-___________

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

HARRIS STRATEX NETWORKS, INC.

Delaware		3663		20-5961564
(State or other jurisdiction of		(Primary Standard Industrial		(I.R.S. Employer
incorporation or organization)		Classification Code Number)		Identification Number)

Copies To:

Juan Otero		Alan B. Kalin
General Counsel and Assistant Secretary		Bingham McCutchen LLP
Stratex Networks, Inc.		1900 University Avenue
120 Rose Orchard Way		East Palo Alto, California 94303
San Jose, California 95134		(650) 849-4400
(408) 943-0777

     Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all conditions to the merger and the contribution transaction described herein have been satisfied or waived.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

									Proposed Maximum
	Title of Each Class of								Aggregate Offering Price per					Proposed Maximum
	Securities to be Registered			Amount to be Registered (2)					Share (3)					Aggregate Offering Price (3)					Amount of Registration Fee (4)
	Shares of Class A common stock, par value $0.01 per share, underlying warrants (1)				539,195				$	11.80				$	6,362,501.00				$	681.00

     The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

EXPLANATORY NOTE

This registration statement will not be declared effective under the Securities Act of 1933, as amended, until the transactions contemplated by the Amended and Restated Formation, Contribution and Merger Agreement, dated as of December 18, 2006, among Harris Corporation, Stratex Networks, Inc., Stratex Merger Corp. and Harris Stratex Networks, Inc. have been completed. Accordingly, this registration statement assumes that the merger and the contribution transaction (as defined in such agreement) have been consummated. If those transactions are not consummated, Harris Stratex will not request that this registration statement be declared effective.

Subject to completion, dated January 24, 2007

PROSPECTUS

539,195 Shares of Class A Common Stock
$0.01 par value

Harris Stratex Networks, Inc.
Research Triangle Park
637 Davis Drive
Morrisville, North Carolina 27560
(919) 767-3250

     This prospectus relates solely to the issuance of up to an aggregate of 539,195 shares of our Class A common stock upon the exercise of warrants of Stratex Networks, Inc., or Stratex, assumed by us upon consummation of the transactions contemplated by the Amended and Restated Formation, Contribution and Merger Agreement, or the combination agreement, among us, Harris Corporation, or Harris, Stratex Merger Corp., or Merger Sub, and Stratex, dated as of December 18, 2006. Under the combination agreement, our wholly owned subsidiary, Merger Sub, merged with and into Stratex, and Harris simultaneously contributed its Microwave Communications Division and cash to the combined company. In the merger, we issued one-fourth of a share of Class A common stock for each outstanding share of Stratex common stock held by Stratex stockholders. In addition, we issued shares of our Class B common stock to Harris in connection with its contribution of the Microwave Communications Division and cash which represented 57% of our outstanding common stock immediately following the merger and Harris’ contribution.

     The warrants are currently exercisable for an aggregate of 539,195 shares of Class A common stock at an exercise price of $11.80 per share of Class A common stock issuable upon exercise.

     If all of the warrants were exercised on a cash basis, the aggregate net proceeds would be approximately $6,362,501. We intend to use any net proceeds received from the exercise of the warrants on a cash basis for working capital and general corporate purposes.

     The Class A common stock of Harris Stratex is listed on the NASDAQ Global Market with the symbol “HSTX”.

THE SHARES OF CLASS A COMMON STOCK INVOLVE A HIGH DEGREE OF RISK. SEE “RISK FACTORS”
BEGINNING ON PAGE 3

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated • , 2007.

TABLE OF CONTENTS

		Page No.
Information Relating to Forward-Looking Statements
Prospectus Summary			1
Risk Factors			3
Use of Proceeds			15
Price Range of Class A Common Stock			15
Dividend Policy			15
Selected Historical and Pro Forma Financial Data			16
Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Business			52
Management			61
Certain Relationships and Related Transactions			69
Principal Stockholders			79
Plan of Distribution			81
Determination of Offering Price			82
Description of Capital Stock			83
Legal Matters			87
Experts			87
Additional Information			87
Index to Financial Statements			F-1
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4
EXHIBIT 99.5
EXHIBIT 99.6
EXHIBIT 99.7

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

     The prospectus contained in this document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act. All statements, trend analyses and other information contained herein about the markets for the services and products of Harris Stratex, Stratex and the Microwave Communications Division and trends in revenue, as well as other statements identified by the use of forward-looking terminology, including “anticipate”, “believe”, “plan”, “estimate”, “expect”, “goal” and “intend”, or the negative of these terms or other similar expressions, constitute forward-looking statements. These forward-looking statements are based on estimates reflecting the best judgment of the senior management of Harris Stratex. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should therefore be considered in light of various important factors, including those set forth in this prospectus. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include the following:

	•		the failure to obtain and retain expected synergies from the combination of the Microwave Communications Division and Stratex;
	•		rates of success in executing, managing and integrating key acquisitions and transactions, including the combination of the Microwave Communications Division and Stratex;
	•		the ability to achieve business plans for Harris Stratex;
	•		the ability to manage and maintain key customer relationships;
	•		the ability to fund debt service obligations through operating cash flow;
	•		the ability to obtain additional financing in the future and react to competitive and technological changes;
	•		the ability to comply with restrictive covenants in Harris Stratex’s indebtedness;
	•		the ability to compete with a range of other providers of microwave communications products and services;
	•		the effect of technological changes on Harris Stratex’s businesses;
	•		the functionality or market acceptance of new products that Harris Stratex may introduce;
	•		the extent to which Harris Stratex’s future earnings will be sufficient to cover its fixed charges;
	•		the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the combination of the Microwave Communications Division and Stratex;
	•		Harris Stratex will be subject to intense competition;
	•		the failure of Harris Stratex to protect its intellectual property rights;
	•		currency and interest rate risks; and
	•		revenues of Harris Stratex following the combination of the Microwave Communications Division and Stratex may be lower than expected.

Harris Stratex undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus or any document incorporated by reference might not occur. For more information regarding the risks and uncertainties of the microwave communications business as well as risks relating to the combination of the Microwave Communications Division and Stratex, see “Risk Factors” beginning on page 3 of this prospectus.

RISK FACTORS

     Harris Stratex is subject to a number of risks that could affect its future financial results. Some of these risks are discussed below. The risks and uncertainties described below are not the only ones facing Harris Stratex. If any of these risks actually occur, Harris Stratex’s financial condition and results of operations could be materially and adversely affected.

Risks Related to the Combination of Stratex with the Microwave Communications Division

The combination of the businesses conducted by the Microwave Communications Division and Stratex creates numerous risks and uncertainties which could adversely affect Harris Stratex’s operating results.

     Strategic transactions like the combination of the Microwave Communications Division with Stratex create numerous uncertainties and risks. The Microwave Communications Division will transition from being a part of Harris to being a part of Harris Stratex, and Stratex will migrate from being a standalone company to being part of a combined company. This combination entails many changes, including the integration of the Microwave Communications Division and its personnel with those of Stratex, and changes in systems and employee benefit plans. These transition activities are complex, and Harris Stratex may encounter unexpected difficulties, or incur unexpected costs, including:

	•		the diversion of management’s attention to integration matters;
	•		difficulties in achieving expected cost savings associated with the combination of the Microwave Communications Division and Stratex;
	•		difficulties in the integration of operations and systems;
	•		difficulties in the assimilation of employees;
	•		difficulties in replacing the support functions previously provided by Harris to the Microwave Communications Division, including support and assistance for financial and operational functions;
	•		challenges in keeping existing customers and obtaining new customers; and
	•		challenges in attracting and retaining key personnel.

     As a result, Harris Stratex may not be able to realize the expected revenue growth and other benefits that it seeks to achieve from the combination of the Microwave Communications Division and Stratex. In addition, Harris Stratex may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of its business, production and services.

Uncertainties associated with the combination of the Microwave Communication’s Division and Stratex may cause Harris Stratex to lose significant customers.

     As a result of the combination of Stratex and the Microwave Communications Division, current and potential customers of Harris Stratex may delay or defer decisions concerning their use of the products and services of the combined company. In particular, Stratex’s license agreement with Alcatel S.A for the sale of the Eclipse^® product by Alcatel can be terminated by Alcatel upon a change of control of Stratex. Harris Stratex has not received notice from any of its customers of intent to terminate its contract in response to the combination. Neither Stratex nor Microwave Communications Division received notice from a customer of intent to terminate its contract in response to the transactions contemplated by the combination agreement. However, if customers elect to terminate their contracts, the financial condition of Harris Stratex may be materially adversely affected.

Loss of key personnel could lead to loss of customers and a decline in revenues, or otherwise adversely affect the operations of Harris Stratex.

     The success of Harris Stratex will depend in part upon its ability to retain its key employees. Competition for qualified personnel in the microwave communications industry may be very intense. In addition, key employees may depart because of issues relating to the difficulty of, or uncertainty regarding, the integration of the businesses, as a result of provisions in their employment agreements which trigger severance payments upon events or circumstances resulting in a change of control such as the proposed merger or

because of uncertainties relating to their future compensation and benefits. If Harris Stratex is unable to attract and retain qualified individuals or Harris Stratex’s costs to do so increase significantly, Harris Stratex’s business could be adversely affected.

Risks Related to the Relationship between Harris and Harris Stratex

Harris Stratex will be controlled by Harris, whose interests may conflict with those of other stockholders.

     Harris owns no shares of Harris Stratex Class A common stock but all of the outstanding shares of Harris Stratex Class B common stock through which it has an approximate 57% interest in the combined company (without regard to any dilution relating to outstanding stock options, warrants or other equity interests). In addition, Harris has the right to appoint separately as a class five of the nine directors of Harris Stratex so long as the shares of Harris Stratex common stock held by Harris entitle Harris to cast a majority of the votes at an election of the directors of Harris Stratex (other than those directors appointed by Harris separately as a class). For two years from the closing date of the combination of the Microwave Communications Division and Stratex, Harris has agreed that it will not acquire or dispose of beneficial ownership in shares of Harris Stratex common stock, except under limited circumstances, and has no obligation to dispose of its interest in Harris Stratex following such two year period. Accordingly, Harris is likely to continue to exercise significant influence over the business policies and affairs of Harris Stratex, including the composition of Harris Stratex’s board of directors and any action requiring the approval of Harris Stratex’s stockholders. The concentration of ownership also may make some transactions, including mergers or other changes in control, more difficult or impossible without the support of Harris. Harris’ interests may conflict with your interests as a stockholder. See the risk factor discussed in “— Harris will have rights reflecting its controlling interest in Harris Stratex. As a result, your ability to influence the outcome of matters requiring stockholder approval will be limited” below.

Harris Stratex is a “controlled company” within the meaning of the NASDAQ rules and, as a result, qualifies for, and intends to rely on, exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that trade on NASDAQ.

     Harris owns more than 50% of the total voting power of the outstanding capital stock of Harris Stratex. Therefore, Harris Stratex qualifies as a “controlled company” under the NASDAQ rules. As a controlled company, Harris Stratex intends to utilize exemptions under the NASDAQ standards that free it from the obligation to comply with some governance requirements under the NASDAQ rules, including the following:

	•		a majority of its board of directors consists of independent directors;
	•		its director nominees must either be selected, or recommended for selection by the board of directors, either by:
	•		a majority of the independent directors; or
	•		a nominations committee comprised solely of independent directors; and
	•		the compensation of its officers be determined, or recommended to the board of directors for determination, either by:

	•		a majority of the independent directors; or
	•		a compensation committee comprised solely of independent directors.

     Harris Stratex intends to use these exemptions and, as a result, you will not have the same protection afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.

Harris has rights reflecting its controlling interest in Harris Stratex. As a result, the ability of the stockholder to influence the outcome of matters requiring stockholder approval will be limited.

     Harris holds a majority of the securities outstanding and is entitled to vote generally in the election of Harris Stratex directors (other than those directors elected separately as a class by Harris). In addition, as the only holder of the outstanding Harris Stratex Class B common stock, Harris will have the unilateral right to elect, remove and replace, at any time, a majority of the board of directors of Harris Stratex so long as the members elected, removed or replaced by Harris satisfy the requirements agreed to by Stratex and Harris and set forth in the investor agreement relating to the combination of the Microwave Communications Division and Stratex. More specifically, Harris has agreed

that, so long as it holds a majority of the voting common stock of Harris Stratex, it will have the right to appoint five of Harris Stratex’s nine directors and, until the second anniversary of the combination of Stratex with the Microwave Communications Division, at least one of the Harris directors will meet the NASDAQ independence standards for audit committee members and at least one other Harris director will not be an employee of Harris or any of its subsidiaries (other than Harris Stratex or its subsidiaries). After the second anniversary, Harris will be able to elect or replace all the Harris directors without regard to their relationship with Harris.

     Harris’ right to vote a majority of the outstanding voting stock of Harris Stratex will also enable it to control decisions without the consent of other Harris Stratex stockholders, including among others, with respect to:

	•		the business direction and policies of Harris Stratex;
	•		mergers or other business combinations involving Harris Stratex, except during the first two years after the closing;
	•		the acquisition or disposition of assets by Harris Stratex;
	•		the payment or nonpayment of dividends;
	•		determinations with respect to tax returns;
	•		the combined company’s capital structure; and
	•		amendments to Harris Stratex’s certificate of incorporation and bylaws.

     In addition to the effects described above, Harris’ control position could make it more difficult for Harris Stratex to raise capital or make acquisitions by issuing its own capital stock. This concentrated ownership also might delay or prevent a change in control and may impede or prevent transactions in which Harris Stratex stockholders might otherwise receive a premium for their shares.

Harris Stratex may have potential conflicts of interest with Harris relating to their ongoing relationship, and because of Harris’ controlling ownership in Harris Stratex, the resolution of these conflicts may not be favorable to Harris Stratex.

     Conflicts of interest may arise between Harris Stratex and Harris in a number of areas relating to their ongoing relationship, including:

	•		indemnification and other matters arising under the combination agreement or other agreements;
	•		intellectual property matters;
	•		employee recruiting and retention;
	•		competition for customers in the areas where Harris is permitted to do business under the non-competition agreement;
	•		sales or distributions by Harris of all or any portion of its ownership interest in Harris Stratex, which could be to a competitor of Harris Stratex;
	•		business combinations involving Harris Stratex; and
	•		business opportunities that may be attractive to both Harris and Harris Stratex.

     Harris Stratex may not be able to resolve any potential conflicts with Harris, and, even if it does, the resolution may be less favorable to Harris Stratex than if it were dealing with an unaffiliated party.

     The investor agreement between Harris and Harris Stratex relating to the combination of Stratex with the Microwave Communications Division provides that Harris and its affiliates are only permitted to enter into a transaction with Harris Stratex if the transaction is approved by a majority of the non-Harris directors or is on terms no less favorable in any material respect to Harris Stratex than those that could have been obtained by Harris Stratex, taking into consideration the then prevailing facts and

circumstances, if it had negotiated with an informed, unrelated third party. However, if a transaction has a fair market value of more than $5 million, it must also be approved in advance by a majority of the non-Harris directors. There are limited exceptions to these arrangements.

     Pursuant to the terms of the non-competition agreement between Harris and Harris Stratex relating to the combination of Stratex with the Microwave Communications Division, Harris has agreed in general terms that, for five years following the combination of the Microwave Communications Division and Stratex, it will not, and will not permit any of its subsidiaries (other than Harris Stratex and its subsidiaries) to, engage in the development, manufacture, distribution and sale of microwave radio systems that are competitive with the products previously offered by Stratex and the Microwave Communications Division or substantially similar to those products in form, fit and function when used in terrestrial microwave point-to-point communications networks that provide access and trunking of voice and data for telecommunications networks. Notwithstanding this restriction, Harris is permitted to purchase and resell products produced by and branded by persons unaffiliated with Harris and to develop, manufacture, distribute and sell microwave radios and related components for use by government entities.

     See “Certain Relationships and Related Transactions” beginning on page 69 of this prospectus and the risk factor discussed in “— Neither Harris nor any of its affiliates will have any fiduciary obligation or other obligations to offer corporate opportunities to Harris Stratex, and the certificate of incorporation of Harris Stratex and investor agreement to be entered into by Harris Stratex and Harris relating to the combination of the Microwave Communications Division and Stratex expressly permit certain directors or employees of Harris Stratex to offer certain corporate opportunities to Harris before Harris Stratex” below.

So long as Harris holds a majority of the securities outstanding and entitled to vote generally in the election of Harris Stratex directors (other than those directors elected separately as a class by Harris), it will have the right to preserve its control position by participating in equity offerings by the combined company.

     At any time that Harris holds a majority of the securities outstanding and entitled to vote generally in the election of Harris Stratex directors (other than those directors elected separately as a class by Harris), subject to limited exceptions, Harris has the right to participate in any offering of capital stock by Harris Stratex including grants of equity to employees on the same terms and conditions as the offering and purchase up to that number of shares of Harris Stratex capital stock necessary to preserve its then voting percentage in the combined company. As a result, Harris will be able to maintain its control position in Harris Stratex as long as it is able, and elects, to participate in any offering of capital stock by Harris Stratex.

Neither Harris nor any of its affiliates has any fiduciary obligation or other obligation to offer corporate opportunities to Harris Stratex, and the certificate of incorporation of Harris Stratex and investor agreement entered into by Harris Stratex and Harris relating to the combination of Stratex with the Microwave Communications Division expressly permit certain directors or employees of Harris Stratex to offer certain corporate opportunities to Harris before Harris Stratex.

     The certificate of incorporation of Harris Stratex and the investor agreement between Harris and Harris Stratex relating to the combination of Stratex with the Microwave Communications Division provide that:

	•		except (1) as otherwise provided in the non-competition agreement between Harris and Harris Stratex relating to the combination of Stratex with the Microwave Communications Division or (2) opportunities offered to an individual who is a director or officer of both Harris Stratex and Harris in writing solely in that person’s capacity as an officer or director of Harris Stratex, Harris is free to compete with Harris Stratex in any activity or line of business; invest or develop a business relationship with any person engaged in the same or similar activities or businesses as Harris Stratex; or do business with any customer of Harris Stratex; or employ any former employee of Harris Stratex;
	•		neither Harris nor its affiliates have any duty to communicate its or their knowledge of or offer any potential business opportunity, transaction or other matter to Harris Stratex unless the opportunity was offered to the individual who is a director or officer of both Harris Stratex and Harris in writing solely in that person’s capacity as an officer or director of Harris Stratex; and
	•		if any director or officer of Harris who is also an officer or director or Harris Stratex becomes aware of a potential business opportunity, transaction or other matter (other than one expressly offered to that director or officer in writing solely in his or her capacity as a director or officer of Harris Stratex), that director or officer will have no duty to communicate or offer that opportunity to Harris Stratex, and will be permitted to communicate or offer that opportunity to Harris (or its affiliates), and

that director or officer will not be deemed to have acted in bad faith or in a manner inconsistent with the best interests of Harris Stratex or in a manner inconsistent with his or her fiduciary or other duties to Harris Stratex.

     The board of directors of Harris Stratex includes at least one person who is also a director and/or an officer of Harris. As a result, Harris may gain the benefit of corporate opportunities that are presented to this director.

In certain circumstances, Harris is permitted to engage in the same types of businesses that Harris Stratex conducts. If Harris elects to pursue opportunities in these areas, Harris Stratex’s ability to successfully operate and expand its business may be limited.

     The non-competition agreement restricts Harris’ and its subsidiaries’ ability to compete with Harris Stratex for five years following the combination of the Microwave Communications Division and Stratex in specified lines of business related to the former business operations of Stratex and the Microwave Communications Division. However, the non-competition agreement does not restrict Harris from competing in a limited number of specific areas in which Harris Stratex will operate, such as the development, manufacture and sale of wireless systems for use by government entities and the purchase and resale of non-Harris-branded wireless systems. Following the five-year term, there will be no restriction on Harris’ ability to compete with Harris Stratex. If Harris elects to pursue opportunities in these areas or re-enters the business from which it is prohibited following the five-year term of the non-competition agreement, our ability to successfully operate and expand its business may be limited. For more information regarding the non-competition agreement, see the “Certain Relationships and Related Transactions - The Non-Competition Agreement” beginning on page 71 of this prospectus.

Sales by Harris of its interest in Harris Stratex could result in offers for shares of Class A common stock the terms of which have been negotiated solely by Harris and could adversely affect the price and liquidity of Harris Stratex Class A common stock.

     Harris is not permitted to buy or sell Harris Stratex common stock until the second anniversary of the combination of the Microwave Communications Division and Stratex, except with the consent of the non-Harris directors of Harris Stratex or to enable Harris to preserve its percentage interest in Harris Stratex’s outstanding common stock. From the second to the fourth anniversary of the combination of the Microwave Communications Division and Stratex, Harris is free to transfer majority control of Harris Stratex to a buyer, at a price and on terms acceptable to Harris in its sole discretion so long as the buyer offers to acquire all outstanding voting shares of Harris Stratex capital stock not owned by Harris on the same terms offered to Harris or the non-Harris directors approve the transfer by Harris in advance. However, non-Harris stockholders of Harris Stratex will have no role in determining the identity of the buyer and the amount and type of consideration to be received or any other terms of the transaction. If equity securities of the buyer are offered or if non-Harris stockholders elect not to accept the buyer’s offer, their continuing investment would be in a company that may be majority-controlled by a company or an investor selected only by Harris.

     In addition, pursuant to the combination agreement, Harris Stratex has registered for resale to the public shares of common stock which are held by Harris as a result of the combination agreement. Sales of registered shares of Harris Stratex by Harris, or the perception that such sales might occur, could depress the trading price of Harris Stratex Class A common stock.

Risks Relating to the Operation of Harris Stratex

Harris Stratex may not be profitable.

     Stratex and the Microwave Communications Division have in recent years regularly incurred losses. Stratex has incurred losses for the last five fiscal years, and the Microwave Communications Division incurred losses for the last five fiscal years. In fiscal 2006, Stratex incurred a loss of $2.3 million, and, as of September 30, 2006, Stratex had an accumulated deficit of $412.6 million. In fiscal 2006, the Microwave Communications Division incurred a loss of $35.8 million. Although the Microwave Communication Division had net income of $5.1 million for the three months ended September 29, 2006, there can be no assurances that Harris Stratex will be consistently profitable, if at all.

     Harris Stratex faces strong competition for maintaining and improving its position in the market which could adversely affect Harris Stratex’s revenue growth and operating results.

     The wireless interconnection and access business is a specialized segment of the wireless telecommunications industry and is extremely competitive. Harris Stratex expects competition in this segment to increase. Some of Harris Stratex’s competitors have more extensive engineering, manufacturing and marketing capabilities and significantly greater financial, technical and personnel

resources than Harris Stratex will have. In addition, some of Harris Stratex’s competitors have greater name recognition, broader product lines, a larger installed base of products and longer-standing customer relationships. Harris Stratex’s competitors include established companies, such as Alcatel, L.M. Ericsson, NEC, Nokia, Ceragon Networks and Siemens AG, as well as a number of smaller public companies and private companies in selected markets. Some of Harris Stratex’s competitors are also base station suppliers through whom it will market and sell its products, which means that Harris Stratex’s business success may depend on these competitors to some extent. One or more of Harris Stratex’s largest customers could internally develop the capability to manufacture products similar to those manufactured or outsourced by Harris Stratex and, as a result, the demand for Harris Stratex’s products and services may decrease.

     In addition, Harris Stratex competes for acquisition and expansion opportunities with many entities that have substantially greater resources than the combined company will have. Furthermore, competitors of Harris Stratex may enter into business combinations in order to accelerate product development or to engage in aggressive price reductions or other competitive practices, resulting in even more powerful or aggressive competitors.

     Harris Stratex’s ability to compete successfully depends on a number of factors, including price, quality, availability, customer service and support, breadth of product line, product performance and features, rapid time-to-market delivery capabilities, reliability, timing of new product introductions by Harris Stratex, its customers and competitors, the ability of its customers to obtain financing and the stability of regional sociopolitical and geopolitical circumstances. Harris Stratex can give no assurances that it will have the financial resources, technical expertise, or marketing, sales, distribution, customer service and support capabilities to compete successfully, or that regional sociopolitical and geographic circumstances will be favorable for the successful operation of the combined company.

Harris Stratex’s average sales prices may decline in the future.

     Manufacturers of digital microwave telecommunications equipment are experiencing, and are likely to continue to experience, declining sales prices. This price pressure is likely to result in downward pricing pressure on the products and services of Harris Stratex. As a result, Harris Stratex is likely to experience declining average sales prices for its products. Harris Stratex’s future profitability will depend upon its ability to improve manufacturing efficiencies, reduce costs of materials used in its products, and to continue to introduce new lower cost products and product enhancements. If Harris Stratex is unable to respond to increased price competition this will harm its business, financial condition and results of operations. Because customers frequently negotiate supply arrangements far in advance of delivery dates, Harris Stratex may be required to commit to price reductions for its products before it is aware of how, or if, cost reductions can be obtained. As a result, current or future price reduction commitments, and any inability on its part to respond to increased price competition, could harm Harris Stratex’s business, financial condition and results of operations.

Because a significant amount of the revenues of Harris Stratex may come from a limited number of customers, the termination of any of these customer relationships may adversely affect Harris Stratex’s business.

     Sales of the products and services of Stratex and the Microwave Communications Division historically have been concentrated to a small number of customers. The following table summarizes the number of customers of Stratex and the Microwave Communications Division that have represented over 10% of sales for the periods identified, along with the percentage of revenues represented by such customers.

Stratex

		Fiscal Years
		Ended March 31,
		2006				2005
Number of significant customers			1				1
Percentage of net sales			10	%			21	%

		Quarters Ended
		September 30,
		2006				2005
Number of significant customers			1				2
Percentage of net sales			16	%			11%, 10%,
						respectively

Microwave Communications Division

		Fiscal Years Ended
		June 30, 2006				July 1, 2005
Number of significant customers			1			—
Percentage of net sales			15	%		—

		Quarters Ended
		September 29, 2006		September 30, 2005
Number of significant customers		—		—
Percentage of net sales		—		—

     Harris Stratex expects that a significant portion of Harris Stratex’s future product sales also may be concentrated among a limited number of customers. In addition, product sales to major customers have varied widely from period to period. The loss of any existing customer, a significant reduction in the level of sales to any existing customer, or Harris Stratex’s inability to gain additional customers could result in declines in revenues compared to the combined historical revenues of Stratex and the Microwave Communication Division or an inability to grow revenues. If these revenue declines occur or if the combined company is unable to create revenue growth, Harris Stratex’s business, financial condition, and results of operations may be adversely affected.

     Harris Stratex may be subject to litigation regarding intellectual property associated with Harris Stratex’s wireless business; this litigation could be costly to defend and resolve, and could prevent the combined company from using or selling the challenged technology.

     The wireless telecommunications industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in often protracted and expensive litigation. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert Harris Stratex’s management and key personnel from the combined company’s business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Such litigation or claims could result in substantial costs and diversion of resources. In the event of an adverse result in any such litigation, Harris Stratex could be required to pay substantial damages, cease the use and transfer of allegedly infringing technology or the sale of allegedly infringing products and expend significant resources to develop non-infringing technology or obtain licenses for the infringing technology. Harris Stratex can give no assurances that Harris Stratex would be successful in developing such non-infringing technology or that any license for the infringing technology would be available to Harris Stratex on commercially reasonable terms, if at all. This could have a materially adverse effect on Harris Stratex’s business, results of operation, financial condition, competitive position and prospects.

     As a subsidiary of Harris, Harris Stratex may have the benefit of one or more existing cross-license agreements between Harris and certain third parties, which may help protect Harris Stratex from infringement claims. At such time as Harris Stratex ceases to be a subsidiary of Harris, those benefits would be lost.

Due to the significant volume of international sales expected by Harris Stratex, Harris Stratex may be susceptible to a number of political, economic and geographic risks that could harm its business.

     Harris Stratex will be highly dependent on sales to customers outside the United States. In fiscal 2006, sales by Stratex and the Microwave Communications Division to international customers accounted for 95% and 60%, respectively, of total net sales. During fiscal 2005 and 2004, sales to international customers accounted for 94% and 96% of Stratex’s net sales, respectively, and 50% and 57% of the Microwave Communication Division’s net sales, respectively. In fiscal 2006, 2005 and 2004, sales to the Middle East/Africa region accounted for approximately 28%, 25% and 33% of Stratex’s net sales, respectively. In fiscal 2006, 2005 and 2004, sales to the Middle East/Africa region accounted for approximately 30%, 23% and 30% of the Microwave Communication Division’s net sales, respectively. Also, significant portions of Stratex’s and the Microwave Communications Division’s international sales are in less developed countries. International sales will continue to account for a large percentage of Harris Stratex’s net product sales for the foreseeable future. As a result, the occurrence of any international, political, economic or geographic event that adversely affects Harris Stratex’s business could result in a significant decline in revenues.

     Some of the risks and challenges of doing business internationally include:

	•		unexpected changes in regulatory requirements;
	•		fluctuations in foreign currency exchange rates;

	•		imposition of tariffs and other barriers and restrictions;
	•		management and operation of an enterprise spread over various countries;
	•		burden of complying with a variety of foreign laws and regulations;
	•		application of the income tax laws and regulations of multiple jurisdictions, including relatively low-rate and relatively high-rate jurisdictions, to Harris Stratex’s sales and other transactions, which results in additional complexity and uncertainty;
	•		general economic and geopolitical conditions, including inflation and trade relationships;
	•		war and acts of terrorism;
	•		natural disasters;
	•		currency exchange controls; and
	•		changes in export regulations.

If Harris Stratex fails to develop and maintain distribution and licensing relationships, its revenues may decrease.

     Although a majority of sales are anticipated to be made through Harris Stratex’s direct sales force, Harris Stratex will also market its products through indirect sales channels such as independent agents, distributors, and telecommunication integrators. These relationships will enhance Harris Stratex’s ability to pursue major contract awards and, in some cases, are intended to provide Harris Stratex’s customers with easier access to financing and a greater variety of equipment and service capabilities which an integrated system provider should be able to offer. Harris Stratex may not be able to maintain and develop additional relationships or, if additional relationships are developed, they may not be successful. Harris Stratex’s inability to establish or maintain these distribution and licensing relationships could restrict its ability to market its products and thereby result in significant reductions in revenue. If these revenue reductions occur, Harris Stratex’s business, financial condition and results of operations would be harmed.

The inability of Harris Stratex’s subcontractors to perform, or its key suppliers to manufacture and deliver materials, could cause its products to be produced in an untimely or unsatisfactory manner, or not at all.

     Harris Stratex’s manufacturing operations, which will be substantially subcontracted, are highly dependent upon the delivery of materials by outside suppliers in a timely manner. Also, Harris Stratex will depend in part upon subcontractors to assemble major components and subsystems used in Harris Stratex’s products in a timely and satisfactory manner. Harris Stratex generally will not enter into long-term or volume purchase agreements with any of its suppliers, and Harris Stratex cannot provide assurances that such materials, components and subsystems will be available for use by Harris Stratex at such time and in such quantities as Harris Stratex requires, if at all. In addition, Stratex and the Microwave Communications Division have historically obtained some of their supplies from a single source. If these suppliers are unable to provide supplies and products to Harris Stratex because they are no longer in business or because they discontinue a certain supply or product needed by Harris Stratex, Harris Stratex may not be able to fill orders placed by its customers on a timely basis or at all. Harris Stratex’s inability to develop alternative sources of supply quickly and on a cost-effective basis could materially impair its ability to manufacture and timely deliver its products to its customers. Harris Stratex cannot give assurances that it will not experience material supply problems or component or subsystem delays in the future. Also, Harris Stratex’s subcontractors may not be able to maintain the quality of its products, which might result in a large number of product returns by customers and could harm Harris Stratex’s business, financial condition and results of operations.

     Additional risks associated with the outsourcing of Harris Stratex’s manufacturing operations to corporations located in Taiwan and their subsidiary in the People’s Republic of China could include, among other things: political risks due to political issues between Taiwan and The People’s Republic of China, risk of natural disasters in Taiwan, such as earthquakes and typhoons, economic and regulatory developments, and other events leading to the disruption of manufacturing operations.

Consolidation within the telecommunications industry could result in a decrease in Harris Stratex’s revenues.

     The telecommunications industry has experienced significant consolidation among its participants, and Harris Stratex expects this trend to continue. Some operators in this industry have experienced financial difficulty and have filed, or may file, for bankruptcy protection. Other operators may merge and one or more of Harris Stratex’s competitors may supply products to the customers of the combined company following those mergers. This consolidation could result in purchasing decision delays and decreased opportunities for Harris Stratex to supply products to companies following any consolidation. This consolidation may also result in lost opportunities for cost reduction and economies of scale. In addition, see the risk factor discussed in “— Because a significant amount of the revenues of Harris Stratex may come from a limited number of customers, the termination of any of these customer relationships may adversely affect Harris Stratex’s business” above.

Harris Stratex’s success will depend on new product introductions and acceptance.

     The market for Harris Stratex’s products is characterized by rapid technological change, evolving industry standards and frequent new product introductions. Harris Stratex’s future success will depend, in part, on continuous, timely development and introduction of new products and enhancements that address evolving market requirements and are attractive to customers. Harris Stratex believes that successful new product introductions provide a significant competitive advantage because of the significant resources committed by customers in adopting new products and their reluctance to change products after these resources have been expended. Stratex and the Microwave Communications Division have spent, and Harris Stratex expects to continue to spend, significant resources on internal research and development to support its effort to develop and introduce new products and enhancements. To the extent that Harris Stratex fails to introduce new and innovative products that are adopted by customers, it could fail to obtain an adequate return on these investments and could lose market share to Harris Stratex’s competitors, which could be difficult or impossible to regain.

Harris Stratex’s customers may not pay for products and services in a timely manner, or at all, which would decrease Harris Stratex’s income and adversely affect Harris Stratex’s working capital.

     Harris Stratex’s business will require extensive credit risk management that may not be adequate to protect against customer nonpayment. Risks of nonpayment by customers will be a significant focus of Harris Stratex’s business. Harris Stratex expects a significant amount of future revenue to come from international customers, many of whom will be start-up telecom operators in developing countries. Harris Stratex does not generally expect to obtain collateral for sales, although it intends to require letters of credit or credit insurance as appropriate for international customers. In addition, a significant amount of the revenues of Stratex and the Microwave Communications Division have been generated from a small number of significant customers. For information regarding the percentage of revenues attributable to certain key customers, see “— Because a significant amount of the revenues of Harris Stratex may come from a limited number of customers, the termination of any of these customer relationships may adversely affect Harris Stratex’s business” above. The historical accounts receivable balances of Stratex and the Microwave Communications Division have been concentrated in a small number of significant customers. Unexpected adverse events impacting the financial condition of customers, bank failures or other unfavorable regulatory, economic or political events in the countries in which Harris Stratex does business may impact collections and adversely impact Harris Stratex’s business, require increased bad debt expense or receivable write-offs and adversely impact Harris Stratex’s cash flows, financial condition and operating results.

Rapid changes in the microwave radio industry and the frequent introduction of lower cost components for Harris Stratex’s product offerings may result in excess inventory that Harris Stratex cannot sell or may be required to sell at distressed prices, and may result in longer credit terms to Harris Stratex’s customers.

     The rapid changes and evolving industry standards that characterize the market for Harris Stratex’s products require the frequent modification of products for an industry participant to be successful. These rapid changes could result in the accumulation of component inventory parts that become obsolete as modified products are introduced and adopted by customers. Stratex and the Microwave Communications Division have experienced significant inventory write-offs in recent years, and because of the rapid changes that characterize the market, Harris Stratex also may be forced to write down excess inventory from time to time. Moreover, these same factors may force Harris Stratex to significantly reduce prices for older products or extend more and longer credit terms to customers, which could negatively impact its cash and possibly result in higher bad debt expense. More generally, Harris Stratex cannot give assurances that it will be successful in matching its inventory purchases with anticipated shipment volumes. As a result, Harris Stratex may fail to control the amount of inventory on hand and may be forced to write-off additional amounts. Such additional inventory write-offs, if required, would adversely impact Harris Stratex’s cash flows, financial condition and operating results.

The unpredictability of Harris Stratex’s quarter-to-quarter results may harm the trading price of Harris Stratex’s Class A common stock.

     Harris Stratex’s quarterly operating results may vary significantly in the future for a variety of reasons, many of which are outside of Harris Stratex’s control. These factors could harm Harris Stratex’s business and include, among others:

	•		volume and timing of Harris Stratex’s product orders received and delivered during the quarter;
	•		Harris Stratex’s ability and the ability of its key suppliers to respond to changes on demand as needed;
	•		suppliers’ inability to perform and timely deliver as a result of their financial condition, component shortages or other supply chain constraints;
	•		continued market expansion through strategic alliances;
	•		continued timely rollout of new product functionality and features;
	•		increased competition resulting in downward pressures on the price of Harris Stratex’s products and services;
	•		unexpected delays in the schedule for shipments of existing products and new generations of the existing platforms;
	•		failure to realize expected cost improvement throughout Harris Stratex’s supply chain;
	•		order cancellations or postponements in product deliveries resulting in delayed revenue recognition;
	•		seasonality in the purchasing habits of customers;
	•		war and acts of terrorism;
	•		natural disasters;
	•		ability of Harris Stratex’s customers to obtain financing to enable their purchase of Harris Stratex’s products;
	•		fluctuations in foreign currency exchange rates;
	•		regulatory developments including denial of export and import licenses; and
	•		general economic conditions worldwide.

     Harris Stratex’s quarterly results are expected to be difficult to predict and delays in product delivery or closing of a sale can cause revenues and net income to fluctuate significantly from anticipated levels. In addition, Harris Stratex may increase spending in response to competition or in pursuit of new market opportunities. Accordingly, Harris Stratex cannot provide assurances that it will be able to achieve profitability in the future or that if profitability is attained, that Harris Stratex will be able to sustain profitability, particularly on a quarter-to-quarter basis.

If Harris Stratex is unable to protect its intellectual property rights adequately, it may be deprived of legal recourse against those who misappropriate Harris Stratex’s intellectual property.

     Harris Stratex’s ability to compete will depend, in part, on its ability to obtain and enforce intellectual property protection for its technology in the United States and internationally. Harris Stratex will rely upon a combination of trade secrets, trademarks, copyrights, patents and contractual rights to protect its intellectual property. In addition, Harris Stratex will enter into confidentiality and invention assignment agreements with its employees, and enters into non-disclosure agreements with its suppliers and appropriate customers so as to limit access to and disclosure of its proprietary information. Harris Stratex cannot give assurances that any steps taken by Harris Stratex will be adequate to deter misappropriation or impede independent third party development of similar technologies. In the event that such intellectual property arrangements are insufficient, Harris Stratex’s business, financial condition and results of operations could be harmed. Harris Stratex will have significant operations in the United States, United Kingdom and

New Zealand, and outsourcing arrangements in Asia. Harris Stratex cannot provide assurances that the protection provided to its intellectual property by the laws and courts of foreign nations will be substantially similar to the protection and remedies available under United States law. Furthermore, Harris Stratex cannot provide assurances that third parties will not assert infringement claims against it based on foreign intellectual property rights and laws that are different from those established in the United States.

If sufficient radio frequency spectrum is not allocated for use by Harris Stratex’s products, and Harris Stratex fails to obtain regulatory approval for its products, its ability to market its products may be restricted.

     Radio communications are subject to regulation by United States and foreign laws and international treaties. Generally, Harris Stratex’s products will need to conform to a variety of United States and international requirements established to avoid interference among users of transmission frequencies and to permit interconnection of telecommunications equipment. Any delays in compliance with respect to Harris Stratex’s future products could delay the introduction of such products.

     In addition, Harris Stratex will be affected by the allocation and auction of the radio frequency spectrum by governmental authorities both in the United States and internationally. Such governmental authorities may not allocate sufficient radio frequency spectrum for use by Harris Stratex’s products or Harris Stratex may not be successful in obtaining regulatory approval for its products from these authorities. Historically, in many developed countries, the unavailability of frequency spectrum has inhibited the growth of wireless telecommunications networks. In addition, to operate in a jurisdiction, Harris Stratex must obtain regulatory approval for its products. Each jurisdiction in which Harris Stratex will market its products has its own regulations governing radio communications. Products that support emerging wireless telecommunications services can be marketed in a jurisdiction only if permitted by suitable frequency allocations, auctions and regulations. The process of establishing new regulations is complex and lengthy. If Harris Stratex is unable to obtain sufficient allocation of radio frequency spectrum by the appropriate governmental authority or obtain the proper regulatory approval for its products, its business, financial condition and results of operations may be harmed.

If Harris Stratex is unable to favorably assess the effectiveness of its internal controls over financial reporting, Harris Stratex may not be able to accurately report its financial results. As a result, current and potential stockholders could lose confidence in Harris Stratex’s financial reporting, which could adversely affect its stock price.

     Effective internal controls over financial reporting are necessary for Harris Stratex to provide reliable financial reports. Pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, or the SOX Act, and beginning with Harris Stratex’s Annual Report on Form 10-K for the fiscal year ending June 27, 2008, Harris Stratex management will be required to certify to and report on, and its independent registered public accounting firm will be required to attest to, the effectiveness of Harris Stratex’s internal controls over financial reporting as of June 27, 2008. If Harris Stratex fails to maintain effective internal controls over financial reporting, its operating results could be misstated, its reputation may be harmed and the trading price of its stock could be negatively impacted. As described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Stratex,” Stratex determined there were two material weaknesses in its internal control over financial reporting as defined in standards established by the Public Company Accounting Oversight Board, or PCAOB. In general, a “material weakness” (as defined in PCAOB Auditing Standard No. 2) is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement in the annual or interim financial statements will not be prevented or detected. In fiscal 2006, Stratex devoted significant resources to improve its internal controls related to these material weaknesses. Stratex believes that these efforts have remediated the concerns that gave rise to the “material weakness” related to revenue recognition. However, due to the assessment of Stratex’s internal controls over financial reporting as of March 31, 2006, Stratex had identified the continuation of a material weakness in the review of the financial statements of foreign operations and the period-end financial close and reporting process for Stratex’s consolidated operations. Historically, Harris has only been required to certify or report on or receive an attestation from its independent registered public accounting firm with respect to Harris, taken as a whole, and not the Microwave Communications Division in particular. Stratex and the Microwave Communications Division have recently reviewed, documented and tested their internal controls over financial reporting. Harris Stratex will continue reviewing its internal controls over the financial close and reporting process, and will implement additional controls as needed. However, Harris Stratex cannot be certain that its controls over its financial processes and reporting will be adequate in the future, and, to the extent that Harris Stratex incurs significant additional expenses in complying with these provisions of the SOX Act, those expenses have not been anticipated and are not otherwise reflected in the unaudited pro forma condensed consolidated financial data of Harris Stratex contained in this prospectus. Any failure to maintain effective internal controls over financial reporting could cause Harris Stratex to prepare inaccurate financial statements, subject Harris Stratex to a misappropriation of assets or cause Harris Stratex to fail to meet its SEC reporting obligations on a timely basis, which could materially adversely affect the trading price of the Class A common stock.

Harris Stratex does not expect to pay dividends for the foreseeable future, and investors must rely on increases in the trading prices of the Harris Stratex Class A common stock for returns on their investment.

     Harris Stratex does not expect to pay dividends in the immediate future. Holders of Harris Stratex Class A common stock must rely on increases in the trading price of their shares for returns on their investment.

USE OF PROCEEDS

     We intend to use the net proceeds from the cash exercise of the warrants for working capital and general corporate purposes.

PRICE RANGE OF CLASS A COMMON STOCK

     No public market existed for our Class A common stock prior to the combination of the Microwave Communications Division and Stratex.

DIVIDEND POLICY

     Harris Stratex does not expect to pay any dividends in the immediate future. Harris Stratex will retain a $50 million credit facility of Stratex following the completion of the merger and contribution transaction, and the covenants of that credit facility will restrict Harris Stratex from paying dividends or making other distributions to the Harris Stratex stockholders under certain circumstances. Harris Stratex also may enter into other credit facilities or debt financing arrangements that further limit Harris Stratex’s ability to pay dividends or make other distributions.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

     The following tables present (1) selected historical financial data of Microwave Communications Division, (2) selected historical financial data of Stratex, and (3) certain unaudited financial data about the pro forma financial condition and results of operations of Harris Stratex after giving effect to the combination of the Microwave Communications Division and Stratex. The historical financial data shows the financial results actually achieved by the Microwave Communications Division and Stratex.

Selected Historical Financial Data of the Microwave Communications Division

     The selected historical financial data presented below is on a carve-out basis and represents the financial data of the Microwave Communications Division of Harris Corporation and its subsidiaries as it was operated within Harris and, in management’s opinion, includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of operations and financial position of MCD for the periods and dates presented. The selected financial data for the interim unaudited data as of the three months ended September 29, 2006 and September 30, 2005, and for each of the three month periods then ended do not necessarily indicate results that may be obtained for any other interim periods or for the fiscal year as a whole. The selected historical financial data as of the fiscal years ended June 30, 2006 and July 1, 2005 and for the fiscal years ended June 30, 2006, July 1, 2005 and July 2, 2004, has been derived from MCD’s audited financial statements and related notes. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MCD” beginning on page 21 of this prospectus, and the historical combined financial statements and related notes of MCD beginning on page F-3 of this prospectus.

		Three Months Ended								Fiscal Years Ended
		September 29,				September 30,																June 27,				June 28,
		2006				2005				June 30,				July 1,				July 2,				2003(3)				2002(4)
		(unaudited)				(unaudited)				2006(1)				2005				2004(2)				(unaudited)				(unaudited)
		(in thousands)
Results of Operations:
Revenue from product sales and services		$	93,555			$	75,324			$	357,500			$	310,427			$	329,816			$	297,470			$	302,915
Cost of product sales and services			(62,011	)			(52,596	)			(271,340	)			(219,946	)			(245,933	)			(221,701	)			(217,237	)
Net income (loss)			5,131				1,397				(35,848	)			(3,778	)			(20,233	)			(35,248	)			(29,752	)

		As of								As of
		September 29,				September 30,												July 2,				June 27,				June 28,
		2006				2005				June 30,				July 1,				2004(2)				2003(3)				2002(4)
		(unaudited)				(unaudited)				2006(1)				2005				(unaudited)				(unaudited)				(unaudited)
		(in thousands)
Balance Sheet Data:
Total assets		$	353,913			$	367,318			$	352,649			$	362,969			$	344,183			$	398,271			$	422,985
Long-term liabilities			3,074				6,749				12,642				14,180				14,978				11,900				12,466
Total net assets			260,134				290,378				252,020				280,313				246,517				272,350				296,770

Selected Historical Financial Data of Stratex

     The selected historical financial data presented below at September 30, 2006 and 2005 and for each of the six-month periods then ended was derived from Stratex’s unaudited financial statements for periods ended September 30, 2006 and 2005 beginning on page F-41 and F-65 of this prospectus, respectively, and which include, in management’s opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of operations and financial position of Stratex for the periods and dates presented. Interim unaudited data for the six-month period ended September 30, 2006 do not necessarily indicate results that may be obtained for any other interim period or for the year as a whole. The selected financial data presented below at March 31, 2006 and 2005 and for each of the three years in the period ended March 31, 2006 was derived from Stratex’s audited consolidated financial statements for the year ended March 31, 2006 beginning on page F-41 of this prospectus. The selected financial data presented below for the years ended March 31, 2003 and 2002 and at March 31, 2004, 2003 and 2002 was derived from Stratex’s audited consolidated financial statements for those periods. The information in the following table should be read together with Stratex’s audited consolidated financial statements for the years ended March 31, 2006, 2005 and 2004 and the related notes beginning on page F-41 of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 36 of this prospectus.

		Six Months Ended
		September 30,								Year Ended March 31,
		2006				2005				2006				2005(3)				2004				2003(2)				2002(1)
		(in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Net sales		$	133,516			$	111,426			$	230,892			$	180,302			$	157,348			$	197,704			$	228,844
Net income (loss)			3,375				(6,427	)			(2,297	)			(45,946	)			(37,068	)			(51,555	)			(168,873	)
Basic and diluted net income (loss) per share			0.03				(0.07	)			(0.02	)			(0.51	)			(0.44	)			(0.62	)			(2.13	)
Basic weighted average shares outstanding			97,405				95,059				95,600				89,634				83,364				82,548				79,166
Diluted weighted average shares outstanding			100,537				95,059				95,600				89,634				83,364				82,548				79,166

		At September 30,							At March 31,
		2006				2005				2006				2005(3)				2004				2003(2)				2002(1)
		(in thousands, except employee head count)
Balance Sheet and other Data:
Total assets		$	184,154			$	153,965			$	180,830			$	160,631			$	163,244			$	184,785			$	214,117
Long-term liabilities			29,892				27,333				37,376				32,185				20,311				19,145				6,675
Stockholders’ equity			72,990				55,092				62,343				60,023				81,182				112,800				167,457
Total employees			471				446				453				456				617				587				760

Selected Unaudited Pro Forma Condensed Consolidated Financial Data of Harris Stratex

     The following table shows certain unaudited information about the pro forma financial condition and results of operations, including per share data, of Harris Stratex after giving effect to the merger and the contribution transaction. The table sets forth selected unaudited pro forma condensed consolidated balance sheet data as of September 30, 2006 and assumes that the merger and the contribution transaction took place on that date with MCD as the accounting acquirer of Stratex in accordance with the provisions of Statement of Financial Accounting Standard No. 141 “Business Combinations”, or SFAS 141. The table also sets forth selected unaudited pro forma condensed consolidated statements of operations for the three months ended September 30, 2006 and the fiscal year ended June 30, 2006 and assumes that the merger and the contribution transaction took place on July 1, 2006 and July 1, 2005, respectively. The Harris Stratex fiscal year ends on the closest Friday to June 30th. The accompanying unaudited pro forma condensed consolidated statement of operations for the three months ended September 30, 2006 and the year ended June 30, 2006 combines the three months ended September 30, 2006 and twelve months ended June 30, 2006, respectively, for both MCD and Stratex. However, the following pro forma presentation does not include any impact of synergies anticipated from the combination of the Microwave Communications Division and Stratex. The information presented below should be read together with the historical consolidated financial statements of Stratex and MCD, including the related notes, beginning on page F-41 of this prospectus, in the case of Stratex, and beginning on page F-3 of this prospectus, in the case of MCD, and together with the historical consolidated financial data for Stratex and MCD and the other unaudited pro forma financial information, including the related notes, beginning on page F-31 of this prospectus as well as with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MCD” beginning on page 21 of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Stratex” beginning on page 36 of this prospectus. For unaudited pro forma condensed consolidated financial information of Harris Stratex, see “Harris Stratex Networks, Inc. Unaudited Pro Forma Condensed Consolidated Financial Data” beginning on page F-33 of this prospectus. The unaudited pro forma financial data are not necessarily indicative of results that actually would have occurred had the merger and the contribution transaction been completed on the dates indicated or that may be obtained in the future. See also “Risk Factors” beginning on page 3 and “Information Relating to Forward-Looking Statements” included elsewhere in this prospectus.

		Three Months
		Ended				Year Ended
		September 30, 2006				June 30, 2006
		(unaudited)				(unaudited)
		(in thousands)				(in thousands)
Microwave Communications Division of Harris Corporation
Results of Operations
Revenue from product sales and services		$	93,555			$	357,500
Cost of product sales and services(1)			(62,011	)			(271,340	)
Net income (loss)			5,131				(35,848	)
Financial Position at End of Period
Total assets		$	353,913			$	—
Long-term liabilities			3,074				—
Total net assets			260,134				—
Stratex Networks, Inc.
Results of Operations
Revenue from product sales and services		$	67,279			$	242,257
Cost of product sales and services			(46,512	)			(171,397	)
Net income			1,552				3,691
Financial Position at End of Period
Total assets		$	184,154			$	—
Long-term liabilities			29,892				—
Total net assets			72,990				—
Pro Forma Adjustments
Results of Operations
Revenue from product sales and services		$	—			$	—
Cost of product sales and services(2)			(2,175	)			(8,700	)
Net loss(3)			(2,769	)			(15,815	)
Financial Position at End of Period
Total assets(4)		$	385,111			$	—
Long-term liabilities(5)			41,666				—

		Three Months
		Ended				Year Ended
		September 30, 2006				June 30, 2006
		(unaudited)				(unaudited)
		(in thousands)				(in thousands)
Total net assets(6)			340,230				—
Pro Forma Combined Financial Data of Harris Stratex Networks, Inc.
Results of Operations
Revenue from product sales and services		$	160,834			$	599,757
Cost of product sales and services			(110,698	)			(451,437	)
Net income (loss)			3,914				(47,972	)
Financial Position at End of Period
Total assets		$	923,178			$	—
Long-term liabilities			74,632				—
Total net assets			673,354				—

Allocation of the purchase price of Stratex determined as follows (amounts in thousands):
Market price of Stratex stock(A)		$	400,148
Estimated acquisition costs			9,000
Total purchase price to be allocated		$	409,148

						Estimated
Allocation of purchase price based on fair market value						Useful Life
Identifiable intangible assets:
Developed technology non-legacy products		$	77,500			10 years
Developed technology legacy products			1,900			2 years
Customer relationships			5,400			8 years
Backlog			900			1 year
Tradename — Eclipse			16,000			10 years
Tradename — Legacy Products			200			2 years
Tradename — Stratex			28,300			Indefinite
Total identifiable intangible assets			130,200
Net tangible assets(B)			43,272
Goodwill			235,676
Total purchase price allocation		$	409,148

	A.		Total market price of Stratex common stock equal to the price of a share of Stratex common stock as of September 19, 2006 ($4.00) X diluted shares of Stratex common stock outstanding per the Stratex September 30, 2006 Balance Sheet (100.0 million shares).
	B.		Stratex net tangible assets as of September 30, 2006 are calculated as follows:

Historical net assets reported		$	72,990
Inventory step-up			11,137
Deferred revenue reduction			2,039
Single trigger employment agreement payouts			(3,834	)
Less deferred tax liability related to identifiable intangible assets			(39,060	)
Adjusted net assets		$	43,272

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MCD

The historical information discussed below is for MCD, which is the accounting predecessor to Harris Stratex.

Overview

     The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of MCD, which is sometimes referred to in this prospectus as the MD&A, is intended to help the reader understand MCD. MD&A is provided as a supplement to, should be read in conjunction with, and is qualified in its entirety by reference to, the Combined Financial Statements for MCD and related Notes beginning on page F-3 of this prospectus. Except for the historical information contained herein, the discussions in MD&A contain forward-looking statements that involve risks and uncertainties. The actual results of the MCD operations could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under “Information Relating to Forward-Looking Statements” included elsewhere in this prospectus.

     The following is a list of the sections of MD&A, together with the perspective of MCD’s management on the contents of these sections of MD&A, which is intended to make reading these pages more productive:

	•		Business Considerations — a general description of the MCD businesses; the value drivers of these businesses and MCD’s strategy for achieving value; fiscal 2006 key indicators; and industry-wide opportunities, challenges and risks that are relevant to MCD in the microwave communications industry.
	•		Operations Review — an analysis of MCD’s 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 an understanding of the MCD business as a whole, for the three years presented in MCD’s financial statements.
	•		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 MCD and their potential impact.

Business Considerations

  General

     MCD is a leading global wireless transmission networks solutions provider focused on providing microwave communications products, systems and services for private network operators and mobile telecommunications providers. MCD’s three segments serve markets for microwave products and services in MCD’s North American region (North America microwave), microwave products and services in MCD’s international region (International microwave) and network management software solutions worldwide (NetBoss). MCD generates revenue, income and cash flows by developing, manufacturing and selling microwave communications products and network management software as well as providing related services. MCD generally sells products and services directly to its customers. MCD utilizes agents and distributors to sell some products and services, especially in international markets. For more information relating to the customers of MCD, see “Business — Customers” beginning on page 56 of this prospectus.

     Financial information with respect to corporate expenses that were not allocated to MCD’s three business segments is reported as part of Corporate Allocations Expense.

Value Drivers of MCD’s Businesses and Strategy for Achieving Value

     MCD is committed to its mission statement, and MCD believes that executing the mission statement creates value. Consistent with this commitment, MCD currently focuses on these key value drivers:

	•		Continue profitable revenue growth in all segments;
	•		Ongoing attention to operating efficiencies and cost reductions;
	•		Maintain an efficient capital structure.

  Continuing Profitable Revenue Growth in All Segments

     MCD plans to capitalize on its strength in the North American market by continuing to win opportunities with public telecommunications providers as well as Federal, state and other private network operators to meet increasing demand for capacity requirements and the demand for high-reliability, high-bandwidth networks that are more secure and better protected against natural and man-made disasters; increase its international revenue by offering new products and expanding regional sales channels to penetrate major regional mobile telecom operators; and continue to offer engineering and other professional services for network planning, systems architecture design and project management as a global competitive advantage.

  Focusing on Operating Efficiencies and Cost Reductions

     MCD’s principal focus areas for operating efficiencies and cost management are: reducing procurement costs through an emphasis on coordinated supply chain management; reducing product costs through dedicated engineering resources focused on product design; improving manufacturing efficiencies across all segments; and optimizing facility utilization.

  Maintaining an Efficient Capital Structure

     MCD’s capital structure is intended to optimize its cost of capital. MCD had $14.4 million in cash, cash equivalents and short-term investments as of June 30, 2006 and had $1 million of cash flows used in operating activities during fiscal 2006.

  Key Indicators

     MCD believes its value drivers, when implemented, will improve its key indicators such as: net income, revenue, gross profit margin, operating cash flows, total assets as a percentage of revenue and total equity as a percentage of revenue.

     See “— Operations Review” below for more information.

  Industry-Wide Opportunities, Challenges and Risks

     Global trends and developments in the microwave communications markets include:

	•		Continuing build-out of new networks in emerging markets to meet rapid subscriber growth;
	•		Increasing demand for microwave communications due to build-outs for third-generation, or 3G, services rapidly increasing the number of cell sites;
	•		Increasing demand to support capacity needs for new triple-play services;
	•		Continuing fixed-line to mobile-line substitution;
	•		Private networks and public telecommunications operators building high-reliability, high-bandwidth networks that are more secure and better protected against natural and man-made disasters;
	•		Continuing global mobile operator consolidation; and
	•		The Federal Communications Commission, or FCC, mandate for a 2 GHz relocation project in calendar 2007.

     MCD management believes that its experience and capabilities are well aligned with, and that it is positioned to capitalize on, the market trends noted above. While MCD believes that these developments generally will have a positive impact on its business, MCD remains subject to general economic conditions that could adversely affect its customers. MCD also remains subject to other risks

associated with these markets, including technological uncertainties, slow market adoption of digital radio or any of MCD’s new products and other risks which are discussed under “Information Relating to Forward-Looking Statements” included elsewhere in this prospectus and “Risk Factors” beginning on page 3 of this prospectus.

Three Months Ended September 29, 2006 Compared to the Three Months Ended September 30, 2005

  Operations Review

  Revenue and Net Income

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Revenue		$	93.6			$	75.3				24.3	%
Net income		$	5.1			$	1.4				267.3	%
% of revenue			5.5	%			1.9	%

     MCD’s revenue for the first quarter of fiscal 2007 was $93.6 million, an increase of 24.3 percent compared to the first quarter of fiscal 2006. Net income for the first quarter of fiscal 2007 was $5.1 million compared to $1.4 million in the first quarter of fiscal 2006. Revenue increased in the North America microwave, International microwave and NetBoss segments by 9.3 percent, 52.5 percent and 11.5 percent, respectively. TRuepoint™ is now MCD’s premier product line and sales of the product continue to increase, which lead to the increase in revenue. Due to the TRuepoint’s™ product line having higher margins than other MCD legacy product lines, overall margins and net income increased over the prior-year quarter.

  Gross Margin

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Revenue		$	93.6			$	75.3				24.3	%
Cost of product sales and services			(62.0	)			(52.6	)			17.9	%
Gross margin		$	31.6			$	22.7				38.8	%
% of revenue			33.7	%			30.2	%

     MCD’s gross margin (revenue less cost of product sales and services) as a percentage of revenue was 33.7 percent in the first quarter of fiscal 2007 compared to 30.2 percent in the first quarter of fiscal 2006. Gross margins increased due to increased shipments of TRuepoint™. See the “Discussion of Business Segments” discussion below of this MD&A for further information.

  Engineering, Selling and Administrative Expenses

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Engineering, selling and administrative expenses		$	24.4			$	19.5				24.8	%
% of revenue			26.1	%			25.9	%

     MCD’s engineering, selling and administrative expenses increased from $19.5 million in the first quarter of fiscal 2006 to $24.4 million in the first quarter of fiscal 2007. As a percentage of revenue, these expenses were relatively flat, increasing slightly from 25.9 percent in the first quarter of fiscal 2006 to 26.1 percent in the first quarter of fiscal 2007. The increase in engineering, selling, and administrative expenses is primarily related to a $1.8 million gain on the sale of a building in San Antonio, Texas in the first quarter of fiscal 2006 and increased selling costs related to the 24.3 percent increase in sales. See “-Discussion of Business Segments” below for further information.

  Income Taxes

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Income before income taxes		$	5.5			$	1.7				232.8	%
Income tax expense			0.4				0.3				52.5	%
% of income before income taxes			7.4	%			16.1	%

     MCD’s income tax expense relates to income taxes paid or to-be-paid in international jurisdictions that do not have net operating loss carryforwards. The amount of domestic, international and state and local tax loss carryforwards as of September 29, 2006 was $85.8 million.

  Discussion of Business Segments

  North America Microwave

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Revenue		$	49.8			$	45.6				9.3	%
Segment operating income			1.9				6.4				(70.3	)%
% of revenue			3.8	%			14.1	%

     North America microwave segment revenue increased 9.3 percent from the first quarter of fiscal 2006 to the first quarter of fiscal 2007. This segment had operating income of $1.9 million in the first quarter of fiscal 2007 compared to $6.4 million in the first quarter of fiscal 2006. The strengthening market for microwave radios primarily drove the increase in revenue. Demand in the North America microwave segment was driven primarily by mobile operators that are upgrading and expanding networks for high bandwidth voice, data and video services and by private networks upgrading for increased reliability, survivability and interoperability.

     The decrease in operating income was primarily due to a change in product mix due to two key customers buying a large volume of radios at lower margins compared to the first quarter of fiscal 2006 combined with increased engineering, selling and administrative expenses in the first quarter of fiscal 2007 when compared to the first quarter of fiscal 2006 due to higher selling expenses.

     Orders in the North America microwave segment decreased 10 percent from $48.6 million in the first quarter of fiscal 2006 to $43.9 million in the first quarter of fiscal 2007. The decrease in orders in the first quarter of fiscal 2007 when compared to fiscal 2006 is due to timing of large awards from customers that took longer to pass through the buyer’s procurement cycle than normal, which is expected to recover in the second quarter of fiscal 2007. Significant orders received in this segment during the first quarter of fiscal 2007 included $6.1 million from U.S. Cellular and $4.9 million from the City of Oakland.

  International Microwave Segment

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Revenue		$	39.3			$	25.7				52.5	%
Segment operating income (loss)			5.0				(3.3	)			—
% of revenue			12.6	%			(12.9	)%

     International microwave segment revenue increased 52.5 percent from the first quarter of fiscal 2006 to the first quarter of fiscal 2007. This segment had operating income of $5.0 million in the first quarter of fiscal 2007 compared to an operating loss of $3.3 million in the first quarter of fiscal 2006. The success of this segment’s TRuepoint™ radio products and a strengthening market for microwave radios primarily drove the increase in revenue. International order rates increased, particularly in Africa.

     The increase in operating income was primarily due to improved gross margins in the first quarter of fiscal 2007 as a result of increased shipments of the TRuepoint™ product line. This increase was partially offset by increased engineering, selling and administrative expenses in the first quarter of fiscal 2007 when compared to the first quarter of fiscal 2006 due to an increase of selling expenses.

     Orders in the International microwave segment increased 42 percent from $31.9 million in the first quarter of fiscal 2006 to $45.4 million in the first quarter of fiscal 2007. Demand in the International microwave segment increased significantly during the first quarter of fiscal 2007, driven by network expansions for a diverse and growing customer base throughout West Africa, East Africa, and the Middle East. Major orders in the first quarter of fiscal 2007 came from regional operators in Nigeria, Tanzania, Kenya, Iraq and Mexico. MCD also received the first order from a major European telecommunications systems integrator for high-capacity TRuepoint(R)radios for a large 3G operator in Indonesia, with follow-on requirements expected in the second quarter of fiscal 2007. During the first quarter of fiscal 2007, MCD also secured a five-year supplier agreement with Africa’s largest mobile phone operator, MTN Group. MCD will supply digital microwave radios for backhaul and access applications across MTN’s extensive networks in Africa.

  NetBoss Segment

										Percent
										Increase/
		Q1 FY07				Q1 FY06				(Decrease)
						(in millions)
Revenue		$	4.5			$	4.0				11.5	%
Segment operating income			0.3				0.1				384.2	%
% of revenue			6.2	%			1.4	%

     NetBoss segment revenue increased 11.5 percent from the first quarter of fiscal 2006 to the first quarter of fiscal 2007. This segment had operating income of $0.3 million in the first quarter of fiscal 2007 compared to $0.1 million in the first quarter of fiscal 2006. The increase in revenue was due to increased orders. The increase in operating income was driven by increased revenue combined with a decrease in engineering, selling and administrative expenses as a percentage of sales.

     Orders in the NetBoss segment increased 72 percent from $3.7 million in the first quarter of fiscal 2006 to $6.4 million in the first quarter of fiscal 2007. The significant increase in orders was primarily due to two major orders from CFE Mexico and MTC Kuwait, both for system expansion.

  Liquidity, Capital Resources and Financial Strategies

  Cash Flows

		First Quarter
		2007				2006
		(in millions)
Net cash used in operating activities		$	(1.0	)		$	(7.4	)
Net cash provided by (used in) investing activities			(1.3	)			3.2
Net cash provided by financing activities			2.6				1.9
Effect of foreign exchange rate changes on cash			0.3				1.0
Net increase (decrease) in cash and cash equivalents		$	0.6			$	(1.3	)

  Cash and Cash Equivalents

     MCD’s cash and cash equivalents increased by $0.6 million to $14.4 million at the end of the first quarter of fiscal 2007, primarily due to $2.6 million of cash and other transfers from Harris Corporation. This increase was partially offset by $1.0 million of cash used in operating activities and $1.3 million of software and plant and equipment additions.

     Management currently believes that existing cash, funds generated from operations, and access to the public and private debt and equity markets will be sufficient to provide for MCD’s anticipated requirements for working capital, and capital expenditures for the next 12 months and the foreseeable future. MCD expects tax payments over the next three years to approximate its tax expense during the same period. No other significant cash payments are anticipated in fiscal 2007 and thereafter, other than those noted in the “-Liquidity, Capital Resources and Financial Strategies-Contractual Obligations” discussion below.

     There can be no assurance, however, that MCD’s business will continue to generate cash flow at current levels, or that anticipated operational improvements will be achieved. If MCD is unable to maintain cash balances or generate sufficient cash flow from operations to service its obligations, MCD may be required to sell assets, reduce capital expenditures, or obtain financing. MCD’s ability to make scheduled principal payments or pay interest on or refinance any future indebtedness depends on its future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to general economic, political, financial, competitive, legislative and regulatory factors beyond MCD’s control.

  Net Cash Used in Operating Activities

     MCD’s net cash used in operating activities was $1.0 million in the first quarter of fiscal 2007 compared to $7.4 million in the first quarter of fiscal 2006. The improvement in cash flow was primarily due to higher profitability on increased sales and a decrease in inventories and unbilled costs, which was partially offset by a decrease in advanced payments and unearned income, and a decrease in accounts payable and accrued expenses in the first quarter of fiscal 2007 compared to the first quarter of fiscal 2006. MCD has enhanced its focus on reducing inventory and increasing cash collections.

  Net Cash Provided by (Used in) Investing Activities

     MCD’s net cash used in investing activities was $1.3 million in the first quarter of fiscal 2007 compared to net cash provided by investing activities of $3.2 million in the first quarter of fiscal 2006. Net cash used in investing activities in the first quarter of fiscal 2007 was due to $1.1 million additions of capitalized software and $0.2 million additions of plant and equipment. Net cash provided by investing activities in the first quarter of fiscal 2006 was primarily due to $4.6 million proceeds from the sale of land and building in San Antonio, Texas. This was partially offset by $0.9 million additions of capitalized software and $0.5 million additions of plant and equipment.

  Net Cash Provided by Financing Activities

     MCD’s net cash provided by financing activities in the first quarter of fiscal 2007 was $2.6 million compared to $1.9 million in the first quarter of fiscal 2006. The net cash provided by financing activities for MCD is primarily from net cash transfers from Harris Corporation.

Fiscal 2006 compared with Fiscal 2005 and Fiscal 2005 compared with Fiscal 2004

  Revenue and Net Loss

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Revenue		$	357.5			$	310.4				15.2	%		$	329.8				(5.9	)%
Net loss		$	(35.8	)		$	(3.8	)			(848.9	)%		$	(20.2	)			(81.3	)%
% of revenue			(10.0	)%			(1.2	)%							(6.1	)%

  Fiscal 2006 Compared with Fiscal 2005

     MCD’s revenue for fiscal 2006 was $357.5 million, an increase of 15.2% compared to fiscal 2005. Net loss for fiscal 2006 was $35.8 million compared to fiscal 2005 net loss of $3.8 million. Fiscal 2006 revenue increased in both the North America microwave and International microwave segments by 5.2% and 35.4% from June 2005, respectively. The increase was partially offset by a decrease in revenue in the NetBoss segment of 26.9% from June 2005.

     MCD’s net loss of $35.8 million in fiscal 2006 included the impact of $39.6 million in charges, related to the International microwave segment, associated with product discontinuances and a shutdown of manufacturing activities in Montreal, Canada. Corporate allocations expense increased from $6.2 million in fiscal 2005 to $12.4 million in fiscal 2006. Corporate allocations expense in fiscal 2006 included the impact of a $5.4 million charge associated with a legal settlement related to arbitration with a Nigerian customer of the Wireless Local Loop business unit that was previously discontinued.

  Fiscal 2005 Compared with Fiscal 2004

     MCD’s revenue for fiscal 2005 was $310.4 million, a decrease of 5.9% compared to fiscal 2004. Revenue decreased in the International microwave segment, which was partially offset by increased revenue in the North America microwave and NetBoss segments. Net loss for fiscal 2005 was $3.8 million compared to $20.2 million in fiscal 2004.

     Operating income from all three of MCD’s segments improved in fiscal 2005 when compared to fiscal 2004 and corporate allocations expense decreased from $6.8 million in fiscal 2004 to $6.2 million in fiscal 2005. See “-Discussion of Business Segments” below for further information.

  Gross Margin

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Revenue		$	357.5			$	310.4				15.2	%		$	329.8				(5.9	)%
Cost of product sales and services			(271.3	)			(219.9	)			23.4	%			(245.9	)			(10.6	)%
Gross margin			86.2				90.5				(4.8	)%			83.9				7.9	%
% of revenue			24.1	%			29.1	%							25.4	%

  Fiscal 2006 Compared with Fiscal 2005

     MCD’s gross margin (revenue less cost of product sales and services) as a percentage of revenue was 24.1% in fiscal 2006 compared to 29.1% in fiscal 2005. Gross margins decreased due to $35.0 million, or 9.8% of revenue, of inventory write-downs and other charges associated with product discontinuances and the shutdown of manufacturing activities at the Montreal, Canada plant. Gross margins benefited from increased shipments of TRuepoint™, a new family of lower-cost microwave radios. See “-Discussion of Business Segments” below for further information.

  Fiscal 2005 Compared with Fiscal 2004

     MCD’s gross margin as a percentage of revenue was 29.1% in fiscal 2005 compared to 25.4% in fiscal 2004. Gross margins increased due to increased shipments of TRuepoint™, a new family of lower-cost microwave radios, and a shift away from lower-margin international projects. Gross margin as a percent of revenue increased in the International microwave segment, which was partially offset by decreased gross margins in the North America microwave and NetBoss segments. See the “-Discussion of Business Segments” below for further information.

  Engineering, Selling and Administrative Expenses

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Engineering, selling and administrative expenses		$	102.3			$	87.8				16.5	%		$	97.1				(9.6	)%
% of revenue			28.6	%			28.3	%							29.4	%

  Fiscal 2006 Compared with Fiscal 2005

     Engineering, selling and administrative expenses increased from $87.8 million in fiscal 2005 to $102.3 million in fiscal 2006. As a percentage of revenue, these expenses increased from 28.3% in fiscal 2005 to 28.6% in fiscal 2006. The increase in engineering, selling, and administrative expenses in whole dollars, as well as a percentage of revenue, is primarily related to $4.8 million of severance and other costs recorded in fiscal 2006 related to the shutdown of manufacturing activities at the Montreal, Canada plant and product discontinuances, stock-based compensation expense and increased selling costs related to the 15.2% increase in sales. See “-Discussion of Business Segments” below for further information.

     Research and product development costs, which are included in engineering, selling and administrative expenses, were $18.9 million in fiscal 2006, compared to $19.2 million in fiscal 2005. The decrease was primarily due to higher spending in the prior year related to MCD’s new TRuepoint™ family of microwave radios.

  Fiscal 2005 Compared with Fiscal 2004

     MCD’s engineering, selling and administrative expenses decreased from $97.1 million in fiscal 2004 to $87.8 million in fiscal 2005. As a percentage of revenue, these expenses decreased from 29.4% to 28.3%. The decrease was primarily due to cost-reduction actions taken in fiscal 2004 related to the successful transfer of TRuepoint™ production from Montreal, Canada to San Antonio, Texas as well as the consolidation of administrative and support functions at our Morrisville, North Carolina location. See “-Discussion of Business Segments” below for further information.

     Research and product development costs, which are included in engineering, selling and administrative expenses, were $19.2 million in fiscal 2005, compared to $20.8 million in fiscal 2004. The decrease was primarily due to a relatively high level of spending on the development of MCD’s TRuepoint™ family of microwave radios in fiscal 2004.

  Income Taxes

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Loss before income taxes		$	(29.1	)		$	(3.5	)			723.4	%		$	(20.1	)			82.5	%
Income tax expense			6.8				0.2				2,658.8	%			0.1				184.9	%
% of loss before income taxes			(23.2	)%			(6.9	)%							0.4	%

     MCD’s income tax expense relates to income taxes paid or to-be-paid in international jurisdictions that do not have net operating loss carryforwards. The amount of domestic, international and state and local tax loss carryforwards as of June 30, 2006 was $103.3 million.

Discussion of Business Segments

  North America Microwave Segment

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Revenue		$	168.1			$	159.8				5.2	%		$	154.1				3.7	%
Segment operating income			16.9				10.3				64.9	%			3.6				182.7	%
% of revenue			10.1	%			6.4	%							2.4	%

  Fiscal 2006 Compared with Fiscal 2005

     North America microwave segment revenue increased 5.2% from fiscal 2005 to fiscal 2006. This segment had operating income of $16.9 million in fiscal 2006 compared to operating income of $10.3 million in fiscal 2005. The strengthening market for microwave radios primarily drove the increase in revenue. Demand for both private networks and mobile service providers continued to be driven by capacity expansion and by network upgrades to provide high-reliability, high-bandwidth applications.

     The increase in operating income was primarily due to increased shipments in fiscal 2006 of TRuepoint™, a family of lower-cost microwave radios. This was partially offset by increased engineering, selling and administrative expenses in fiscal 2006 when compared to fiscal 2005 as a result of increased selling expenses and stock and cash based compensation plan expenses.

     Orders in the North America microwave segment increased 25% from $159 million in fiscal 2005 to $199 million in fiscal 2006. Significant orders received in this segment during fiscal 2006 included a $14 million order from the Commonwealth of Kentucky as part of a state-wide, three-year, program to transition the Kentucky Early Warning System from analog to digital technology using TRuepoint™ radios and various other large orders from private network and major mobile telecommunications providers in North America.

  Fiscal 2005 Compared with Fiscal 2004

     North America microwave segment revenue increased 3.7% from fiscal 2004 to fiscal 2005. The segment operating income increased from $3.6 million in fiscal 2004 to $10.3 million in fiscal 2005. Significant orders during the year included an on-going network project for the Federal Bureau of Investigation, a major order with a large defense contractor in support of an international communications project, and various private network and mobile telecommunications providers in North America.

     The fiscal 2004 operating income of $3.6 million included a charge of $2.8 million associated with cost-reduction actions related to the consolidation of administrative and support functions at our Morrisville, North Carolina location.

  International Microwave Segment

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Revenue		$	172.3			$	127.2				35.4	%		$	156.3				(18.6	)%
Segment operating loss			(34.1	)			(11.9	)			185.6	%			(17.5	)			(31.9	)%
% of revenue			(19.8	)%			(9.4	)%							(11.2	)%

  Fiscal 2006 Compared with Fiscal 2005

     International microwave segment revenue increased 35.4% from fiscal 2005 to fiscal 2006. This segment had an operating loss of $34.1 million in fiscal 2006 compared to an operating loss of $11.9 million in fiscal 2005. The success of this segment’s TRuepoint™ radio products and a strengthening market for microwave radios primarily drove the increase in revenue. International order rates increased, particularly in Africa.

     The increase in operating loss was primarily due to $39.6 million of inventory write-downs and severance costs associated with product discontinuances and the shut-down of manufacturing activities in Montreal, Canada. During the second quarter of fiscal 2005, MCD successfully completed the release of the TRuepoint™ product family, which is its product offering for the low- and mid-capacity microwave radio market segments. In light of the market acceptance of this product family, as demonstrated by TRuepoint™ product sales, management announced during the second quarter of fiscal 2006 a manufacturer’s discontinuance, or MD, of the MicroStar M/H™, MicroStar L™ and Galaxy™ product families (the product families the TRuepoint™ product line was developed to replace) and of the ClearBurst™ product family, a product line that shared manufacturing facilities with the MicroStar™ and the Galaxy™ product lines in Montreal, Canada. In November 2005, letters were sent to MicroStar™, Galaxy™ and ClearBurst™ customers, informing them of the MD announcement.

     MCD estimated expected demand for these products based on responses to the letters noted above and a percentage of the installed base, using previous product MD history as a basis for this estimate. In addition, the customer service inventory of these discontinued products was reviewed and quantities required to support existing warranty obligations and contractual obligations were quantified. These analyses identified inventory held in multiple locations including Montreal, Canada; Redwood Shores, California; San Antonio, Texas; Paris, France; Mexico City, Mexico; São Paulo, Brazil; and Shenzhen, China. As a result of these analyses, $34.0 million of inventory was written down in the second quarter of fiscal 2006. Also, $5.6 million of severance and other costs were recorded in fiscal 2006 related to the shutdown of manufacturing activities at the Montreal, Canada plant and product discontinuances. The inventory reserved in the second quarter of fiscal 2006 has been subsequently disposed of or scrapped. No additional material costs or charges are expected to be incurred in connection with these product discontinuances.

     The decrease in gross margins and operating losses associated with the product discontinuances noted above was partially offset by improved gross margins in fiscal 2006 as a result of increased shipments of TRuepoint™. Engineering, selling and administrative

expenses increased in fiscal 2006 when compared to fiscal 2005 as a result of increased selling expenses and stock and cash based compensation plan expenses.

     Orders in the International microwave segment increased 22% from $153 million in fiscal 2005 to $186 million in fiscal 2006. Significant orders received in this segment during fiscal 2006 included $58 million in orders from VMobile Nigeria as part of a contract to provide radios for its transmission and transport network spanning more than 5,000 kilometers. Significant international orders were also received from customers in Nigeria, Canada, Mexico, Kenya, Ivory Coast, Romania, Brazil and Zambia.

  Fiscal 2005 Compared with Fiscal 2004

     International microwave segment revenue decreased 18.6% from fiscal 2004 to fiscal 2005. The segment improved from an operating loss of $17.5 million in fiscal 2004 to an operating loss of $11.9 million in fiscal 2005. Strength in international markets came from the Middle East, Africa, Europe and improved Latin American markets. The decline in revenue was primarily attributable to the revenue generated in fiscal 2004 from the build out of a large mobile telecom network for MTN Nigeria.

     Gross margins and operating losses in the International microwave segment improved in fiscal 2005 as a result of increased shipments of TRuepoint™, a new family of lower-cost microwave radios, and a shift away from lower-margin international projects. Engineering, selling and administrative expenses were lower in fiscal 2005 when compared to fiscal 2004 due to cost-reduction actions taken during fiscal 2004. The fiscal 2004 operating loss of $17.5 million included a charge of $4.5 million associated with cost-reduction actions related to the successful transfer of TRuepoint™ production from Montreal, Canada to San Antonio, Texas. TRuepoint™ orders and sales accelerated during fiscal 2005.

     Fiscal 2005 significant international orders were received from customers in Nigeria, Brazil, Mexico, Ivory Coast, Jordan, and Indonesia. MCD also received orders in fiscal 2005 from several new channel partners in Italy and China.

  NetBoss Segment

										2006/2005								2005/2004
										Percent								Percent
										Increase/								Increase/
		2006				2005				(Decrease)				2004				(Decrease)
		(in millions, except percentages)
Revenue		$	17.1			$	23.4				(26.9	)%		$	19.4				20.3	%
Segment operating income			1.1				4.4				(75.9	)%			0.7				570.4	%
% of revenue			6.2	%			18.8	%							3.4	%

  Fiscal 2006 Compared with Fiscal 2005

     NetBoss® segment revenue decreased 26.9% from fiscal 2005 to fiscal 2006. This segment had operating income of $1.1 million in fiscal 2006 compared to operating income of $4.4 million in fiscal 2005. The decrease in revenue and operating income was due to obtaining the majority of the revenue through customer add-ons and software maintenance as opposed to adding major new customers.

     Orders in the NetBoss® segment decreased 14% from $23.4 million in fiscal 2005 to $17 million in fiscal 2006. Significant orders received in this segment during fiscal 2006 included MTC Kuwait, Norkring Norway, New Hampshire State Police, Cimmeron Telephone and Syniverse.

  Fiscal 2005 Compared with Fiscal 2004

     NetBoss® segment revenue increased 20.3% from fiscal 2004 to fiscal 2005. This segment had operating income of $4.4 million in fiscal 2005 compared to operating income of $0.7 million in fiscal 2004. The increase in revenue and operating income was due to large new customer projects, an increase in software maintenance revenue, completing work on major NetBoss^® integration projects, and releasing bad debt reserves associated with America Movil Brazil upon customer payment.

     Significant orders received in this segment during fiscal 2005 included Tekelec Reseller (Verizon Wireless, Telmex, Telemar), Radiocommunicatii in Romania, Comisión Federal de Energía in Mexico, MTN Nigeria and DPOC (a U.S. government entity).

Liquidity, Capital Resources and Financial Strategies

  Cash Flows

		Fiscal Years Ended
		2006				2005				2004
		(in millions)
Net cash provided by (used in) operating activities		$	19.5			$	(4.3	)		$	38.6
Net cash used in investing activities			(8.2	)			(19.4	)			(14.7	)
Net cash provided by (used in) financing activities			(5.9	)			24.9				(28.6	)
Effect of foreign exchange rate changes on cash			0.6				1.3				(1.1	)
Net increase (decrease) in cash and cash equivalents		$	6.0			$	2.5			$	(5.8	)

  Cash and Cash Equivalents

     MCD’s cash and cash equivalents increased by $6.0 million to $13.8 million at the end of fiscal 2006, primarily due to $19.5 million of cash provided by operating activities and $4.6 million of proceeds from the sale of land and building in San Antonio, Texas. These increases were partially offset by $12.8 million of software and plant and equipment additions and $5.0 million of cash and other transfers to Harris Corporation.

     MCD management currently believes that existing cash, funds generated from operations will be sufficient to provide for MCD’s anticipated requirements for working capital, and capital expenditures for the next 12 months and the foreseeable future. If required, Harris Stratex would access the public and/or private debt and equity markets to fund its operations. MCD expects tax payments over the next three years to approximate its tax expense during the same period. No other significant cash payments by MCD are anticipated in fiscal 2007 and thereafter, other than those noted in the “-Contractual Obligations” discussion below in this MD&A of MCD.

     There can be no assurance, however, that MCD’s business will continue to generate cash flow at current levels, or that anticipated operational improvements will be achieved. If MCD is unable to maintain cash balances or generate sufficient cash flow from operations to service its obligations, MCD may be required to sell assets, reduce capital expenditures, or obtain financing. MCD’s ability to make scheduled principal payments or pay interest on or refinance any future indebtedness depends on its future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to general economic, political, financial, competitive, legislative and regulatory factors beyond MCD’s control.

  Net Cash Provided by Operating Activities

     MCD’s net cash provided by operating activities was $19.5 million in fiscal 2006 compared to net cash used in operating activities of $4.3 million in fiscal 2005. The improvement in cash flow was primarily due to an increase in accounts payable, accrued compensation and benefits and accrued expenses associated with higher production volumes and increased incentive compensation and commission accruals.

  Net Cash Used in Investing Activities

     MCD’s net cash used in investing activities was $8.2 million in fiscal 2006 compared to $19.4 million in fiscal 2005. Net cash used in investing activities in fiscal 2006 was due to $9.6 million additions of plant and equipment and $3.2 million additions of capitalized software, which was partially offset by $4.6 million proceeds from the sale of land and building in San Antonio, Texas. Net cash used in investing activities in fiscal 2005 was primarily due to $9.3 million of additions of plant and equipment and $10.1 million of additions of capitalized software.

     The decrease in additions of capitalized software from $10.1 million in fiscal 2005 to $3.2 million in fiscal 2006 mainly relates to next generation software that was developed in the NetBoss segment. MCD’s total additions of capitalized software and property, plant and equipment in fiscal 2007 are expected to be in the $8 million to $10 million range.

  Net Cash Provided by (used in) Financing Activities

     MCD’s net cash used in financing activities in fiscal 2006 was $5.9 million compared to net cash provided by financing activities in fiscal 2005 of $24.9 million. The net cash provided by (used in) financing activities for MCD is primarily from net cash transfers to and from Harris Corporation.

  Contractual Obligations

     At June 30, 2006, MCD had contractual cash obligations to repay debt to purchase goods and services and to make payments under operating leases. Payments due under these long-term obligations are as follows:

						Obligations Due by Fiscal Year
										2008				2010
										and				and				After
		Total				2007				2009				2011				2011
		(in millions)
Purchase obligations(1)		$	3.3			$	3.3			$	—			$	—			$	—
Operating lease commitments			6.6				3.7				2.9				—				—
Total contractual cash obligations		$	9.9			$	7.0			$	2.9			$	—			$	—

  Off-Balance Sheet Arrangements

     In accordance with the definition under Securities and Exchange Commission rules, any of the following qualify as off-balance sheet arrangements:

	•		Any obligation under certain guarantee contracts;
	•		A retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;
	•		Any obligation, including a contingent obligation, under certain derivative instruments; and
	•		Any obligation, including a contingent obligation, under a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant.

     Currently, MCD is not participating in transactions that generate relationships with unconsolidated entities or financial partnerships, including variable interest entities, and MCD does not have any material retained or contingent interest in assets as defined above. As of June 30, 2006, MCD did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity. In addition, MCD is not currently a party to any related party transactions that materially affect its results of operations, cash flows or financial condition.

     Certain properties leased by MCD have been sublet to third parties due to MCD’s downsizing of certain operations pursuant to restructuring plans or otherwise. In the event any of these third parties vacate any of these premises, MCD would be legally obligated under the master lease agreements. MCD believes that the financial risk of default by such sublessors is individually and in the aggregate not material to its financial position, results of operations or cash flows.

  Commercial Commitments

     MCD has entered into commercial commitments in the normal course of business including surety bonds, standby letter of credit agreements and other arrangements with financial institutions and customers primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers or to obtain insurance policies with its insurance carriers. At June 30, 2006, MCD had commercial commitments on outstanding letters of credit, guarantees and other arrangements, as follows:

		Expiration of Commitments by Fiscal Year
																		After
		Total				2007				2008				2009				2009
		(in millions)
Standby letters of credit used for:
Bids		$	0.7			$	0.6			$	0.1			$	—			$	—
Down payments			5.7				4.6				1.1				—				—
Performance			5.0				3.0				1.7				0.3				—
Warranty			0.2				0.2				—				—				—
			11.6				8.4				2.9				0.3				—
Surety bonds used for:
Bids			3.5				3.5				—				—				—
Performance			15.9				2.2				13.7				—				—
			19.4				5.7				13.7				—				—
Guarantees			0.4				0.4				—				—				—
Total commitments		$	31.4			$	14.5			$	16.6			$	0.3			$	—

  Financial Risk Management

     MCD uses foreign exchange contracts and options to hedge both balance sheet and off-balance sheet future foreign currency commitments. Generally, these foreign exchange contracts offset foreign currency denominated inventory and purchase commitments from suppliers; accounts receivable from, and future committed sales to, customers; and intercompany loans. MCD believes the use of foreign currency financial instruments should reduce the risks that arise from doing business in international markets. At June 30, 2006, MCD had open foreign exchange contracts with a notional amount of $19.4 million, of which $7.1 million were classified as cash flow hedges and $12.3 million were classified as fair value hedges. This compares to total foreign exchange contracts with a notional amount of $34.5 million as of July 1, 2005, of which $26.9 million were classified as cash flow hedges and $7.6 million were classified as fair value hedges. At June 30, 2006, contract expiration dates ranged from less than one month to 11 months with a weighted average contract life of less than a month.

     More specifically, the foreign exchange contracts classified as cash flow hedges are primarily being used to hedge currency exposures from anticipated cash flow expenses related to MCD’s Mexican office. As of June 30, 2006, MCD estimated that a pre-tax loss of $0.1 million would be reclassified into earnings from comprehensive income within the next 11 months related to these cash flow hedges.

     The net gain included in MCD’s earnings in fiscal 2006, 2005 and 2004 representing the amount of fair value and cash flow hedges’ ineffectiveness was not material. No amounts were recognized in MCD’s earnings in fiscal 2006, 2005, and 2004 related to the component of the derivative instruments’ gain or loss excluded from the assessment of hedge effectiveness. In addition, no amounts were recognized in MCD’s earnings in fiscal 2006, 2005 and 2004 related to hedged firm commitments that no longer qualify as fair value hedges. All of these derivatives were recorded at their fair value on the balance sheet in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”, or Statement 133.

     Factors that could impact the effectiveness of MCD’s hedging programs for foreign currency include accuracy of sales estimates, volatility of currency markets and the cost and availability of hedging instruments. A 10% adverse change in currency exchange rates for MCD’s foreign currency derivatives held at June 30, 2006 would have an impact of approximately $1.1 million on the fair value of such instruments. This quantification of exposure to the market risk associated with foreign exchange financial instruments does not take into account the offsetting impact of changes in the fair value of MCD’s foreign denominated assets, liabilities and firm commitments.

  Impact of Foreign Exchange

     The impact of translating the assets and liabilities of these operations to U.S. dollars is included as a component of division equity. At June 30, 2006, the cumulative translation adjustment decreased division equity by $1.4 million compared to a reduction of $14.2 million at July 1, 2005. MCD utilizes foreign currency hedging instruments to minimize the currency risk of international transactions. Gains and losses resulting from currency rate fluctuations did not have a material effect on MCD’s results in fiscal 2006, 2005 or 2004.

  Impact of Inflation

     To the extent feasible, MCD has consistently followed the practice of adjusting its prices to reflect the impact of inflation on salaries and fringe benefits for employees and the cost of purchased materials and services.

Critical Accounting Policies and Estimates

     The following is not intended to be a comprehensive list of all of MCD’s accounting policies or estimates. MCD’s significant accounting policies are more fully described in “Note 1: Significant Accounting Policies” in the Notes to Combined Financial Statements beginning on page F-7 of this prospectus. In preparing the financial statements and accounting for the underlying transactions and balances, MCD applies its accounting policies and estimates as disclosed in such Notes. MCD considers the estimates discussed below as critical to an understanding of its financial statements because their application places the most significant demands on MCD’s judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain. Specific risks for these critical accounting estimates are described in the following paragraphs. The impact and any associated risks related to these estimates on MCD’s business operations are discussed throughout this MD&A where such estimates affect MCD’s reported and expected financial results. Senior management of MCD’s parent company, Harris Corporation, has discussed the development and selection of the critical accounting policies and estimates and the related disclosure included herein with the Audit Committee of its Board of Directors. Preparation of this prospectus requires MCD to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of MCD’s financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

     Besides estimates that meet the “critical” accounting estimate criteria, MCD makes many other accounting estimates in preparing its financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that MCD does not deem “critical.”

  Provisions for Excess and Obsolete Inventory

     MCD values its inventory at the lower of cost or market. MCD balances the need to maintain prudent inventory levels to ensure competitive delivery performance with the risk of excess or obsolete inventory due to changing technology and customer requirements. MCD regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on its estimated forecast of product demand, anticipated end of product life and production requirements. The review of excess and obsolete inventory primarily relates to all of MCD’s business segments. Several factors may influence the sale and use of MCD’s inventories, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of obsolete inventory quantities on hand. Additionally, MCD’s estimates of future product demand may prove to be inaccurate, in which case MCD may have understated or overstated the provision required for excess and obsolete inventory. In the future, if MCD determines that its inventory is overvalued, MCD would be required to recognize such costs in “Cost of product sales” in its statement of operations income at the time of such determination. Likewise, if MCD determines its inventory is undervalued, MCD may have overstated “Cost of product sales” in previous periods and would be required to recognize such additional income. MCD has not made any material changes in the reserve methodology used to establish its inventory loss reserves during the past three fiscal years.

     As of June 30, 2006, MCD’s reserve for excess and obsolete inventory was $18.3 million, or 17.5% of the gross inventory balance, which compares to a reserve of $32.9 million, or 23.4% of the gross inventory balance as of July 1, 2005. MCD recorded $53.8 million, $0.5 million and $0.1 million in inventory write-downs that either reduced the reserve for excess and obsolete inventory or the pre-tax income during fiscal 2006, 2005 and 2004, respectively. In fiscal 2006, MCD had significant write-downs in inventory due to the discontinuance of legacy products in the International microwave segment. Although MCD makes every reasonable effort to ensure the accuracy of its forecasts of future product demand, including the impact of planned future product launches, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of MCD’s inventory and MCD’s reported operating results.

  Stock Options and Share-Based Compensation

     Employees of MCD participate in the equity compensation program of its parent company, Harris Corporation. Effective July 2, 2005, Harris adopted Statement 123R, which requires the measurement and recognition of compensation expense for all stock-based payments made to employees, including employee stock option, performance share, performance unit, restricted stock and restricted unit awards based on estimated fair value. Harris previously applied the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, or APB 25, and related interpretations and provided the required pro forma disclosures under Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation”, or Statement 123.

     Harris adopted Statement 123R using the modified prospective transition method beginning in fiscal 2006. Accordingly, during fiscal 2006 MCD recorded stock-based compensation expense for awards granted prior to but not yet vested as of the beginning of fiscal 2006 as if the fair value method required for pro forma disclosure under Statement 123 were in effect for expense recognition purposes adjusted for estimated forfeitures. For stock-based awards granted after the beginning of fiscal 2006, MCD recognized compensation expense based on the estimated grant date fair value method required under Statement 123R. The compensation expense for these awards was recognized using a straight-line amortization method. MCD’s net income for fiscal 2006 includes a stock-based compensation expense of $1.7 million. As of June 30, 2006, the total unrecorded stock-based compensation balance for unvested shares, net of expected forfeitures, was $1.7 million, which is expected to be amortized over a weighted-average period of 1.6 years.

     While fair value may be readily determinable for awards of stock, market quotes are not available for long-term, nontransferable stock options because these instruments are not traded. Harris currently uses the Black-Scholes-Merton option-pricing model to estimate the fair value of stock options. Option valuation models require the input of highly subjective assumptions, including, but not limited to, stock price volatility and stock option exercise behavior. Harris expects to continue to use the Black-Scholes- Merton model for valuing stock-based compensation expense. However, the estimate of future stock-based compensation expense will be affected by a number of items including stock price, the number of stock options granted in the future, as well as a number of complex and subjective valuation assumptions and the related tax effect. These valuation assumptions include, but are not limited to, the volatility of the Harris stock price, expected life and stock option exercise behaviors. Harris has not made any material changes in the methodologies used to determine the assumptions used to estimate the fair value of stock options during the past three fiscal years.

     A change in any of these assumptions could affect the estimated fair value of any given grant and cause MCD’s results to be materially different. For example, a one-year increase in the estimated term of the stock options granted during fiscal 2006 would have increased MCD’s compensation expense by $0.1 million in fiscal 2006 and a 400 basis-point increase in the assumed volatility rate of the stock options granted during fiscal 2006 would have increased MCD’s compensation expense by $0.1 million in fiscal 2006. See “Note 10: Stock Options and Share-Based Compensation” in the Notes to Combined Financial Statements beginning on page F-15 of this prospectus for further information related to stock options and share-based compensation.

  Impact of Recently Issued Accounting Pronouncements

     As described in “Note 2: Accounting Changes or Recent Pronouncements” in the Notes to Combined Financial Statements beginning on page F-11 of this prospectus, there are accounting pronouncements that have recently been issued but have not yet been implemented by MCD. Note 2 describes the potential impact that these pronouncements are expected to have on MCD’s financial position, results of operations and cash flows.

MANAGEMENT’S DISCUSSION OF ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OF
STRATEX

The historical financial information discussed below is for Stratex and its subsidiaries, which was a predecessor company prior to the combination of the Microwave Communications Division and Stratex.

Business Overview

     Stratex designs, manufactures, markets and sells advanced wireless solutions for worldwide mobile and fixed telephone network interconnection and access. Since its founding in 1984, Stratex has introduced a number of innovative products in the telecommunications market and has delivered wireless transmission systems for the transport of data, voice and video communication, including comprehensive service and support. Stratex markets its products primarily to mobile wireless carriers around the world. A significant percentage of Stratex’s revenue is derived from sales outside the United States. As a result, its revenues from sales of equipment and services outside the United States were 97% in the first quarter of fiscal 2007, 95% in fiscal 2006, 94% in fiscal 2005 and 96% in fiscal 2004.

     In fiscal 2006, Stratex continued to focus its efforts and made significant progress in transitioning from its legacy products to the Eclipse business model. Stratex introduced some initial products as part of its plan to roll out the next generation of Eclipse products. Its results of operations improved significantly in fiscal 2006 as compared to fiscal 2005. Stratex achieved key milestones that it had been focusing on as part of its strategic plan.

     As indicated in the table below, Stratex’s gross margins have shown gradual improvement since the beginning of 2006.

		Q2 FY 2007				Q1 FY 2007				Q4 FY 2006				Q3 FY 2006				Q2 FY 2006				Q1 FY 2006
Gross margin			30.9	%			30.0	%			30.7	%			29.2	%			26.8	%			23.0	%

     Stratex believes that it has accomplished these financial improvements mainly because of the success of the expanding Eclipse product line and due to the streamlining of operations by taking certain cost reduction measures over the past few years. Revenue from Eclipse products in fiscal 2006 was $134.5 million as compared to $39.6 million in fiscal 2005.

Critical Accounting Policies and Estimates

     The preparation of Stratex’s consolidated financial statements in accordance with generally accepted accounting principles requires Stratex to make estimates and judgments that affect the reported amounts of assets and liabilities, including the disclosure of contingent assets and liabilities at the date of Stratex’s consolidated financial statements, and the reported amounts of revenue and expenses. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. Stratex management bases its estimates and judgments on historical experience, market trends, and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Stratex management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of Stratex’s consolidated financial statements.

  Revenue Recognition

     Stratex recognizes revenue pursuant to Staff Accounting Bulletin No. 104, or SAB 104, “Revenue Recognition.” Accordingly, revenue is recognized when all four of the following criteria are met: (i) persuasive evidence that the arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectibility is reasonably assured.

     In accordance with SAB 104, revenues from product sales are generally recognized when title and risk of loss passes to the customer and the above criteria are met, except when product sales are combined with significant post-shipment installation services. Under this exception, revenue is deferred until such services have been performed. Installation service revenue is recognized when the related services are performed. When sales are made under payment terms beyond Stratex’s normal credit terms, revenue is recognized only when cash is collected from the customer unless the sale is covered by letters of credit or other bank guarantees. Revenue from service obligations under maintenance contracts is deferred by Stratex and recognized on a straight-line basis over the contractual period, which is typically one year.

     In the fourth quarter of fiscal 2006, Stratex entered into a license agreement with Alcatel for Eclipse software and products, which agreement obligates Alcatel to pay Stratex a license fee based on the dollar value of Alcatel’s quarterly purchases from our contract manufacturers. A minimum quarterly license fee is recognized as revenue in the fiscal quarter it is invoiced. License fees in excess of the quarterly minimum are recognized as revenue in the quarter in which they are invoiced, due and payable. The agreement includes additional support services that may be provided by Stratex to Alcatel. In accordance with Emerging Issues Task Force, or EITF, 00-21 “Revenue Arrangements with Multiple Deliverables” Stratex has determined that revenue related to these services should be recognized separately from the license fee and as and when the services are performed.

  Provision for Warranty

     At the time Stratex recognizes revenue, Stratex establishes an accrual for estimated warranty expenses associated with its sales and records it as a component of cost of sales. Stratex’s standard warranty period generally is 27 months from the date of sale if the customer uses us or Stratex’s approved installers to install the products; otherwise it is 15 months from the date of sale. The warranty accrual is made based on forecasted returns and average cost of repair. Forecasted returns are based on trended historical returns. While Stratex believes that its warranty accrual is adequate and that the judgment applied is appropriate, the estimated amounts could differ materially from actual results. If actual warranty costs exceed the accrued expense, Stratex’s cost of sales will increase. For more information regarding Stratex’s warranty accrual for fiscal years 2006, 2005 and 2004, see Note 9 in the Notes to the Consolidated Financial Statements of Stratex on page F-55 of this prospectus.

  Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or market, where cost includes material, labor, and manufacturing overhead. Stratex regularly monitors inventory quantities on hand and records a provision for excess and obsolete inventories based primarily on its forecast of future product demand and production requirements. Cost of sales included an excess and obsolete inventory provision of $3.6 million for fiscal 2006 and $2.9 million for fiscal 2005. Although Stratex makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or technological developments could significantly impact the value of Stratex’s inventory and reported operating results. If actual market conditions are less favorable than Stratex’s assumptions, additional provisions for excess and obsolete inventory may be required, which would increase reported cost of sales. Stratex’s estimates of future product demand may prove to be inaccurate, in which case Stratex may have understated or overstated the provision required for excess and obsolete inventory. In the future, if Stratex’s inventory is determined to be overvalued, Stratex would be required to recognize such costs in its cost of sales at the time of such determination. If Stratex’s inventory is determined to be undervalued, Stratex may have overstated its cost of sales in previous periods and would be required to report lower cost of sales in a future period.

     Stratex currently subcontracts substantially all of its manufacturing. Each month Stratex provides its suppliers with a six-month forecast so they can secure parts with a substantial manufacturing and delivery lead time in order to meet forecasted delivery schedules. Stratex is generally obligated to pay for the items purchased by its suppliers based on such forecasts. If actual demand for Stratex’s products is less than forecasted, Stratex may have excess inventory, which would be recorded as an additional provision component of cost of sales.

  Valuation of Long-Lived Assets

     Stratex accounts for impairment or disposal of long-lived assets in accordance with Statement of Financial Accounting Standard No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”, or SFAS 144. SFAS 144 supersedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of”, or SFAS 121, by requiring that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and by broadening the presentation of discontinued operations to include more disposal transactions. Stratex values assets based on the fair value of the asset. In fiscal 2005, Stratex recorded an impairment loss on property and equipment of $0.9 million. In fiscal 2006 and the first quarter of fiscal 2007, there was no impairment loss recorded on long-lived assets by Stratex.

Valuation of Intangible Assets

     Stratex accounts for intangible assets in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142. SFAS No. 142 requires that goodwill and identifiable intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Stratex reviews its intangible assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

     In fiscal 2004, Stratex acquired intangible assets of $2.4 million. Stratex was amortizing these intangible assets over their estimated useful life of 18 months. During fiscal 2005, Stratex reviewed its intangible assets for impairment and accelerated the amortization of the intangible assets as Stratex concluded they were impaired. Stratex amortized the entire balance of intangible assets in the third quarter of fiscal 2005. During fiscal 2006 and the first quarter of fiscal 2007, Stratex did not record any intangible assets.

  Restructuring and Impairment Charges

     Liability for costs associated with an exit or disposal activity is recognized by Stratex when the liability is incurred in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”, or SFAS 146. Prior to December 31, 2002 Stratex accounted for restructurings in accordance with Emerging Issues Task Force No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” or EITF No. 94-3 and SAB No. 100, “Restructuring and Impairment Charges”. Under EITF 94-3, a liability for an exit cost was recognized by Stratex at the date of its commitment to an exit plan. The restructuring accrual related to vacated properties was calculated net of estimated sublease income Stratex expected to receive once it subleased the properties that have been vacated. To determine the lease loss, certain assumptions were made related to (1) the time period over which the buildings will remain vacant, (2) sublease terms, (3) sublease rates and (4) an estimate of brokerage fees. The lease loss represents Stratex management’s estimate of time to sublease and actual sublease rates. Sublease income is estimated based on current market quotes for similar properties. If Stratex is unable to sublease these properties on a timely basis or if Stratex is forced to sublease them at lower rates due to changes in market conditions, Stratex would adjust the accrual accordingly. Accordingly, SFAS No. 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized. In fiscal 2005 and fiscal 2004 Stratex recorded restructuring charges of $2.3 million and $4.0 million, respectively, for lease obligations related to buildings that were vacated in fiscal 2003 and fiscal 2002 primarily due to a change in the estimate of sublease income which was initially estimated at the time the buildings were vacated.

  Provision for Uncollectible Receivables

     In establishing the appropriate provisions for trade and long-term receivables due from customers, Stratex makes assumptions with respect to their future collectibility. Such assumptions are based on an individual assessment of a customer’s credit quality as well as subjective factors and payment trends, including the aging of receivable balances and taking into consideration the country in which the customer is located as over 90% of Stratex’s customers are located outside of the United States. Generally, these individual credit assessments occur prior to the inception of the credit exposure and at regular reviews during the life of the exposure and consider:

	•		a customer’s ability to meet and sustain its financial commitments;
	•		a customer’s current and projected financial condition; and
	•		the positive or negative effects of the customer’s current and projected industry outlook.

  Deferred Taxes

     Stratex must make estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. Stratex must assess the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, Stratex must increase its provision for taxes by recording a valuation allowance against the deferred tax assets that Stratex estimates will not ultimately be recoverable. To the extent that Stratex’s estimates regarding valuation allowance are understated, additional charges to income tax expense would be recorded in the period in which it determines the understatement. If Stratex’s estimates are overstated, income tax benefits will be recognized when realized. As of June 30, 2006,

Stratex believes that all the deferred tax assets recorded on the balance sheet are not realizable in the foreseeable future and Stratex had recorded a full valuation allowance. For details regarding Stratex’s deferred tax assets please see Note 10 in the Consolidated Financial Statements of Stratex on page F-56 of this prospectus.

Results of Operations

  Three and Six Months Ended September 30, 2006 Versus Three and Six Months Ended September 30, 2005

  Revenues

     Net sales for the second quarter of fiscal 2007 increased to $67.3 million, compared to $56.6 million reported in the second quarter of fiscal 2006, and increased to $133.5 million for the first half of fiscal 2007, compared to $111.4 million in the first half of fiscal 2006. Stratex believes that this increase was primarily attributable to an increase in the demand for its newest product line, Eclipse, as well as wireless subscriber growth and growth in fixed wireless transmission infrastructures in developing geographic regions like Africa. Revenue from Eclipse product accounted for 73% of Stratex’s total revenue for the quarter as compared to 54% of the total revenue in the second quarter of last fiscal year.

     Revenue by geographic regions. The following table sets forth information on Stratex’s sales by geographic regions for the periods indicated (in thousands except percentages):

		Three Months Ended September 30,																Six Months Ended September 30,
						% of								% of								% of								% of
		2006				Total				2005				Total				2006				Total				2005				Total
United States		$	2,000				3	%		$	3,820				7	%		$	4,159				3	%		$	6,194				6	%
Other Americas			4,602				7	%			6,831				12	%			9,228				7	%			13,564				12	%
Poland			4,607				7	%			6,743				12	%			5,677				4	%			11,800				10	%
Other Europe			14,745				22	%			8,052				14	%			33,613				25	%			25,089				22	%
Middle East			1,167				2	%			5,168				9	%			10,018				8	%			8,589				8	%
Thailand			3,324				5	%			4,053				7	%			4,770				4	%			11,724				11	%
Bangladesh			1,823				3	%			9,123				16	%			2,896				2	%			13,258				12	%
Other Asia/Pacific			7,145				10	%			4,263				8	%			19,238				14	%			9,178				8	%
Ghana			10,880				16	%			1,166				2	%			17,335				13	%			2,994				3	%
Tanzania			6,760				10	%			54				0	%			9,976				8	%			65				0	%
Other Africa			10,226				15	%			7,281				13	%			16,606				12	%			8,971				8	%
Total Revenues		$	67,279				100	%		$	56,554				100	%		$	133,516				100	%		$	111,426				100	%