PHONE COM INC, 424B4, 1999-06-11

PHONE COM INC
424B4, 1999-06-11
PREPACKAGED SOFTWARE

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<PAGE>

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-75219

4,000,000 Shares

[PHONE.COM LOGO]

PHONE.COM, INC.

Common Stock

------------

Prior to this offering, there has been no public market for the common
stock of Phone.com, Inc. Our common stock has been approved for listing on The
Nasdaq Stock Market's National Market under the symbol "PHCM."

The underwriters have an option to purchase a maximum of 600,000 additional
shares to cover over-allotments of shares.

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" STARTING
ON PAGE 7.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS PHONE.COM
--------------- --------------- ---------------
<S> <C> <C> <C>
Per Share....................... $16.00 $1.12 $14.88
Total........................... $64,000,000 $4,480,000 $59,520,000
</TABLE>

The shares of common stock will be delivered on or about June 16, 1999.

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

CREDIT SUISSE FIRST BOSTON

BANCBOSTON ROBERTSON STEPHENS

HAMBRECHT & QUIST

U.S. BANCORP PIPER JAFFRAY

Prospectus dated June 10, 1999
<PAGE>

[INSIDE FRONT COVER]

[COLOR ARTWORK]

PHONE.COM works with device manufacturers, including the following companies,
to enable Internet access for wireless telephones.

[Description of graphic on inside front cover page: Unwired Planet logo in
center of concentric circles. Located around the circles are photos of
wireless telephones that incorporate UP.Browser, as well as logos and names of
the manufacturers.]

UP.Applications, UP.Browser, UP.Link, UP.Organizer, UP.Web, and the
Phone.com name and logotype are trademarks, UP.Mail is a registered trademark
of Phone.com, Inc. All Rights Reserved. All other brand, company or product
names and marks are used only for the purpose of identification and may be
trademarks or registered trademarks, which are the sole property of their
respective owners. Copyright(C) 1999 Phone.com, Inc. All Rights Reserved.
<PAGE>

[Description of graphics and text on left front gatefold page:]

[Series of photos of persons using wireless telephones enabled with UP.Browser.
Next to the photos are the following captions, as well as screen captures and
the logos of the Internet content providers referenced in each caption:]

TRAVEL
I use UP.Browser to connect to Biztravel.com for flight information.

YELLOW PAGES
With UP.Browser and InfoSpace.com, I found the local 24-hour copy center, as
well as a nearby Chinese restaurant.

EMAIL
I check my email on my phone screen. With UP.Browser I can respond with an email
or an automatically dialed voice call.

NEWS
With Data Broadcasting Corporation and UP.Browser I have key news items and
information about customers and competitors at my fingertips.

SPORTS
I get stats and scores from SportsFeed, right on the screen of my wireless
telephone.
<PAGE>

[Description of graphics and text on right front gatefold page]

UP.LINK SERVER SUITE is a turnkey software solution that enables network
operators to offer Internet-based services to their wireless subscribers.
UP.Link Server Suite also provides network operators with subscriber
provisioning and network management functions on a robust and scalable software
platform.

[Description of graphic: Schematic of components of UP.Link Server Suite in the
center of concentric circles. The schematic is connected on the left by a
horizontal line to a radio tower with the words "WIRELESS NETWORK" next to it.
The schematic is connected on the right by a diagnonal line to a computer server
labeled "Network Operator Telephony Applications" and by a horizontal line to a
cloud labeled "Internet." The cloud, in turn is connected by vertical lines to
two computer servers labeled "Content Provider Web Sites" and "Corporate
Applications."]

The components of UP.Link Server Suite include:

UP.Applications is a suite of wireless Internet-based applications including
UP.Mail, an email application; UP.Organizer, a suite of personal information
management applications; and UP.Web, a Web-based interface for accessing
UP.Organizer data using personal computers.

The Services component includes the following services, which interact with
applications through a framework of open application programming interfaces.
The Push Server allows applications to push information to wireless subscribers.
The Fax Server enables the forwarding of email and other data content to fax
machines. The Identity Server maintains a subscriber registry that retains
subscribers' service settings and allows network operators to track their
subscribers' service usage. The Content Translation Framework provides forward
and backward compatibility of content formats between different generations of
browsers and wireless telephones.

UP.Link gateway provides network-layer functions and connects Internet- and
intranet-based services to wireless networks and wireless telephones.

The Administration component provides a Web-based administration control system
to keep the network operator's Internet-based network components up and running,
assess system status and provision new subscribers.

<PAGE>

------------

TABLE OF CONTENTS

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Page
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<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Use Of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Additional Information About Phone.com................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion And Analysis Of Financial Condition And Results
Of Operations........................................................... 20
Business................................................................. 36
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 52
Certain Transactions....................................................... 64
Principal Stockholders..................................................... 66
Description Of Capital Stock............................................... 68
Shares Eligible For Future Sale............................................ 71
Underwriting............................................................... 73
Notice To Canadian Residents............................................... 75
Legal Matters.............................................................. 76
Experts.................................................................... 76
Where You Can Find More Information........................................ 76
Index To Consolidated Financial Statements................................. F-1
</TABLE>
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DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL JULY 5, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

3
<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully.

PHONE.COM, INC.

We are a leading provider of software that enables the delivery of Internet-
based services to mass-market wireless telephones. Using our software, network
operators can provide Internet-based services to their wireless subscribers,
and wireless telephone manufacturers can turn their mass-market wireless
telephones into mobile Internet appliances. Wireless subscribers thus have
access to Internet- and corporate intranet-based services, including email,
news, stocks, weather, travel and sports. In addition, subscribers have access
via their wireless telephones to network operators' intranet-based telephony
services, which may include over-the-air activation, call management, billing
history information, pricing plan subscription and voice message management.
Our software platform consists of the UP.Link Server Suite, which is installed
on network operators' systems, and UP.Browser, which is embedded in wireless
telephones.

We were a pioneer in the convergence of the Internet and mobile telephony.
To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the Wireless Application
Protocol Forum in close cooperation with co-founders Ericsson, Motorola and
Nokia. In April 1998, the WAP Forum published technical specifications for
application development and product interoperability, substantial portions of
which are based on our technology and on Internet standards. Over 100 leading
network operators, telecommunications device and equipment manufacturers, and
software companies worldwide have joined the WAP Forum as of May 1999.

We focus on selling our UP.Link Server Suite and related technical support
to network operators to enable them to offer a variety of wireless Internet-
based services to their subscribers. The UP.Link Server Suite includes (1) a
means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway; (2) a service platform that
performs subscriber management and service provisioning functions and
communicates with the network operator's customer care and billing systems; and
(3) Internet-based wireless applications such as email and personal information
management software. As of May 1999, 24 network operators have licensed our
software and have commenced or announced commercial service or are in market or
laboratory trials. Our current network operator customers include:

<TABLE>
<S> <C>
. AT&T Wireless Services . IDO Corporation
. Bell Atlantic Mobile . LG TeleCom
. Bell Mobility . Nextel
. SFR/CEGETEL . Omnitel
. DDI Corporation . Orange
. Deutsche Telekom Mobilnet . Telecom Italia Mobile
. France Telecom Mobile . Telenor
. GTE Wireless . Telstra
</TABLE>

The UP.Browser is a browser and messaging software product that is
specifically designed for mass-market wireless telephones. We license our
UP.Browser software to wireless telephone

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<PAGE>

manufacturers, who embed UP.Browser into their products. In order to encourage
these manufacturers to include UP.Browser in their wireless telephone models,
no per-unit royalty is charged. As of May 1999, 23 wireless telephone
manufacturers have licensed UP.Browser, including:

<TABLE>
<S> <C>
. Alcatel . Panasonic (Matsushita)
. Casio . Qualcomm
. Hitachi . Sagem
. Hyundai . Samsung Electronics
. IGS . Sharp
. Kyocera . Siemens
. LG Information & Communications . Sony
. Mitsubishi . Toshiba
. Motorola
</TABLE>

In addition, Ericsson and Nokia have announced that they will introduce
wireless telephones that will be interoperable with the UP.Link Server Suite.

Our current stockholders include the following companies or their
affiliates:

<TABLE>
<S> <C>
. AT&T Wireless Services . Kyocera Corporation
. Bell Atlantic Mobile . Mitsubishi Electric Corporation
. Bell Mobility . Paribas
. Citicorp . Qualcomm
. DDI Corporation . Reuters
. Gemplus . Sema Group
. Hikari Tsushin . Siemens
. Itochu Corporation
</TABLE>

Our principal executive offices are located at 800 Chesapeake Drive, Redwood
City, California 94063, and our telephone number is (650) 562-0200.

THE OFFERING

<TABLE>
<C> <S>
Common stock offered....................... 4,000,000 shares
Common stock to be outstanding after this
offering.................................. 30,506,858 shares
Use of proceeds............................ Working capital and general
corporate purposes
Nasdaq National Market symbol.............. PHCM
</TABLE>

This table is based on shares outstanding as of March 31, 1999. This table
excludes:

. 3,321,346 shares subject to outstanding options at a weighted average
exercise price of $1.86 as of March 31, 1999,
. 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of March 31, 1999,
. an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999.

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS
DECEMBER 16, 1994 YEAR ENDED JUNE 30, ENDED MARCH 31,
(INCEPTION) TO -------------------------- -----------------
JUNE 30, 1995 1996 1997 1998 1998 1999
----------------- ------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues:
License................ $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support
services.............. -- -- 212 1,683 635 3,786
Consulting services.... -- -- -- -- -- 1,401
------ ------- ------- -------- ------- --------
Total revenues........ -- -- 292 2,205 924 6,717
------ ------- ------- -------- ------- --------
Gross profit (loss)..... -- -- (61) 1,047 150 4,023
------ ------- ------- -------- ------- --------
Operating loss.......... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
------ ------- ------- -------- ------- --------
Net loss................ $ (103) $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
====== ======= ======= ======== ======= ========
Basic and diluted net
loss per share......... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $47,831 $106,251
Total assets.............................................. 57,320 115,740
Equipment loan and capital lease obligations, less current
portion.................................................. 607 607
Total stockholders' equity................................ 31,998 90,418
</TABLE>
- --------
See Note 1 of Notes to Consolidated Financial Statements for an explanation of
the method used to determine the number of shares used to compute the net loss
per share amounts.

The as adjusted numbers in the table above are adjusted to give effect to
receipt of the net proceeds from the sale of shares of common stock offered by
us at the initial public offering price of $16.00 per share after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. See also "Use of Proceeds," "Capitalization" and "Underwriting."

Except as otherwise noted herein, all information in this prospectus assumes
no exercise of the underwriters' over-allotment option and gives effect to:

. the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock upon completion of this offering and
. the filing of our amended and restated certificate of incorporation upon
completion of this offering.

6
<PAGE>

RISK FACTORS

You should carefully consider the following risks before making an
investment decision. The risks described below are intended to highlight risks
that are specific to us and are not the only ones that we face. Additional
risks and uncertainties, such as those that generally apply to our industry or
to companies undertaking initial public offerings, also may impair our business
operations. You should also refer to the other information set forth in this
prospectus, including the discussions set forth in "Special Note Regarding
Forward-Looking Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as our
consolidated financial statements and the related notes. You should rely only
on the information contained in this document. We have not authorized anyone to
provide you with information that is different. The information in this
document may only be accurate on the date of this document.

OUR FUTURE PROFITABILITY IS UNCERTAIN BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.

Because we commenced operations in December 1994 and commercially released
our first products in June 1996, we only have a limited operating history on
which you can base your evaluation of our business. We may not continue to grow
or achieve profitability. We face a number of risks encountered by early stage
companies in the wireless telecommunications and Internet software industries,
including:

. our need for network operators to launch and maintain commercial services
utilizing our products;
. the uncertainty of market acceptance of commercial services utilizing our
products;
. our substantial dependence on products with only limited market
acceptance to date;
. our need to introduce reliable and robust products that meet the
demanding needs of network operators and wireless telephone
manufacturers;
. our need to expand our marketing, sales, consulting and support
organizations, as well as our distribution channels;
. our ability to anticipate and respond to market competition;
. our need to manage expanding operations; and
. our dependence upon key personnel.

Our business strategy may not be successful, and we may not successfully
address these risks. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Overview."

WE MAY NOT ACHIEVE OR SUSTAIN OUR REVENUE OR PROFIT GOALS.

Because we expect to continue to incur significant product development,
sales and marketing, and administrative expenses, we will need to generate
significant revenues to become profitable and sustain profitability on a
quarterly or annual basis. We may not achieve or sustain our revenue or profit
goals, and our ability to do so depends on a number of factors outside of our
control, including the extent to which:

. there is market acceptance of commercial services utilizing our products;
. our competitors announce and develop, or lower the prices of, competing
products; and
. our strategic partners dedicate resources to selling our products and
services.

7
<PAGE>

As a result, we may not be able to increase revenue or achieve profitability
on a quarterly or annual basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS, AND
OUR STOCK PRICE MAY DECLINE IF WE DO NOT MEET EXPECTATIONS OF INVESTORS AND
ANALYSTS.

Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If we do not meet
expectations of investors and analysts in a given quarter, our stock price
could decline. Most of our expenses are relatively fixed. As a result, any
shortfall in revenues relative to our expectations could cause a significant
decline in our quarterly operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results of
Operations."

OUR SALES CYCLE IS LONG, AND OUR STOCK PRICE COULD DECLINE IF SALES ARE DELAYED
OR CANCELLED.

Quarterly fluctuations in our operating performance are exacerbated by our
sales cycle, which is lengthy, typically between nine and twelve months, and
unpredictable. Because our products represent a significant capital investment
for our customers, we spend a substantial amount of time educating customers
regarding the use and benefits of our products and they in turn spend a
substantial amount of time performing internal reviews and obtaining capital
expenditure approvals before purchasing our products. Any delay in sales of our
products could cause our quarterly operating results to vary significantly from
projected results, which could cause our stock price to decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

OUR SUCCESS DEPENDS ON ACCEPTANCE OF OUR PRODUCTS AND SERVICES BY NETWORK
OPERATORS.

From inception through March 31, 1999, 42% of our total cumulative revenues
have come from fees paid to us by wireless telephone manufacturers that embed
our browser in their wireless telephones. However, our future success depends
on our ability to increase revenues from sales of our UP.Link Server Suite
software and related services to new and existing network operator customers,
and we may not be able to achieve widespread adoption by these customers. This
dependence is exacerbated by the relatively small number of network operators
worldwide. We currently have only a limited number of network operator
customers. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."

THE MARKET FOR THE DELIVERY OF INTERNET-BASED SERVICES THROUGH WIRELESS
TELEPHONES IS RAPIDLY EVOLVING, AND WE MAY NOT BE ABLE TO ADEQUATELY ADDRESS
THIS MARKET.

The market for the delivery of Internet-based services through wireless
telephones is rapidly evolving and is characterized by an increasing number of
market entrants that have introduced or developed, or are in the process of
introducing or developing, products that facilitate the delivery of Internet-
based services through wireless telephones. As a result, the life cycle of our
products is difficult to estimate. We may not be able to develop and introduce
new products, services and enhancements that respond to technological changes
or evolving industry standards on a timely basis, in which case our business
would suffer. In addition, we cannot predict the rate of adoption by wireless
subscribers of these services or the price they will be willing to pay for
these services. As a result, it is extremely difficult to predict the pricing
of these services and the future size and growth rate of this market.

8
<PAGE>

Our network operator customers face implementation and support challenges in
introducing Internet-based services via wireless telephones, which may slow
their rate of adoption or implementation of the services our products enable.
Historically, network operators have been relatively slow to implement new
complex services such as Internet-based services. In addition, network
operators may encounter greater customer service demands to support Internet-
based services via wireless telephones than they do for their traditional voice
services. We have limited or no control over the pace at which network
operators implement these new services. The failure of network operators to
introduce and support services utilizing our products in a timely and effective
manner could harm our business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."

TO DATE, WE HAVE RELIED ON SALES TO A SMALL NUMBER OF CUSTOMERS, SOME OF WHOM
ARE OUR STOCKHOLDERS, AND THE FAILURE TO RETAIN THESE CUSTOMERS OR ADD NEW
CUSTOMERS MAY HARM OUR BUSINESS.

To date, a significant portion of our revenues in any particular period has
been attributable to a limited number of customers, comprised primarily of
network operators and wireless telephone manufacturers, some of whom are our
stockholders. We believe that we will continue to depend upon a limited number
of customers for a significant portion of our revenues for each quarter for the
foreseeable future. Any failure by us to capture a significant share of those
customers could materially harm our business. For example, during the year
ended June 30, 1998, AT&T Wireless Services, which will own approximately 2.5%
of our common stock after this offering, and Matsushita Communication
Industrial accounted for approximately 22% and 18%, respectively, of our total
revenues. For the nine months ended March 31, 1999, AT&T Wireless Services, DDI
Corporation, who will own approximately 0.6% of our common stock after this
offering, and a wireless telephone manufacturer accounted for approximately
14%, 11% and 13%, respectively, of our total revenues.

IF WIRELESS TELEPHONES ARE NOT WIDELY ADOPTED FOR MOBILE DELIVERY OF INTERNET-
BASED SERVICES, OUR BUSINESS COULD SUFFER.

We have focused our efforts on mass-market wireless telephones as the
principal means of delivery of Internet-based services using our products. If
wireless telephones are not widely adopted for mobile delivery of Internet-
based services, our business would suffer materially. Mobile individuals
currently use many competing products, such as portable computers, to remotely
access the Internet and email. These products generally are designed for the
visual presentation of data, while wireless telephones historically have been
limited in this regard. If mobile individuals do not adopt wireless telephones
as a means of accessing Internet-based services, our business would suffer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."

IF WE FAIL TO ACHIEVE WIDESPREAD INTEGRATION OF OUR UP.BROWSER IN WIRELESS
TELEPHONES, OUR BUSINESS COULD SUFFER.

Because our UP.Link Server Suite software offers enhanced features and
functionality that are not currently covered by the specifications promulgated
by the WAP Forum, subscribers currently must use UP.Browser-enabled wireless
telephones in order to fully utilize these features and functionality. Thus, if
we fail to achieve widespread integration of our UP.Browser in wireless
telephones, our business could suffer materially. All of our agreements with
wireless telephone

9
<PAGE>

manufacturers are nonexclusive, so they may choose to embed a browser other
than ours in their wireless telephones. We may not succeed in maintaining and
developing relationships with telephone manufacturers, and any arrangements may
be terminated early or not renewed at expiration. In addition, wireless
telephone manufacturers may not produce products using UP.Browser in a timely
manner and in sufficient quantities, if at all. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."

THE MARKET FOR OUR PRODUCTS AND SERVICES IS HIGHLY COMPETITIVE.

The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. We
expect that we will compete primarily on the basis of price, time to market,
functionality, quality and breadth of product and service offerings. Our
current and potential competitors include the following:

. Wireless equipment manufacturers, such as Ericsson and Nokia;
. Microsoft;
. Wireless Knowledge, a joint venture of Microsoft and Qualcomm;
. Systems integrators, such as CMG plc and APiON Ltd., and software
companies, such as Oracle Corporation; and
. Providers of Internet software applications and content, electronic
messaging applications and personal information management software
solutions.

In particular, Microsoft Corporation has announced its intention to
introduce products and services that may compete directly with our UP.Link,
UP.Browser and UP.Application products. In addition, Microsoft has announced
that it intends to enable its Windows CE operating system to run on wireless
handheld devices, including wireless telephones, and to develop and market its
own browser for these devices. Many of our existing competitors, as well as
potential competitors, have substantially greater financial, technical,
marketing and distribution resources than we do. See "Business--Competition."

OUR SOFTWARE PRODUCTS MAY CONTAIN DEFECTS OR ERRORS, AND SHIPMENTS OF OUR
SOFTWARE MAY BE DELAYED.

The software we develop is complex and must meet the stringent technical
requirements of our customers. We must develop our products quickly to keep
pace with the rapidly changing Internet software and telecommunications
markets. Software products and services as complex as ours are likely to
contain undetected errors or defects, especially when first introduced or when
new versions are released. We have in the past experienced delays in releasing
some versions of our products until software problems were corrected. Our
products may not be free from errors or defects after commercial shipments have
begun, which could result in the rejection of our products and damage to our
reputation, as well as lost revenues, diverted development resources, and
increased service and warranty costs, any of which could harm our business. See
"Business--Research and Product Development."

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<PAGE>

WE DEPEND ON RECRUITING AND RETAINING KEY MANAGEMENT AND TECHNICAL PERSONNEL
WITH TELECOMMUNICATIONS AND INTERNET SOFTWARE EXPERIENCE.

Because of the technical nature of our products and the dynamic market in
which we compete, our performance depends on attracting and retaining key
employees. In particular, our future success depends in part on the continued
services of each of our current executive officers. We currently maintain key
person life insurance policies for Alain Rossmann, our Chief Executive Officer,
and Charles Parrish, our Executive Vice President. We are seeking to hire a
Vice President of Worldwide Sales. Competition for qualified personnel in the
telecommunications and Internet software industries is intense, and finding
qualified personnel with experience in both industries is even more difficult.
We believe that there are only a limited number of persons with the requisite
skills to serve in many key positions, and it is becoming increasingly
difficult to hire and retain these persons. Competitors and others have in the
past, and may in the future, attempt to recruit our employees. See "Business--
Employees."

WE MAY FAIL TO SUPPORT OUR ANTICIPATED GROWTH IN OPERATIONS.

To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy and further develop products and expand service
capabilities, while managing anticipated growth by implementing effective
planning and operating processes. If we fail to manage our growth effectively,
our business could suffer materially. To manage anticipated growth, we must:

. continue to implement and improve our operational, financial and
management information systems;
. hire, train and retain additional qualified personnel;
. continue to expand and upgrade core technologies; and
. effectively manage multiple relationships with various network operators,
wireless telephone manufacturers, content providers, applications
developers and other third parties.

Our systems, procedures and controls may not be adequate to support our
operations, and our management may not be able to achieve the rapid execution
necessary to exploit the market for our products and services. See "Business--
Employees."

OUR SUCCESS, PARTICULARLY IN INTERNATIONAL MARKETS, DEPENDS IN PART ON OUR
ABILITY TO MAINTAIN AND EXPAND OUR DISTRIBUTION CHANNELS.

Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and systems integrators and to
expand our indirect distribution channels. If we are unable to maintain the
relationships that we have with our existing distribution partners, increase
revenues derived from sales through our indirect distribution channels, or
increase the number of distribution partners with whom we have relationships,
then we may not be able to increase our revenues or achieve profitability.

To date, almost all of our revenues from international markets have resulted
from our direct sales efforts. However, we expect that network operators in
international markets generally will require that our products and support
services be supplied through value-added resellers and systems

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<PAGE>

integrators. Thus, we expect that a significant portion of international sales
will be made through value-added resellers and systems integrators, and the
success of our international operations will depend on our ability to maintain
productive relationships with value-added resellers and systems integrators.

In addition, our agreements with our distribution partners do not restrict
the sale by them of products and services that are competitive with our
products and services, and each of our partners generally can cease marketing
our products and services at their option and, in some circumstances, with
little notice and with little or no penalty. See "Business--Sales and
Marketing."

WE DEPEND ON OTHERS TO PROVIDE CONTENT AND DEVELOP APPLICATIONS FOR WIRELESS
TELEPHONES.

In order to increase the value to customers of our product platform and
encourage subscriber demand for Internet-based services via wireless
telephones, we must successfully promote the development of Internet-based
applications and content for this market. If content providers and application
developers fail to create sufficient applications and content for Internet-
based services via wireless telephones, our business could suffer materially.
Our success in motivating content providers and application developers to
create and support content and applications that subscribers find useful and
compelling will depend, in part, on our ability to develop a customer base of
network operators and wireless telephone manufacturers large enough to justify
significant and continued investments in these endeavors. See "Business--
Research and Product Development" and "--Sales and Marketing."

IF WE ARE UNABLE TO INTEGRATE OUR PRODUCTS WITH THIRD-PARTY TECHNOLOGY, SUCH AS
NETWORK OPERATORS' SYSTEMS, OUR BUSINESS MAY SUFFER.

Our products are integrated with network operators' systems and wireless
telephones. If we are unable to integrate our platform products with these
third-party technologies, our business could suffer materially. For example,
if, as a result of technology enhancements or upgrades of these systems or
telephones, we are unable to integrate our products with these systems or
telephones, we could be required to redesign our software products. Moreover,
many network operators use legacy, or custom-made, systems for their general
network management software. Legacy systems are typically very difficult to
integrate with new server software such as our UP.Link Server Suite. We may not
be able to redesign our products or develop redesigned products that achieve
market acceptance. See "Business--Research and Product Development."

AN INTERRUPTION IN THE SUPPLY OF SOFTWARE THAT WE LICENSE FROM THIRD PARTIES
COULD CAUSE A DECLINE IN PRODUCT SALES.

We license technology that is incorporated into our products from third
parties, such as RSA Data Security, Inc. and other companies. Any significant
interruption in the supply of any licensed software could cause a decline in
product sales, unless and until we are able to replace the functionality
provided by this licensed software. We also depend on these third parties to
deliver and support reliable products, enhance their current products, develop
new products on a timely and cost-effective basis, and respond to emerging
industry standards and other technological changes. The failure of these third
parties to meet these criteria could materially harm our business. See
"Business--Research and Product Development."

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS.

Our success depends significantly on our ability to protect our proprietary
rights to the technologies used in our products. If we are not adequately
protected, our competitors could use the

12
<PAGE>

intellectual property that we have developed to enhance their products and
services, which could harm our business. We rely on patent protection, as well
as a combination of copyright and trademark laws, trade secrets,
confidentiality provisions and other contractual provisions, to protect our
proprietary rights, but these legal means afford only limited protection. See
"Business--Intellectual Property Rights."

WE MAY BE SUED BY THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.

The telecommunications and Internet software industries are characterized by
the existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of entrants into our market increases, the possibility of
an intellectual property claim against us grows. Any intellectual property
claims, with or without merit, could be time-consuming and expensive to
litigate or settle and could divert management attention from administering our
core business. See "Business--Intellectual Property Rights."

INTERNATIONAL EXPANSION IS AN IMPORTANT PART OF OUR STRATEGY, AND THIS
EXPANSION CARRIES SPECIFIC RISKS.

International sales of products and services accounted for 7% and 44% of our
total revenues in the years ended June 30, 1997 and 1998, respectively, and 64%
of our total revenues for the nine months ended March 31, 1999. We expect
international sales to continue to account for a significant portion of our
revenues, although the percentage of our total revenues derived from
international sales may vary. Risks inherent in our international business
activities include business risks, economic and political risks, and legal
risks. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Business--Sales and Marketing."

OUR YEAR 2000 COMPLIANCE EFFORTS MAY INVOLVE SIGNIFICANT TIME AND EXPENSE, AND
UNCORRECTED PROBLEMS COULD HARM OUR BUSINESS.

Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January
1, 2000, computer systems and software used by many companies in a wide variety
of industries, including technology, transportation, utilities, finance and
telecommunications, will produce erroneous results or fail unless they have
been modified or upgraded to process date information correctly. Year 2000
compliance efforts may involve significant time and expense, and uncorrected
problems could materially and adversely affect our business. We may face claims
based on year 2000 issues arising from the integration of multiple products,
including ours, within an overall system. Network operators may also cease or
delay purchase and installation of new complex systems, such as our server
software products, as a result of, and during, their own internal year 2000
testing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Readiness Disclosure."

WE MAY ACQUIRE TECHNOLOGIES OR COMPANIES IN THE FUTURE, AND THESE ACQUISITIONS
COULD RESULT IN THE DILUTION OF OUR STOCKHOLDERS AND DISRUPTION OF OUR
BUSINESS.

We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks, any of which could materially harm our
business, including:

. diversion of management's attention from other business concerns;
. failure to assimilate the acquired company with our pre-existing
business;

13
<PAGE>

. potential loss of key employees from either our pre-existing business or
the acquired business;
. dilution of our existing stockholders as a result of issuing equity
securities; and
. assumption of liabilities of the acquired company.

We have no current agreements or negotiations underway with respect to any
acquisitions.

OUR STOCK PRICE, LIKE THAT OF MANY COMPANIES IN THE INTERNET AND
TELECOMMUNICATIONS SOFTWARE INDUSTRIES, MAY BE VOLATILE.

We expect that the market price of our common stock will fluctuate as a
result of variations in our quarterly operating results. These fluctuations may
be exaggerated if the trading volume of our common stock is low. In addition,
due to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to:

. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order; and
. changes in estimates of our financial performance or changes in
recommendations by securities analysts.

OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK
AND COULD EXERT SIGNIFICANT INFLUENCE OVER MATTERS REQUIRING STOCKHOLDER
APPROVAL AFTER THIS OFFERING.

Immediately after this offering, our executive officers and directors and
their respective affiliates, will continue to own approximately 39% of our
outstanding common stock. Accordingly, these stockholders may, as a practical
matter, be able to exert significant influence over matters requiring approval
by our stockholders, including the election of directors and the approval of
mergers or other business combinations. This concentration could have the
effect of delaying or preventing a change in control.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER.

Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include the following:

. establishing a classified board in which only a portion of the total
board members will be elected at each annual meeting;
. authorizing the board to issue preferred stock;
. prohibiting cumulative voting in the election of directors;
. limiting the persons who may call special meetings of stockholders;
. prohibiting stockholder action by written consent; and
. establishing advance notice requirements for nominations for election of
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.

See "Management--Board Composition" and "Description of Capital Stock--Anti-
Takeover Provisions of Delaware Law and Charter Provisions."

14
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements. These statements involve known and unknown risks, uncertainties,
and other factors that may cause our or our industry's actual results, levels
of activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by these forward-looking statements. These factors are described in
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and other sections of this prospectus.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology.

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

15
<PAGE>

USE OF PROCEEDS

The net proceeds to us from the sale of the 4,000,000 shares of common stock
offered by us are estimated to be approximately $58.4 million (approximately
$67.3 million if the underwriters' over-allotment option is exercised in full)
at the initial public offering price of $16.00 per share, after deducting the
underwriting discounts and commissions and the estimated offering expenses.

We intend to use the net proceeds of this offering primarily for additional
working capital and other general corporate purposes, including increased sales
and marketing expenditures, increased research and development expenditures and
capital expenditures. We have not yet determined our expected use of these
proceeds, but we currently estimate that we will incur at least $22 million in
research and development expenditures, $16 million in sales and marketing
expenditures and $6 million in capital expenditures during the next twelve
months. The amounts and timing of these expenditures will vary depending on a
number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We may also use a portion of the net proceeds to acquire
additional businesses, products and technologies, to lease additional
facilities, or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific plans, agreements or
commitments to do so and are not currently engaged in any negotiations for any
acquisition or joint venture. The amounts that we actually expend for working
capital and other general corporate purposes will vary significantly depending
on a number of factors, including future revenue growth, if any, and the amount
of cash we generate from operations. As a result, we will retain broad
discretion in the allocation of the net proceeds of this offering. Pending the
uses described above, we will invest the net proceeds in short-term, interest-
bearing, investment-grade securities.

The principal purposes of this offering are to create a public market for
our common stock, to obtain additional capital, to increase our visibility and
to facilitate future access to the public capital markets.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the foreseeable future. In addition, the terms of our current equipment loan
prohibit us from paying dividends without our lender's consent.

ADDITIONAL INFORMATION ABOUT PHONE.COM

We were incorporated in Delaware under the name "Libris, Inc." in December
1994 and changed our name to"Unwired Planet, Inc." in April 1996. In April
1999, we changed our name from "Unwired Planet, Inc." to "Phone.com, Inc." Our
principal executive offices are located at 800 Chesapeake Drive, Redwood City,
California 94063, and our telephone number is (650) 562-0200. The address of
our Web site is "www.phone.com." Information contained on our Web site shall
not be deemed to be a part of this prospectus.

16
<PAGE>

CAPITALIZATION

The following table sets forth the following information:

. the actual capitalization of Phone.com as of March 31, 1999;
. the pro forma capitalization of Phone.com after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
20,174,170 shares of common stock and the filing of our amended and
restated certificate of incorporation upon completion of this offering;
and
. the as adjusted capitalization to give effect to the sale of shares of
common stock at the initial public offering price of $16.00 per share in
this offering after deducting the underwriting discounts and commissions
Phone.com expects to pay in connection with this offering and estimated
offering expenses payable by Phone.com.

This table should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- --------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
Equipment loan and capital lease obligations, less
current portion.................................. $ 607 $ 607 $ 607
-------- -------- -------
Stockholders' equity:
Convertible preferred stock $0.001 par value,
20,329,720 shares authorized, 20,174,170 shares
issued and outstanding, actual;
5,000,000 shares authorized, none issued or
outstanding, pro forma
and as adjusted................................ 20 -- --
Common stock $0.001 par value, 32,000,000 shares
authorized,
6,332,688 shares issued and outstanding,
actual; 100,000,000 shares authorized,
26,506,858 shares issued and outstanding, pro
forma; and 100,000,000 shares authorized,
30,506,858 shares issued and outstanding, as
adjusted(1).................................... 6 26 30
Additional paid-in capital...................... 69,158 69,158 127,574
Deferred stock-based compensation............... (1,545) (1,545) (1,545)
Treasury stock.................................. (196) (196) (196)
Notes receivable from stockholders.............. (285) (285) (285)
Accumulated deficit............................. (35,160) (35,160) (35,160)
-------- -------- -------
Total stockholders' equity.................... 31,998 31,998 90,418
-------- -------- -------
Total capitalization........................ $ 32,605 $ 32,605 $91,025
======== ======== =======
</TABLE>
- ---------------------
(1) This table excludes the following shares:
. 3,321,346 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.86 per share as of March 31, 1999,
. 31,486 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.81 per share as of March 31, 1999,
and
. an aggregate of 5,672,807 shares available for future issuance under our
1995 Stock Plan, 1996 Stock Plan, 1999 Directors' Stock Option Plan and
1999 Employee Stock Purchase Plan as of March 31, 1999. See "Management--
Stock Plans" and Notes 4 and 5 of the Notes to Consolidated Financial
Statements.

17
<PAGE>

DILUTION

The pro forma net tangible book value of our common stock on March 31, 1999
was $32.0 million, or approximately $1.21 per share. Pro forma net tangible
book value represents the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the net tangible book value per share of our common stock
immediately following this offering. After giving effect to our sale of shares
of common stock offered by this prospectus at the initial public offering price
of $16.00 per share and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, our net tangible
book value would have been $90.4 million, or approximately $2.96 per share.
This represents an immediate increase in net tangible book value of $1.76 per
share to existing stockholders and an immediate dilution in net tangible book
value of $13.04 per share to new investors.

<TABLE>
<S> <C> <C>
Initial public offering price per share............................ $16.00
Net tangible book value per share as of March 31, 1999........... $1.21
Increase per share attributable to new investors................. 1.76
-----
Pro forma net tangible book value per share after this offering.... 2.96
------
Dilution per share to new investors................................ $13.04
======
</TABLE>

The following table sets forth, as of March 31, 1999, the differences
between the number of shares of common stock purchased from us, the total price
and average price per share paid by existing investors and by the new
investors, before deducting the underwriting discounts and commissions and
estimated offering expenses payable by us at the initial public offering price
of $16.00 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 26,506,858 86.9% $ 70,003,000 52.2% $ 2.64
New investors ............ 4,000,000 13.1 64,000,000 47.8 16.00
---------- ----- ------------ -----
Total..................... 30,506,858 100.0% $134,003,000 100.0%
========== ===== ============ =====
</TABLE>

If the underwriters' over-allotment option is exercised in full, the
following will occur:

. the number of shares of common stock held by existing stockholders will
decrease to approximately 85.2% of the total number of shares of our
common stock outstanding after this offering; and
. the number of shares held by new investors will be increased to or
approximately 14.8% of the total number of shares of our common stock
outstanding after this offering.

18
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
consolidated financial data in conjunction with our consolidated financial
statements and related notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The consolidated statements of operations data for the
years ended June 30, 1996, 1997 and 1998, and the nine months ended March 31,
1999, and the consolidated balance sheet data as of June 30, 1997 and 1998, and
March 31, 1999 are derived from our consolidated financial statements that have
been audited by KPMG LLP, independent auditors, which are included elsewhere in
this prospectus. The consolidated statements of operations data for the period
from December 16, 1994 (inception) to June 30, 1995 and the consolidated
balance sheet data as of June 30, 1995 and 1996 are derived from audited
consolidated financial statements that are not included in this prospectus. The
consolidated statements of operations data for the nine months ended March 31,
1998 is derived from our unaudited consolidated financial statements included
elsewhere in this prospectus and include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for the fair presentation of our consolidated financial position and
results of operations for those periods. The historical results presented below
are not necessarily indicative of the results to be expected for any future
fiscal year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
NINE MONTHS
DECEMBER 16, YEAR ENDED JUNE 30, ENDED MARCH 31,
1994 (INCEPTION) -------------------------- -----------------
TO JUNE 30, 1995 1996 1997 1998 1998 1999
---------------- ------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues:
License................ $ -- $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and
support services...... -- -- 212 1,683 635 3,786
Consulting services.... -- -- -- -- -- 1,401
------ ------- ------- -------- ------- --------
Total revenues....... -- -- 292 2,205 924 6,717
------ ------- ------- -------- ------- --------
Cost of revenues:
License................ -- -- 87 95 59 172
Maintenance and
support services...... -- -- 266 1,063 715 1,876
Consulting services.... -- -- -- -- -- 646
------ ------- ------- -------- ------- --------
Total cost of
revenues............ -- -- 353 1,158 774 2,694
------ ------- ------- -------- ------- --------
Gross profit (loss).. -- -- (61) 1,047 150 4,023
------ ------- ------- -------- ------- --------
Operating expenses:
Research and
development........... 92 1,387 3,959 5,732 3,871 8,406
Sales and marketing.... 6 757 3,198 5,011 3,307 6,504
General and
administrative........ 5 522 1,237 1,801 1,185 2,731
Stock-based
compensation.......... -- -- -- 108 45 784
------ ------- ------- -------- ------- --------
Total operating
expenses............ 103 2,666 8,394 12,652 8,408 18,425
------ ------- ------- -------- ------- --------
Operating loss....... (103) (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net.... -- 196 464 982 528 1,139
------ ------- ------- -------- ------- --------
Loss before income
taxes............... (103) (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes............ -- -- -- -- -- 710
------ ------- ------- -------- ------- --------
Net loss............. $ (103) $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
====== ======= ======= ======== ======= ========
Basic and diluted net
loss per share......... $(0.02) $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
====== ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 4,671 4,704 4,776 5,221 5,142 5,618
====== ======= ======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
---------------------------- MARCH 31,
1995 1996 1997 1998 1999
------ ------ ------ ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments........................... $2,300 $5,848 $8,014 $33,464 $47,831
Total assets........................... 2,315 6,767 9,759 39,144 57,320
Equipment loan and capital lease
obligations, less current portion..... -- -- -- 915 607
Total stockholders' equity............. 2,243 6,464 8,125 28,393 31,998
</TABLE>

19
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of this prospectus includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. We use words such as "anticipates," "believes,"
"expects," "future," and "intends," and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions. These risks are described in "Risk Factors" and elsewhere in this
prospectus. See "Special Note Regarding Forward-Looking Statements."

OVERVIEW

We were incorporated in December 1994 and, from inception until June 1996,
our operations consisted primarily of various start-up activities, including
development of technologies central to our business, recruiting personnel and
raising capital. In 1995, we developed our initial technology, which enables
the delivery of Internet-based services to wireless telephones. In 1996, we
introduced and deployed our first products based on this technology. We first
recognized license revenues in August 1996, and generated license revenues of
approximately $80,000 and $522,000 for the fiscal years ended June 30, 1997 and
1998, respectively, and $1.5 million for the nine months ended March 31, 1999.
We incurred net losses of approximately $8.0 million and $10.6 million for the
fiscal years ended June 30, 1997 and 1998, respectively, and $14.0 million for
the nine months ended March 31, 1999. As of March 31, 1999, we had an
accumulated deficit of $35.2 million.

To provide a worldwide standard for the delivery of Internet-based services
over mass-market wireless telephones, we formed the WAP Forum in close
cooperation with Ericsson, Motorola and Nokia, the world's three largest
manufacturers of wireless telephones. In February 1998, the WAP Forum published
technical specifications for application development and product
interoperability based substantially on Phone.com's technology and on Internet
standards. Leading network operators, telecommunications device and equipment
manufacturers and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum.

We generate revenues from licenses, maintenance and support services and
consulting services. We receive license revenues from licensing our UP.Link
Server Suite software directly to network operators and indirectly through
value-added resellers. From our inception through March 31, 1999, cumulative
revenues from licensing our UP.Link Server Suite software represented 42% of
total cumulative revenues, inclusive of installation, training and support
services provided to network operators. Maintenance and support services
revenues also include engineering and support services provided to wireless
telephone manufacturers. Cumulative engineering and support services fees from
UP.Browser agreements with wireless telephone manufacturers represented 42% of
our total cumulative revenues from inception through March 31, 1999. Consulting
services revenues are derived from consulting services provided to network
operator customers either directly by us or indirectly through resellers.

Our future success depends on our ability to increase revenues from sales of
products and services to new and existing network operator customers. If the
market for Internet-based services via wireless telephones fails to develop or
develops more slowly than expected, then our business would be materially and
adversely affected. In addition, because there is a relatively small number of

20
<PAGE>

network operators worldwide, any failure to sell our products to network
operator customers successfully could result in a shortfall in revenues that
could not be readily offset by other revenue sources.

Our business strategy also relies to a significant extent on the widespread
propagation of UP.Browser-enabled telephones through our relationships with
network operators and wireless telephone manufacturers. In order to encourage
adoption of UP.Browser-enabled wireless telephones, we license our UP.Browser
software to wireless telephone manufacturers free of per-unit royalties and
other license fees and provide maintenance and support services for an annual
flat fee. As of May 1999, we had licensed UP.Browser to 23 wireless telephone
manufacturers. As of May 1999, five wireless telephone manufacturer customers
had made commercial shipments of telephones with the UP.Browser embedded. In
addition, we are currently providing engineering support services in connection
with 45 browser integration projects.

During the year ended June 30, 1998, AT&T Wireless Services, which will own
approximately 2.5% of our common stock after this offering, and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the nine months ended March 31, 1999, AT&T Wireless
Services, DDI Corporation, which will own approximately 0.6% of our common
stock after this offering, and a wireless telephone manufacturer accounted for
approximately 14%, 11% and 13%, respectively, of our total revenues.

For agreements entered into prior to July 1, 1998, we recognized revenues in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position No. 91-1, Software Revenue Recognition.
Effective July 1, 1998, we adopted SOP 97-2, Software Revenue Recognition, as
amended. SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair value of the elements. The adoption of SOP 97-2 did not have a
significant impact on our accounting for revenues.

We license our UP.Link Server Suite products to network operators through
our direct sales force and indirectly through our channel partners. Our license
agreements do not provide for a right of return. Allowances for future
estimated warranty costs are provided at the time revenue is recognized.
Licenses can be purchased on an as-deployed basis or on a prepaid basis. For
licenses purchased on an as-deployed basis, license revenue is recognized as
subscribers are activated to use the services that are based on our UP.Link
Server Suite products. We have no obligation to provide standards-compliant
products once a subscriber has been activated. For licenses purchased on a
prepaid basis, prepaid license fees are recognized under subscription
accounting due to our commitment to provide standards-compliant products for
each license covered by the prepaid arrangement. This subscription revenue is
recognized ratably over the contractual term of the prepaid arrangement (i.e.,
the date the prepaid licenses expire if not used), beginning after delivery and
acceptance have occurred. The prepaid license period is generally twelve to
thirty months. Licenses expire if not activated prior to the end of the prepaid
license term. We recognize revenues from maintenance and support services
provided to network operators ratably over the term of the agreement, generally
one year, and recognize revenues from consulting services provided to network
operators as the services are performed.

We recognize revenues from UP.Browser agreements with wireless telephone
manufacturers ratably over the period during which the services are performed,
generally one year. We provide our wireless telephone manufacturer customers
with support associated with their efforts to port our UP.Browser software to
their wireless telephones, software error corrections and new releases as they
become available commercially.

21
<PAGE>

Deferred revenue was $18.7 million as of March 31, 1999. We expect that
deferred revenue will decline in the long term as network operators deploy
services based on our products. In particular, license revenue was recognized
in the third quarter of fiscal 1999 in connection with the launch by
CEGETEL/SFR of commercial services based on our products and the acceptance of
our products by DDI Corporation. We recognized previously deferred license
revenues of $135,000 in the quarter ended March 31, 1999, and will recognize
approximately $400,000 in each of the quarters ending June 30, 1999,
September 30, 1999, December 31, 1999 and March 31, 2000 relating to our sales
to CEGETEL/SFR. With regard to sales to DDI Corporation, we recognized
previously deferred license revenues of $364,000 in the quarter ended March 31,
1999, and will recognize approximately $550,000 in each of the quarters ending
June 30, 1999, September 30, 1999 and December 31, 1999.

License revenue also was recognized in the third quarter of fiscal 1999
under an agreement with AT&T Wireless Services initially entered into in May
1996. Under that agreement, AT&T Wireless Services, prepaid $4.7 million for
the right to deploy up to a fixed number of licenses through December 1999. Due
to the early nature of the commercial deployments of our products by network
operators and because we believed we would assume additional obligations to
assist AT&T Wireless Services in deploying the software licenses if
difficulties were encountered during the deployment, the license portion of the
prepaid fee was recognized as licenses were deployed. Between August 1997 and
December 1998, $484,000 was recognized relating to this prepayment. In
connection with an amendment to the agreement entered into in March 1999, AT&T
Wireless Services agreed that we would not be further obligated to assist them
in the deployment of the prepaid licenses discussed above. Therefore, the
remaining deferred revenue of approximately $4.2 million as of the date of the
contract amendment in March 1999 that related to the prepayment is being
recognized as revenue ratably over the remaining contractual term of the
prepaid arrangement. Accordingly, we recognized revenue of $465,000 in the
quarter ending March 31, 1999, and will recognize approximately $1.25 million
in each of the quarters ending June 30, 1999, September 30, 1999, and December
31, 1999, associated with the prepayment.

To date, we have not recognized significant revenues derived from sales
through our indirect channels. We expect that our gross profit on revenues
derived from sales through indirect channel partners will be less than the
gross profit on revenues from direct sales. Our success, in particular in
international markets, depends in part on our ability to increase sales of our
products and services through value-added resellers and to expand our indirect
distribution channels. In addition, our agreements with our distribution
partners generally do not restrict the sale of products that are competitive
with our products and services, and each of our partners can cease marketing
our products and services at their option.

. failure by us and/or third parties to develop localized content and
applications that are used with our products;
. costs of localizing our products for foreign markets;
. difficulties in staffing and managing foreign operations;
. longer accounts receivable collection time;
. political and economic instability;
. fluctuations in foreign currency exchange rates;

22
<PAGE>

. reduced protection of intellectual property rights in some foreign
countries;
. contractual provisions governed by foreign laws;
. export restrictions on encryption and other technologies;
. potentially adverse tax consequences; and
. the burden of complying with complex and changing regulatory
requirements.

Since early 1997, we have invested substantially in research and
development, marketing, domestic and international sales channels, professional
services and our general and administrative infrastructure. These investments
have significantly increased our operating expenses, contributing to net losses
in each fiscal quarter since our inception. Our limited operating history makes
it difficult to forecast future operating results. Although our revenues have
grown in recent quarters, our revenues may not increase at a rate sufficient to
achieve and maintain profitability, if at all. We anticipate that our operating
expenses will increase substantially in absolute dollars for the foreseeable
future as we expand our product development, sales and marketing, professional
services and administrative staff. Even if we were to achieve profitability in
any period, we may not sustain or increase profitability on a quarterly or
annual basis.

NINE MONTHS ENDED MARCH 31, 1998 AND 1999

License Revenues

License revenues increased from $289,000 for the nine months ended March 31,
1998 to $1.5 million for the nine months ended March 31, 1999. The increase in
license revenues was due primarily to the launch by CEGETEL/SFR of commercial
services based on our products, the acceptance of our products by DDI
Corporation and the satisfaction of our deployment obligations related to AT&T.
Revenues recognized during the nine months ended March 31, 1999 as a result of
these three customers were $135,000, $364,000 and $393,000, respectively.

Maintenance and Support Services Revenues

Maintenance and support services revenues increased from $635,000 for the
nine months ended March 31, 1998 to $3.8 million for the nine months ended
March 31, 1999. The increase in maintenance and support services revenues was
attributable primarily to increased demand for maintenance and engineering
support services by wireless telephone manufacturers, resulting in an increase
of approximately $2.3 million, and to revenues of $884,000 associated with
trials of our UP.Link Server Suite software by wireless network operators.

Consulting Services Revenues

Consulting services revenues were $1.4 million for the nine months ended
March 31, 1999. No consulting services were performed in the nine months ended
March 31, 1998.

Cost of License Revenues

Cost of license revenues consists primarily of third-party license and
support fees. Cost of license revenues increased from $59,000 for the nine
months ended March 31, 1998 to $172,000 for the nine months ended March 31,
1999. The growth in cost of license revenues was attributable primarily to the
increase in license revenues. As a percentage of license revenues, cost of
license revenues for the nine months ended March 31, 1998 and 1999 was 20% and
11%, respectively. The decrease as a percentage of license revenues was
attributable primarily to higher license revenues for the nine months ended
March 31, 1999 and to the amortization of fixed maintenance fees relating to
third party software licenses. We expect that cost of license revenues will
vary as a percentage of license revenues from period to period.

23
<PAGE>

Cost of Maintenance and Support Services Revenues

Cost of maintenance and support services revenues consists of compensation
and related overhead costs for personnel engaged in the delivery of
installation, training and support services to network operators, and
engineering and support services to wireless telephone manufacturers. The
engineering and support services performed for wireless telephone manufacturers
includes assistance relating to integrating our UP.Browser software into the
manufacturers' wireless telephones. Cost of maintenance and support services
revenues increased from $715,000 for the nine months ended March 31, 1998 to
$1.9 million for the nine months ended March 31, 1999. The growth in cost of
maintenance and support services revenues was attributable primarily to an
increase in personnel dedicated to support a larger number of wireless
telephone manufacturer customers, which increased costs by approximately
$500,000 from March 31, 1998 to March 31, 1999, and increased staffing in
anticipation of growth in the number of network operator customers, which
increased costs by approximately $650,000 during the same period. As a
percentage of maintenance and support service revenues, cost of maintenance and
support services revenues for the nine months ended March 31, 1998 and 1999 was
113% and 50%, respectively. Gross profit on maintenance and support services
increased between March 31, 1998 and March 31, 1999 due to the increase in the
number of browser integration assignments for wireless telephone manufacturers,
which had the effect of spreading our costs over a greater revenue base. In
addition, the number of trials in progress by network operators increased
during this period. We anticipate that the cost of maintenance and support
services revenues will increase in absolute dollars in future operating
periods.

Cost of Consulting Services Revenues

Cost of consulting services revenues consists of compensation and
independent consultant costs for personnel engaged in our consulting services
operations and related overhead. We commenced our consulting operations in
fiscal 1999. Cost of consulting services revenues for the nine months ended
March 31, 1999 was $646,000. No consulting services were performed in the nine
months ended March 31, 1998. As a percentage of consulting services revenues,
cost of consulting services revenues for the nine months ended March 31, 1999
was 46%. Gross profit on consulting services revenues is impacted by the mix of
company personnel and independent consultants assigned to projects. The gross
profit we achieve is also impacted by the contractual terms of the consulting
assignments we undertake, and the gross profit on fixed price contracts
typically is more susceptible to fluctuation than contracts performed on a
time-and-materials basis. We anticipate that the cost of consulting services
revenues will increase in absolute dollars as we continue to invest in the
growth of our consulting services operations.

Research and Development Expenses

Research and development expenses consist primarily of compensation and
related costs for research and development personnel. Research and development
expenses increased 117% from $3.9 million for the nine months ended March 31,
1998 to $8.4 million for the nine months ended March 31, 1999. This increase
was attributable primarily to the addition of personnel in our research and
development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of compensation and related
costs for sales and marketing personnel, sales commissions, marketing programs,
public relations, promotional materials,

24
<PAGE>

travel expenses and trade show exhibit expenses. Sales and marketing expenses
increased 97% from $3.3 million for the nine months ended March 31, 1998 to
$6.5 million for the nine months ended March 31, 1999. This increase resulted
from the addition of personnel in our sales and marketing organizations,
reflecting our increased selling effort to develop market awareness of our
products and services. We anticipate that sales and marketing expenses will
increase in absolute dollars as we increase our investment in these areas.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and
related expenses, accounting, legal and administrative expenses, professional
service fees and other general corporate expenses. General and administrative
expenses increased 130% from $1.2 million for the nine months ended March 31,
1998 to $2.7 million for the nine months ended March 31, 1999. This increase
consisted of approximately $900,000 related to the addition of personnel
performing general and administrative functions and, to a lesser extent, legal
expenses associated with increased product licensing and patent activity. We
expect general and administrative expenses to increase in absolute dollars as
we add personnel and incur additional expenses related to the anticipated
growth of our business and operation as a public company.

Stock-Based Compensation

Some stock options granted and restricted stock sold during the fiscal year
ended June 30, 1998 and during the nine months ended March 31, 1999 have been
deemed to be compensatory. Total deferred stock-based compensation associated
with these equity arrangements through March 31, 1999 amounted to $2.4 million
related to stock options granted and restricted stock issued from October 1997
through March 1999. These amounts are being amortized over the respective
vesting periods of these equity arrangements in a manner consistent with
Financial Accounting Standards Board Interpretation No. 28. Of the total
deferred stock-based compensation, $45,000 and $784,000 was amortized in the
nine months ended March 31, 1998 and 1999, respectively. We expect amortization
of approximately $227,000, $696,000, $375,000, $185,000 and $62,000 in the
fourth quarter of the fiscal year ending June 30, 1999, and in the fiscal years
ending June 30, 2000, 2001, 2002 and 2003, respectively.

Interest Income, Net

Net interest income is comprised primarily of interest earned on cash and
cash equivalents and short-term investments, offset by interest expense related
to obligations under capital leases and our
equipment loan. Net interest income was $528,000 and $1.1 million for the nine
months ended
March 31, 1998 and 1999, respectively. The increase was primarily attributable
to increased cash balances as a result of our private placement financing
consummated in February 1998, and to a lesser extent, to our private placement
financing consummated in March 1999.

Income Taxes

Income tax expense of $710,000 for the nine months ended March 31, 1999,
consisted of foreign taxes. Since inception, we have incurred net losses for
federal and state tax purposes and have not recognized any tax provision or
benefit. As of March 31, 1999, we had net operating loss carryforwards of
approximately $31.0 million for both federal and California income tax
purposes. These carryforwards, if not utilized, expire beginning in the year
2004 through 2019. We also have

25
<PAGE>

research and development credit carryforwards of approximately $367,000 and
$279,000 for federal and California income tax purposes, respectively. We also
have a foreign tax credit carryforward of $670,000, which expires in 2004.
Federal and California tax laws impose significant restrictions on the
utilization of net operating loss carryforwards in the event of a shift in our
ownership that constitutes an "ownership change," as defined in Section 382 of
the Internal Revenue Code. If we have an ownership change, the ability to
utilize the stated carryforwards could be significantly reduced. See Note 7 of
Notes to Consolidated Financial Statements.

As of March 31, 1999, we had deferred tax assets of $14.6 million, which
were fully offset by a valuation allowance. Deferred tax assets consist
principally of the federal and state net operating loss carryforwards,
capitalized start-up expenditures, accruals and reserves not currently
deductible for tax purposes, research and development credits, and foreign tax
credit carryforwards. We have provided a valuation allowance due to the
uncertainty of generating future profits that would allow for the realization
of these deferred tax assets. Accordingly, no tax benefit was recorded in the
accompanying consolidated statements of operations.

FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998

License Revenues

License revenues increased from $80,000 in the fiscal year ended June 30,
1997 to $522,000 in the fiscal year ended June 30, 1998. No license revenues
were recognized in the fiscal year ended June 30, 1996. The increase in license
revenues was due primarily to the launch of wireless Internet-based services by
network operators.

Maintenance and Support Services Revenues

Maintenance and support services revenues increased from $212,000 in the
fiscal year ended June 30, 1997 to $1.7 million in the fiscal year ended June
30, 1998. The increase in maintenance and support services revenues was due
primarily to an increase in services provided to wireless telephone
manufacturers and increased installation and support fees from network
operators. No maintenance and support services were performed in the fiscal
year ended June 30, 1996.

Cost of License Revenues

Cost of license revenues increased from $87,000 in the fiscal year ended
June 30, 1997 to $95,000 in the fiscal year ended June 30, 1998. As a
percentage of license revenues, cost of license revenues in the fiscal years
ended June 30, 1997 and 1998 was 109% and 18%, respectively. Costs of license
revenues in the fiscal year ended June 30, 1997 included $74,000 attributable
to non-recurring third-party software license and software customization fees.

Cost of Maintenance and Support Services Revenues

Cost of maintenance and support services revenues increased from $266,000 in
the fiscal year ended June 30, 1997 to $1.1 million in the fiscal year ended
June 30, 1998. The growth in cost of maintenance and support services revenues
was attributable primarily to growth in the number of wireless telephone
manufacturing customers and costs associated with installation of our UP.Link
Server Suite software at network operators' facilities. As a percentage of
maintenance and support services revenues, cost of maintenance and support
services revenues in the fiscal years ended June 30, 1997 and 1998 was 125% and
63%, respectively.

26
<PAGE>

Research and Development Expenses

Research and development expenses increased 185% from $1.4 million in the
fiscal year ended June 30, 1996 to $4.0 million in the fiscal year ended June
30, 1997 and increased 45% to $5.7 million in the fiscal year ended June 30,
1998. The increases in the fiscal years ended June 30, 1997 and 1998 were
attributable primarily to the addition of personnel in our research and
development organization associated with product development and increased
patent prosecution activity.

Sales and Marketing Expenses

Sales and marketing expenses increased 322% from $757,000 in the fiscal year
ended June 30, 1996 to $3.2 million in the fiscal year ended June 30, 1997 and
increased 57% to $5.0 million in the fiscal year ended June 30, 1998. The
increases in the fiscal years ended June 30, 1997 and 1998 reflected the
addition of personnel in our sales and marketing organizations, as well as
costs associated with increased selling efforts to develop market awareness of
our products and services.

General and Administrative Expenses

General and administrative expenses increased 137% from $522,000 in the
fiscal year ended June 30, 1996 to $1.2 million in the fiscal year ended June
30, 1997 and increased 46% to $1.8 million in the fiscal year ended June 30,
1998. The increases in the fiscal years ended June 30, 1997 and 1998 were due
primarily to the addition of personnel performing general and administrative
functions and higher legal expenses associated with increased product licensing
activity.

Stock-Based Compensation

We recorded deferred stock-based compensation of $1.9 million through June
30, 1998, associated with stock options granted and restricted stock issued
from October 1997 through June 1998. Amortization of stock-based compensation
was $108,000 for the fiscal year ended June 30, 1998. We recorded no deferred
stock based compensation for the fiscal years ended June 30, 1996 and 1997.

Interest Income, Net

Net interest income was $196,000, $464,000 and $982,000 in the fiscal years
ended June 30, 1996, 1997 and 1998, respectively. The year-to-year increases
resulted primarily from earnings on rising cash, cash equivalent and short-term
investment balances as a result of our private placement financings, partially
offset in the fiscal year ended June 30, 1998 by interest expense related to
obligations under capital leases and our equipment loan.

Income Taxes

Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit. As of June 30,
1998, we had net operating loss carryforwards of approximately $19.0 million
for both federal and California income tax purposes. These carryforwards, if
not utilized, expire beginning in the year 2004 through 2019. We also had
research and development credit carryforwards of approximately $379,000 and
$287,000 for federal and California income tax purposes, respectively. See Note
7 of Notes to Consolidated Financial Statements.

27
<PAGE>

As of June 30, 1997 and 1998, we had deferred tax assets of $4.7 million and
$8.8 million, respectively, which were fully offset by a valuation allowance.
Deferred tax assets consist principally of the federal and state net operating
loss carryforwards, capitalized start-up expenditures, accruals and reserves
not currently deductible for tax purposes and research and development credits.
We have provided a valuation allowance due to the uncertainty of generating
future profits that would allow for the realization of these deferred tax
assets. Accordingly, no tax benefit was recorded in the accompanying
consolidated statements of operations.

28
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our consolidated operating results for each
of the seven quarters ended March 31, 1999. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of this information when read in
conjunction with our annual audited consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1998 1998 1998 1998 1999
--------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License................ $ 17 $ 158 $ 114 $ 233 $ 202 $ 64 $ 1,264
Maintenance and
support services...... 94 222 319 1,048 1,005 1,327 1,454
Consulting services.... -- -- -- -- 161 426 814
------- ------- ------- ------- ------- ------- -------
Total revenues....... 111 380 433 1,281 1,368 1,817 3,532
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License................ 5 25 29 36 62 26 84
Maintenance and
support services...... 175 245 295 348 433 676 767
Consulting services.... -- -- -- -- 58 77 511
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 180 270 324 384 553 779 1,362
------- ------- ------- ------- ------- ------- -------
Gross profit (loss).. (69) 110 109 897 815 1,038 2,170
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 1,072 1,381 1,418 1,861 2,446 2,492 3,468
Sales and marketing.... 837 1,128 1,342 1,704 1,801 2,074 2,629
General and
administrative........ 341 403 441 616 684 955 1,092
Stock-based
compensation.......... -- 6 39 63 249 255 280
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 2,250 2,918 3,240 4,244 5,180 5,776 7,469
------- ------- ------- ------- ------- ------- -------
Operating loss....... (2,319) (2,808) (3,131) (3,347) (4,365) (4,738) (5,299)
Interest income, net.... 96 76 356 454 415 365 359
------- ------- ------- ------- ------- ------- -------
Loss before income
taxes............... (2,223) (2,732) (2,775) (2,893) (3,950) (4,373) (4,940)
Income taxes............ -- -- -- -- -- -- 710
------- ------- ------- ------- ------- ------- -------
Net loss............. $(2,223) $(2,732) $(2,775) $(2,893) $(3,950) $(4,373) $(5,650)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (0.44) $ (0.53) $ (0.53) $ (0.53) $ (0.71) $ (0.78) $ (0.99)
======= ======= ======= ======= ======= ======= =======
Shares used in computing
basic and diluted net
loss per share......... 5,050 5,147 5,230 5,459 5,539 5,617 5,699
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL
REVENUES
Revenues:
License................ 15 % 42 % 26 % 18 % 15 % 4 % 36 %
Maintenance and
support services...... 85 58 74 82 73 73 41
Consulting services.... -- -- -- -- 12 23 23
------- ------- ------- ------- ------- ------- -------
Total revenues....... 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License................ 4 7 7 3 4 2 2
Maintenance and
support services...... 158 64 68 27 32 37 23
Consulting services.... -- -- -- -- 4 4 14
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 162 71 75 30 40 43 39
------- ------- ------- ------- ------- ------- -------
Gross profit (loss).. (62) 29 25 70 60 57 61
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 966 363 327 145 179 137 98
Sales and marketing.... 754 297 310 133 132 114 74
General and
administrative........ 307 106 102 48 50 53 31
Stock-based
compensation.......... -- 2 9 5 18 14 8
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 2,027 768 748 331 379 318 211
------- ------- ------- ------- ------- ------- -------
Operating loss....... (2,089) (739) (723) (261) (319) (261) (150)
Interest income, net.... 86 20 82 35 30 20 10
------- ------- ------- ------- ------- ------- -------
Loss before income
taxes............... (2,003) (719) (641) (226) (289) (241) (140)
Income taxes............ -- -- -- -- -- -- 20
------- ------- ------- ------- ------- ------- -------
Net loss............. (2,003)% (719)% (641)% (226)% (289)% (241)% (160)%
======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF
RELATED REVENUES
Cost of license
revenues............... 29% 16 % 25 % 15 % 31 % 41 % 7 %
Cost of maintenance and
support services
revenues............... 186% 110 % 92 % 33 % 43 % 51 % 53 %
Cost of consulting
services revenues...... -- -- -- -- 36 % 18 % 63 %
</TABLE>

29
<PAGE>

During the six quarters ended December 31, 1998, our license revenues were
not significant and varied widely, as we continued to make substantial
investments in our business. In the quarter ended March 31, 1999, our license
revenues increased substantially to $1.3 million, as we recognized previously
deferred revenue of $964,000 under agreements with CEGETEL/SFR, DDI Corporation
and AT&T Wireless Services. During each of the next three calendar quarters of
1999, we will recognize license revenues of approximately $2.2 million under
these agreements.

Revenues from maintenance and support services were not significant through
the quarter ended March 31, 1998. Beginning in the quarter ended June 30, 1998,
our revenues from maintenance and support services increased substantially due
principally to increasing UP.Browser license activity with wireless telephone
manufacturers and UP.Link Server Suite trial agreements with network operators.

Cost of license revenues increased from $26,000 in the quarter ended
December 31, 1998 to $84,000 in the quarter ended March 31, 1999. As a
percentage of license revenues, cost of license revenues was 41% and 7% in the
quarters ended December 31, 1998 and March 31, 1999, respectively. The decrease
as a percentage of license revenues was attributable primarily to higher
license revenues in the quarter ended March 31, 1999 and to the amortization of
fixed maintenance fees relating to third party software licenses. Because this
fixed cost has been amortized over revenues that vary from quarter to quarter,
our cost of license revenues as a percentage of license revenues has fluctuated
historically. We expect that cost of license revenues will vary as a percentage
of license revenues from period to period.

Cost of maintenance and support services as a percentage of related revenues
declined from 186% for the quarter ended September 30, 1997 to 33% for the
quarter ended June 30, 1998 as increased efficiencies were realized as revenues
increased over the corresponding period. Cost of maintenance and support
services as a percentage of related revenues increased from 33% for the quarter
ended June 30, 1998 to 53% for the quarter ended March 31, 1999 as personnel
were added in anticipation of increased demand for maintenance and support
services.

Cost of consulting services revenues increased from $77,000 in the quarter
ended December 31, 1998 to $511,000 in the quarter ended March 31, 1999. As a
percentage of consulting services revenues, cost of consulting services
revenues was 18% and 63% in the quarters ended December 31, 1998 and March 31,
1999, respectively. The increase reflects a higher mix of consulting services
performed on a time and materials basis during the latter period, and we expect
that cost of consulting services revenues will vary as a percentage of
consulting services revenues from period to period.

The total number of our employees grew from 47 at September 30, 1997 to 157
at April 30, 1999. As a result of the growth in the number of employees in our
research and development, sales and marketing, and general and administrative
organizations, our research and development, sales and marketing, and general
and administrative expenses have increased on a quarter-to-quarter basis.

We believe that period-to-period comparisons of our operating results are
not necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses generally may
fluctuate significantly in the future as a result of a variety of factors. We
face a number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets such as the wireless
telecommunications and the

30
<PAGE>

Internet software industries. We may not be able to successfully address these
risks and difficulties. In addition, although we have experienced revenue
growth recently, our revenue growth may not continue, and we may not achieve or
maintain profitability in the future.

Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter due to a number of factors,
some of which are outside of our control. These factors include, but are not
limited to:

. delays in market acceptance or implementation by our customers of our
products and services;
. changes in demand by our customers for additional products and services;
. our lengthy sales cycle, our concentrated target market and the
potentially substantial effect on total revenues that may result from
the gain or loss of business from each incremental network operator
customer;
. introduction of new products or services by us or our competitors;
. delays in developing and introducing new products and services;
. changes in our pricing policies or those of our competitors or
customers;
. changes in our mix of domestic and international sales;
. risks inherent in international operations;
. changes in our mix of license, consulting and maintenance and support
services revenues;
. changes in accounting standards, including standards relating to revenue
recognition, business combinations and stock-based compensation; and
. the impact of Year 2000 concerns on the timing of capital expenditures
by network operators and their launches of commercial services utilizing
our products and services.

Our sales cycle, which is lengthy--typically between nine and twelve
months--contributes to fluctuations in our quarterly operating results. Many
factors outside our control add to the lengthy education and customer approval
process for our products. For example, many of our prospective customers have
neither budgeted expenses for the provision of Internet-based services to
wireless subscribers nor specifically dedicated personnel for the procurement
and implementation of our products and services. Further, the emerging and
evolving nature of the market for Internet-based services via wireless
telephones may lead prospective customers to postpone their purchasing
decisions. In addition, general concerns regarding year 2000 compliance may
further delay purchase decisions by prospective customers.

Most of our expenses, such as employee compensation and lease payments for
facilities and equipment, are relatively fixed. In addition, our expense levels
are based, in part, on our expectations regarding future revenues. As a result,
any shortfall in revenues relative to our expectations could cause significant
changes in our operating results from quarter to quarter. Due to the foregoing
factors, we believe period to period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, which totaled $66.0 million in aggregate
net proceeds through March 31, 1999. We have also financed our operations
through an equipment loan and a capitalized lease, which totaled $1.0 million
in principal amount outstanding at March 31, 1999. As of March 31, 1999, we had
$20.2 million of cash and cash equivalents and $27.6 million of short-term
investments, and working capital of $29.4 million.

31
<PAGE>

Net cash used for operating activities was $2.3 million, $6.6 million and
$5.1 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively, and $1.0 million for the nine months ended March 31, 1999. For
each of the fiscal years ended June 30, 1996, 1997 and 1998, and for the nine
months ended March 31, 1999, cash used for operating activities was
attributable primarily to net losses and an increase in accounts receivable
offset in part by depreciation and amortization, increases in accounts payable
and accrued liabilities, and increases in deferred revenue. For the nine months
ended March 31, 1999, accounts receivable increased by approximately $2.7
million. This increase was due to increased sales to both wireless telephone
manufacturers and network operators. To date, we have had no write-offs of
accounts receivable and we have not recorded any allowance for doubtful
accounts. Accrued liabilities increased by approximately $3.0 million during
the nine months ended March 31, 1999, which was primarily due to the accrual of
approximately $1.0 million of costs associated with the Series E convertible
preferred stock financing completed in March 1999 and an increase in accrued
consulting costs of approximately $650,000. Deferred revenue increased by
approximately $11.7 million during the nine months ended March 31, 1999, as a
result of increased license prepayments by network operators of approximately
$9.9 million and increased fees from wireless telephone manufacturers of
approximately $1.8 million.

Net cash used for investing activities was $852,000, $4.8 million and $18.0
million for the fiscal years ended June 30, 1996, 1997 and 1998, respectively,
and $7.9 million for the nine months ended March 31, 1999. For each of the
fiscal years, cash used in investing activities reflects purchases of property
and equipment, with increased purchases of short-term investments in the fiscal
years ended June 30, 1997 and 1998 and in the nine months ended March 31, 1999.

Net cash provided by financing activities was $6.7 million, $9.7 million and
$31.7 million for the fiscal years ended June 30, 1996, 1997 and 1998,
respectively. Cash provided by financing activities in each of these periods
was attributable to proceeds from the issuance of preferred stock, and for the
fiscal year ended June 30, 1998, cash provided by financing activities also was
attributable in part to proceeds from our equipment loan. In March 1999 we
completed the sale of 2,458,543 shares of Series E convertible preferred stock
at a purchase price of $7.24 per share, which resulted in net proceeds to us of
approximately $16.7 million. We intend to use the proceeds from the Series E
convertible preferred stock financing for general corporate purposes. All of
these shares will automatically convert into shares of common stock upon the
closing of this offering.

As of March 31, 1999, our principal commitments consisted of obligations
outstanding under operating leases, our equipment loan and capitalized lease
obligations. Although we have no material commitments for capital expenditures,
we expect to increase capital expenditures and lease commitments consistent
with our anticipated growth in operations, infrastructure and personnel. We
also may increase our capital expenditures as we expand into additional
international markets. See Notes 3, 4 and 6 of Notes to Consolidated Financial
Statements.

We have not yet determined our anticipated use of the proceeds of this
offering, but we currently estimate that we will incur at least $22 million in
research and development expenditures, $16 million in sales and marketing
expenditures and $6 million in capital expenditures during the next twelve
months. The amounts and timing of these expenditures will vary depending on a
number of factors, including the amount of cash generated by our operations,
competitive and technological developments and the rate of growth, if any, of
our business. We believe that the net proceeds from this offering, together
with our current cash, cash equivalents and short-term investments, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least

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<PAGE>

the next twelve months. If cash generated from operations is insufficient to
satisfy our liquidity requirements, we may seek to sell additional equity or
debt securities or to obtain a credit facility. If additional funds are raised
through the issuance of debt securities, these securities could have rights,
preferences and privileges senior to holders of common stock, and the terms of
any debt could impose restrictions on our operations. The sale of additional
equity or convertible debt securities could result in additional dilution to
our stockholders, and additional financing may not be available in amounts or
on terms acceptable to us, if at all. If we are unable to obtain this
additional financing, we may be required to reduce the scope of our planned
product development and marketing efforts, which could harm our business,
financial condition and operating results.

YEAR 2000 READINESS DISCLOSURE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and
software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. This problem may result in software
failures or the creation of erroneous results.

We have conducted a year 2000 readiness review for the current versions of
our products. The review includes assessment, implementation (including
remediation, upgrading and replacement of some product versions), validation
testing, and contingency planning.We have largely completed all phases of this
plan, except for contingency planning, for the current versions of our
products. As a result, we believe all current versions of our products are
capable of properly distinguishing between 20th and 21st century dates, when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with our products are also capable of properly distinguishing between 20th
and 21st century dates. We have not tested all noncurrent versions of our
products and do not intend to do so. However, we have delivered software
releases containing corrections to all identified year 2000 errors in our
UP.Link Server Suite software to our network operator customers with our
software in production and expect that those releases will be implemented by
our customers prior to December 31, 1999.

We are testing software obtained from third parties (licensed software,
shareware, and freeware) that is incorporated into our products, and we have
contacted our vendors to confirm that licensed software is capable of properly
distinguishing between 20th and 21st century dates. We have been informed by
many of our vendors that their products that we use are capable of properly
distinguishing between 20th and 21st century dates. Despite testing by us and
by current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with year 2000 date functions. Known or unknown errors or
defects in our products could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, or increased service and
warranty costs, any of which could materially and adversely affect our
business, operating results or financial condition. Some commentators have
predicted significant litigation regarding year 2000 compliance issues, and we
are aware of lawsuits against other software vendors. Because of the
unprecedented nature of this litigation, it is uncertain whether or to what
extent we may be affected by it.

Our internal systems include our information technology, or IT, non-IT
systems and embedded systems. We have completed an assessment of our material
internal IT, non-IT and embedded systems, including both our own software
products and third-party software and hardware technology. We expect to
complete validation testing of our IT systems and related contingency planning
by September 1999. To the extent that we are not able to test the technology
provided by

33
<PAGE>

third-party vendors, we are seeking assurances from vendors that their systems
are year 2000 compliant. We are not currently aware of any material operational
issues associated with preparing our internal IT, non-IT and embedded systems
for the year 2000. However, we may experience material unanticipated problems
or additional costs caused by undetected errors or defects in the technology
used in our internal IT, non-IT and embedded systems.

We do not currently have any information concerning the year 2000 compliance
status of our customers. Our network operator customers face implementation and
support challenges in introducing Internet-based services via wireless
telephones. Historically, network operators have been relatively slow to
implement new complex services, such as Internet-based services, and year 2000
compliance issues could slow adoption or implementation of our products. If our
current or future customers fail to achieve year 2000 compliance or if they
divert technology expenditures, especially technology expenditures that were
earmarked for our products, to address year 2000 compliance problems, our
business could suffer.

We have funded our year 2000 plan from available cash and have not
separately accounted for these expenses in the past. To date, these expenses
have not been material. Most of our expenses have related to, and are expected
to continue to relate to, the operating costs associated with time spent by
employees and management consultants in the evaluation process and year 2000
compliance matters generally. We expect to incur approximately $500,000 to
verify that our IT, non-IT and embedded systems are capable of properly
distinguishing between 20th century and 21st century dates. In addition, we may
experience material problems and expenses associated with year 2000 compliance
that could adversely affect our business, results of operations, and financial
condition. Finally, we are also subject to external forces that might generally
affect industry and commerce, such as year 2000 compliance failures by utility
or transportation companies and related service interruptions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK DERIVATIVES AND
FINANCIAL INSTRUMENTS

Foreign Currency Hedging Instruments

We transact business in various foreign currencies and, accordingly, we are
subject to exposure from adverse movements in foreign currency exchange rates.
To date, the effect of changes in foreign currency exchange rates on revenues
and operating expenses have not been material. Substantially all of our
revenues are earned in U.S. dollars. Operating expenses incurred by our
European and Japanese subsidiaries are denominated primarily in U.K. pounds
sterling and Japanese yen, respectively.

We currently do not use financial instruments to hedge operating expenses in
the U.K. or Japan denominated in their respective local currency. We intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis.

We do not use derivative financial instruments for speculative trading
purposes, nor do we currently hedge our foreign currency exposure to offset the
effects of changes in foreign exchange rates.

Fixed Income Investments

Our exposure to market risks for changes in interest rates relates primarily
to corporate debt securities. We place our investments with high credit quality
issuers and, by policy, limit the amount of the credit exposure to any one
issuer.

34
<PAGE>

Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents; all investments with maturities of three
months or greater are classified as available-for-sale and considered to be
short-term investments.

35
<PAGE>

BUSINESS

PHONE.COM, INC.

INDUSTRY BACKGROUND

Growth of the Internet

The Internet has emerged as a global communications medium enabling millions
of people to share information and conduct business electronically.
International Data Corporation, or IDC, estimates that there were approximately
159 million users of the Internet worldwide at the end of 1998 and that the
number of users will grow to 410 million by the end of 2002. We cannot assure
you that this estimate will be achieved. The dramatic growth in the number of
business and consumer Internet users has led to a proliferation of useful
information and services on the Internet, including email, news, electronic
commerce, educational and entertainment applications and a multitude of other
value-added services. As a result, the Internet has become a primary and
ubiquitous daily resource for millions of people.

Growth of Wireless Telecommunications

Worldwide use of wireless telecommunications has grown rapidly as cellular
and other emerging wireless communications services have become more widely
available and affordable for the mass business and consumer markets. Advances
in technology, changes in telecommunications regulations and the allocation and
licensing of additional radio spectrum have contributed to this growth
worldwide. Dataquest estimates that there were approximately 187 million
digital wireless subscribers worldwide at the end of 1998 and that the number
of subscribers will grow to 590 million by the end of 2002. We cannot assure
you that this estimate will be achieved.

The Wireless Network Operator Environment

As a result of deregulation, new radio frequency spectrum licenses,
privatizations and rapid network expansion by new entrants, the competitive
environment among network operators in major markets worldwide has become
intense. Efforts to attract and retain subscribers have resulted in significant
price-based competition. Increased competition has in turn raised the costs
associated with acquiring new subscribers, has lowered average revenues per
subscriber, and has increased the propensity of subscribers to switch from one
network operator to another. For these reasons, network operators are looking
for new revenue sources in the form of value-added services they can deliver to

36
<PAGE>

their wireless subscribers. They are also looking for ways to differentiate
their product offerings in an effort to retain customers. Finally, they are
focused on finding and deploying solutions that enable them to deliver and
support their services in a more cost-effective manner.

The Convergence of the Internet and Mobile Telephony

As people have become increasingly dependent on email services, remote
access to corporate intranets, and other Internet-based services, mass-market
wireless telephones that provide mobile access to these resources have become
increasingly useful tools. Phone.com was a pioneer in the convergence of the
Internet and mobile telephony. In 1995, Phone.com developed its initial
technology, which enables the delivery of Internet-based services to wireless
telephones. In 1996, Phone.com introduced and deployed its first products based
on this technology.

To provide a worldwide open standard enabling the delivery of Internet-based
services to mass-market wireless telephones, Phone.com, Ericsson, Motorola and
Nokia formed the Wireless Application Protocol Forum. In 1998, the WAP Forum
published technical specifications for application and content development and
product interoperability based on Internet technology and standards. By
complying with WAP specifications, wireless telephone manufacturers, network
operators, content providers and application developers can provide Internet-
based products and services that are interoperable.

In 1998, the WAP Forum published the Wireless Markup Language, or WML. WML
is compliant with the Extensible Markup Language, or XML, specification
published by the World Wide Web Consortium. XML is a programming language that
provides a means of describing and exchanging data in an open format. Content
providers and application developers use WML to optimize the display of, and
interaction with, Web-based data on wireless telephones. Based substantially on
technology that Phone.com contributed to the public domain, WML is optimized
for delivery of Internet content to mass-market wireless telephones, which have
numeric keypads instead of full keyboards, small screens, and limited memory
capacity, processing power, battery life and bandwidth. In the same manner that
the programming language known as Hypertext Markup Language, or HTML, has
provided an open standard that has fueled the development of Internet
applications and content for personal computers, WML is designed to be an
industry standard that will encourage the development of Internet applications
and content for wireless telephones.

Leading network operators, telecommunications device and equipment
manufacturers, and software companies worldwide have sanctioned the
specifications promulgated by the WAP Forum. The WAP Forum is currently chaired
by Charles Parrish, Executive Vice President of Phone.com, and, as of May 1999,
has grown to over 100 members, including the following companies:

BOARD MEMBERS

<TABLE>
<S> <C>
Phone.com Motorola
Alcatel Nokia Mobile Phones
CEGETEL/SFR (Societe Francaise du NTT Mobile Communications Network
Radio Telephone) (NTT DoCoMo)
DDI Corporation SBC Communications
Ericsson Mobile Communications AB Sprint PCS
IBM Telstra Corporation
Matsushita Communication Industrial
</TABLE>

37
<PAGE>

NETWORK OPERATORS

<TABLE>
<S> <C>
AT&T Wireless Services Rogers Cantel Mobile Communications
Bell Atlantic Mobile Sonera Corporation
BellSouth Cellular SWISSCOM LTD.
Bouygues Telecom Telefonica Servicios Moviles
Cellnet Communications Telia Mobile AB
Deutsche Telecom Mobilnet GmbH Tokyo Digital Phone
France Telecom Telecom Italia Mobile
Hongkong Telecom Mobile Services Telenor Mobil Group
IDO Corporation TU-KA Cellular Tokyo
Omnitel Vodafone
One 2 One
</TABLE>

DEVICE AND EQUIPMENT MANUFACTURERS

<TABLE>
<S> <C>
Acer Peripherals ORGA Kartensysteme GmbH
Bosch Telecom Danmark A/S Philips Consumer Communications
CMG Telecommunications & Utilities Qualcomm
De La Rue Card Systems RTS Wireless
Gemplus Samsung Electronics
Hewlett-Packard Schlumberger Industries S.A.
ICO Global Communications Sema Group Telecom
Intel Corporation Siemens AG
LG Information & Communications Sony International (Europe) GmbH
Logica Aldiscon Tecnomen Oy
Lucent Technologies Telital S.p.A.
Mitsubishi Wireless Communications Toshiba
NEC Technologies (UK) Uniden
Nortel Unisys

SOFTWARE COMPANIES

APiON M.D. Communications
Bussan Systems Integration Company Microsoft
Certicom Oracle Corporation
Comverse Network Systems Puma Technology
CCL (Computer & Communications RSA Data Security
Research Laboratories, ITRI) Sendit AB
CTC (Itochu Techno-Science Corporation) Scandinavian Softline Technology Oy
Dr. Materna GmbH Spyglass
Dolphin Telecommunications Symbian
Fujitsu Software Corporation Systems Engineering Consultants
Geoworks Corporation Tegic Communications
Glenayre Technologies VTT Information Technology
GSM Information Network
</TABLE>

The Market Opportunity

In response to an increasingly competitive environment, network operators
are seeking to deliver Internet-based services to their wireless subscribers as
a means to generate revenues from new sources, differentiate their service
offerings and reduce operating costs. To do this, network operators

38
<PAGE>

require a scalable turnkey software solution to deliver Internet-based services
and content to their wireless subscribers.

THE PHONE.COM SOLUTION

We provide a leading software communications platform that enables the
delivery of Internet-based services to mass-market wireless telephones. Using
our scalable platform, network operators can provide Internet-based services to
their wireless subscribers, and wireless telephone manufacturers can turn their
mass-market wireless telephones into mobile Internet appliances. Wireless
subscribers thus have access to Internet- and corporate intranet-based
services, including email, news, stocks, weather, travel and sports.

[Diagram depicting components of UP.Link platform and relationships of various
systems, including wireless telephones, servers and Internet]

Our platform consists of the UP.Link Server Suite and UP.Browser software
products. The UP.Link Server Suite includes:

. a means of exchanging data between the Internet and mass-market wireless
telephones, commonly referred to as a gateway;
. a service platform that performs subscriber management and service
provisioning functions, as well as communicating with the network
operator's customer care and billing systems; and
. Internet-based applications such as email and personal information
management software.

The UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. In addition, approximately 4,500
third-party developers have registered to use our UP.SDK software development
kit, and a variety of third-party content is currently available for wireless
telephones equipped with UP.Browser, including information from ABCNews.com,
Bloomberg, Reuters, Quote.com and ESPN Sportszone.

With the introduction of the next version of our software solution,
currently expected to be commercially available in the second half of 1999, our
products will provide an open, interoperable, WAP-compliant platform for the
delivery of Internet-based services. Our software solution supports all major
digital wireless telephony standards in use around the world:

<TABLE>
<C> <S>
. CDMA (Code Division Multiple Access) . GSM (Global System for Mobile
. TDMA (Time Division Multiple Access) Communication)
. iDEN (Integrated Digital Enhanced Network) . CDPD (Cellular Digital Packet Data)
. PHS (Personal Handyphone System) . PDC (Personal Digital Cellular)
</TABLE>

39
<PAGE>

Key benefits of our platform for network operators include the following:

. Opportunity to generate incremental revenues. Network operators can
generate additional revenues by offering value-added Internet-based
services. They can also charge for the increased data and voice airtime
that these applications encourage. For example, a user can access an
email message via UP.Mail and initiate a voice call to any phone number
appearing in the message with the press of one button.

. Ability to differentiate services and improve subscriber retention. Using
our products, network operators can offer new Internet-based services to
wireless subscribers. In addition, by enabling wireless subscribers to
store personal contact information in their networks and to personalize
the selection and presentation of Internet content such as stock quotes,
sports scores and news, network operators can enhance subscriber
retention.

. Opportunity to reduce operating costs. Our UP.Link Server Suite can also
be used by network operators to reduce operating costs. For example,
network operators' call centers are burdened by high rates of calls from
subscribers inquiring about billing, service availability, usage and
other service-related matters. Our software platform enables network
operators to leverage standards-based Internet technology to allow
subscribers to make many of these inquiries using their wireless
telephones without assistance by customer care representatives. By
bypassing the call center infrastructure for these activities, network
operators can reduce their operating costs.

THE PHONE.COM STRATEGY

Our objective is to be the leading supplier to network operators of software
and services that enable the convergence of the Internet and mobile telephony.
Key elements of our strategy include:

. Focus on Providing Products and Services to Network Operators. We focus
on providing comprehensive solutions that enable network operators to
deliver Internet-based services to their wireless subscribers. Our close
working relationships with network operators provide us with a valuable
understanding of our customers' technology and operations, which we
intend to leverage to accelerate time to market of our products and
identify new sales opportunities. In order to drive revenues from our
UP.Link Server software and related services, we utilize direct and
indirect sales channels. Our direct sales force focuses on selling
products and consulting services and assists our indirect channel
partners in selling our products and services. Our indirect sales channel
partners are currently Alcatel, Itochu Techno-Science Corporation, Sema
Group and Siemens. These partners sell our products and services as an
integral part of their product and service offerings to network operators
primarily in international markets. We intend to add new partners to our
indirect sales channel to serve customers in key markets and expect that
sales through our indirect sales channel partners will represent an
increasing portion of our revenues.

. Continue to Invest in our Technology. Network operators have stringent
requirements for server software performance, scalability and
reliability. Extensive technical expertise is required to integrate these
solutions with the network operators' complex systems. We also expect
that network operators will demand regular upgrades that include new
functions and features. Consequently, we intend to continue to invest
heavily in research and product development. We also intend to maintain
our technology leadership by leveraging our role in prominent industry
standard-setting organizations such as the WAP Forum and the World Wide
Web Consortium.

40
<PAGE>

. Drive the Sale and Development of Internet-Based Applications. Network
operators that offer Internet-based services by using our UP.Link Server
Suite generally seek new value-added applications to offer to their
subscribers. We currently offer the following Internet-based
applications:

. UP.Mail, which delivers email to wireless telephones,
. UP.Organizer, a personal information management application, and
. UP.Web, which enables subscribers to access, manage and update
their personal information and configuration for UP.Mail and
UP.Organizer from their personal computers.

We are continuously enhancing our existing products and developing new
applications to provide additional functionality for network operators
and wireless subscribers.

. Propagate Widespread Use of UP.Browser in Mass-Market Wireless
Telephones. We believe that increasing the number of wireless telephone
manufacturers that incorporate UP.Browser into their mass-market wireless
telephones enhances the attractiveness of our UP.Link server software to
network operators. Therefore, in order to drive widespread adoption, we
license UP.Browser to wireless telephone manufacturers, free of per-unit
royalties. As of May 1999, we have licensed UP.Browser to 23 wireless
telephone manufacturers.

. Promote the Development of Internet-Based Services Over Mass-Market
Wireless Telephones. To encourage the growth of our business, we actively
encourage Internet content and application developers to create WML
applications. In connection with this activity, we provide our UP.SDK
software development kit and support to Internet content and application
developers free of charge. To date, there are over 4,500 registered
developers in our Developer Program. Internet content providers that
currently deliver content for wireless telephones equipped with
UP.Browser include ABCNews.com, BizTravel.com, Bloomberg, Data
Broadcasting Corporation, ESPN Sportszone, InfoSpace.com, Quote.com,
Reuters and Sportsfeed.

PRODUCTS AND SERVICES

Products

Our software products enable the delivery of Internet-based services to
mass-market wireless telephones. Our software products include:

. UP.Link Server Suite--a product that network operators use to connect
their subscribers' mass-market wireless telephones to Internet services
. UP.Browser--a browser that is embedded in mass-market wireless telephones
and enables wireless subscribers to access Internet services
. UP.Smart--a suite of software applications that delivers personal digital
assistant features to smartphones
. UP.SDK--a software development kit that Internet content providers and
third-party developers use to create WML-compliant applications

UP.Link Server Suite

UP.Link Server Suite is a turnkey software solution with features and
applications that enable network operators to offer Internet-based services to
their wireless subscribers. UP.Link Server Suite connects data-enabled wireless
telephones to applications and content hosted by Web servers on the

41
<PAGE>

Internet or private intranets. UP.Link Server Suite also provides network
operators with subscriber provisioning and network management functions on a
robust and scalable software platform. The UP.Link Server Suite consists of the
following components:

<TABLE>
<CAPTION>
COMPONENTS DESCRIPTION
<C> <S>
Gateway UP.Link Gateway provides the network-layer functions of the
UP.Link Server Suite, and connects Internet- and intranet-
based services to wireless networks and wireless telephones.
UP.Link Gateway connects the multiple protocols for wireless
data communications to the open standards of the Internet,
thereby enabling Web servers to recognize a wireless telephone
as an Internet standards-compliant client.
- -------------------------------------------------------------------------------
Administration The UP.Link administration component provides a Web-based
administration control system to keep the network operator's
Internet-based network components up and running, assess
system status and provision new subscribers.
The UP.Link Provisioning Application Programming Interface, or
PAPI, enables integration of UP.Link with the network
operator's existing customer care, help desk and billing
systems.
- -------------------------------------------------------------------------------
Services The services component provides an open application
programming framework with interfaces, or APIs, that
standardize the way that the services component interacts with
applications. These services include:
. Push Server--allows applications to push information to
wireless subscribers. For example, an email application can
use the Push Server to notify a wireless subscriber of new
messages.
. Fax Server--enables the forwarding of email attachments and
other data content to fax machines for printing.
. Identity Server--maintains a subscriber registry that
retains wireless subscribers' service settings and allows
network operators to track their subscribers' service usage.
. Content Translation Framework--provides forward and backward
compatibility of content formats between different
generations of browsers and wireless telephones. Translates
between international character sets in real-time. Also
translates standard HTML Web pages into WML pages for
viewing on wireless telephones.
. Application Registry--provides a structure for the
interoperability of different applications. For example,
third-party applications can retrieve and store contact
records in the UP.Organizer's address book or pass an email
address to UP.Mail.
- -------------------------------------------------------------------------------
Applications UP.Applications is a suite of wireless Internet-based
applications, including:
. UP.Mail--provides access to the same email account through
both wireless telephones and personal computers.
. UP.Organizer--provides a suite of synchronized Internet-
based personal information management applications,
including an address book, calendar and to-do list.
. UP.Web--a Web-based user interface that allows subscribers
to use their personal computers to perform many of the same
tasks they perform on their wireless telephones with
UP.Organizer.
</TABLE>

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<PAGE>

UP.Browser

UP.Browser is a browser and messaging software product that is designed and
optimized for mass-market wireless telephones. Using UP.Browser, subscribers
can access Web-based information and services that are hosted on network
operators' or third-party Web servers. Due to its open and highly portable
architecture, UP.Browser can be embedded into different types of wireless
telephones and utilize each telephone's specific display and input
characteristics, such as graphical displays and programmable keys. Key features
of UP.Browser include:

<TABLE>
<CAPTION>
FEATURES DESCRIPTION
<C> <S>
Browsing UP.Browser displays WML-designed pages from any
Web or intranet site. In addition, UP.Browser
incorporates text-input software from Tegic
Communications.
- -------------------------------------------------------------------------------
Universal Inbox Notifies subscribers with a visual or audible
indication when a Web page or other data has
been proactively "pushed" to their wireless
telephones. Universal Inbox also integrates in
a single local mailbox diverse alert types,
including email and voice mail, as well as Web-
based content such as stock quotes, traffic
alerts and flight information.
- -------------------------------------------------------------------------------
Local Application Environment Allows access to important information when out
of network coverage. Increases efficiency of
applications and minimizes perceived delay when
used over bandwidth-constrained networks.
- -------------------------------------------------------------------------------
Security UP.Browser employs the same encryption
technology used by many commercial Web sites.
Consequently, all interaction between the
wireless telephone and a Web site can be
authenticated and encrypted.
</TABLE>

UP.Smart

UP.Smart is a suite of software applications that augments UP.Browser with a
set of popular functions commonly found on personal digital assistants.
UP.Smart includes address book, calendar, to-do list and memo functions.
UP.Smart also utilizes Puma Technology's synchronization software to enable a
user to synchronize UP.Smart with PC-based personal information management
applications by connecting the UP.Smart-equipped wireless telephone to a
personal computer through a serial cable. The information is stored both on the
wireless telephone and personal computer, making it accessible even when the
wireless telephone is not connected to the network.

UP.SDK

Our software development kit, known as UP.SDK, provides tools and
documentation for Internet content providers and developers to create and
maintain WML-based Internet services. UP.SDK consists of the following
components:

. The UP.Simulator, a Windows-based application that simulates the behavior
of UP.Browser-equipped wireless telephones, allowing developers to more
easily test WML services.
. Specialized functions and libraries that simplify the process of
generating WML applications.

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<PAGE>

. Tools for establishing secure communications between WML applications and
UP.Link Servers.
. Sample WML files and application source code.

Services

We offer consulting services to network operators and wireless telephone
manufacturers. Our consulting services help us to shorten our software license
sales cycle, accelerate deployment of our technology and deepen our
understanding of our customers' networks. We also provide both customer support
and custom software development services for network operators, as well as
software consulting services to wireless telephone manufacturers that license
UP.Browser.

CUSTOMERS

Wireless Network Operators

We sell our UP.Link Server Suite and related technical support to network
operators worldwide to enable them to offer a variety of wireless Internet
services to their subscribers. These network operators have licensed our
software and have either announced a commercial service launch or are in a
market or laboratory trial phase.

As of May 1999, 24 network operators, including the following companies,
have licensed our software:

<TABLE>
<CAPTION>
NAME STAGE TECHNOLOGY COUNTRY
<S> <C> <C> <C>
AT&T Wireless Services Deployed in July 1996 CDPD USA
- -----------------------------------------------------------------------------------------
Bell Atlantic Mobile Deployed in September 1996 CDPD USA
- -----------------------------------------------------------------------------------------
GTE Wireless Deployed in May 1997 CDPD USA
- -----------------------------------------------------------------------------------------
SFR/CEGETEL Deployed in March 1999 GSM France
- -----------------------------------------------------------------------------------------
DDI Corporation Deployed in April 1999 CDMA Japan
- -----------------------------------------------------------------------------------------
IDO Corporation Deployed in April 1999 CDMA Japan
- -----------------------------------------------------------------------------------------
Bell Mobility Deployed in May 1999 CDMA Canada
- -----------------------------------------------------------------------------------------
LG TeleCom Commercial Launch expected CDMA South Korea
June 1999
- -----------------------------------------------------------------------------------------
Nextel Communications Announced Commercial Launch iDEN USA
(expected third quarter calendar 1999)
- -----------------------------------------------------------------------------------------
France Telecom Mobile Trial GSM France
- -----------------------------------------------------------------------------------------
Omnitel Trial GSM Italy
- -----------------------------------------------------------------------------------------
Orange Trial GSM U.K.
- -----------------------------------------------------------------------------------------
Deutsche Telekom Trial GSM Germany
Mobilnet GmbH (T-Mobil)
- -----------------------------------------------------------------------------------------
Telecom Italia Mobile Trial GSM Italy
- -----------------------------------------------------------------------------------------
Telstra Trial GSM Australia
- -----------------------------------------------------------------------------------------
Telenor Trial GSM Norway
</TABLE>

We also provide our network operator customers with consulting services that
enable them to rapidly adopt our technology and bring wireless Internet-based
services to market. Our consulting

44
<PAGE>

services focus on those areas where our products interface with the network
operators' internal systems such as billing, provisioning and customer care. We
also provide our network operator customers with assistance in choosing the
appropriate content and applications for their subscribers and creating the
promotion and pricing strategies for their service.

Our agreements with network operators provide these customers with a non-
exclusive license to use our UP.Link Server Suite software in connection with
providing Internet-based services to their subscribers. Pricing and payment
terms for these licenses are negotiated with the customer based on the number
of subscriber licenses purchased by the network operator, and the licenses can
be purchased on an as-deployed basis or on a prepaid basis. While these
agreements do not provide for a right of return, these agreements typically
provide for a six-month warranty, indemnification against intellectual property
infringement claims, a commitment to provide standards-compliant products, and
a source code escrow. In addition, we typically provide fee-based maintenance
and support services to these customers, under which they receive error
corrections and remote support. They can also elect to receive new releases of
UP.Link Server Suite for an additional fee.

Wireless Telephone Manufacturers

We license our UP.Browser software to wireless telephone manufacturers, who
embed UP.Browser into their products. In order to encourage these manufacturers
to include UP.Browser in their wireless telephone models, no per-unit royalty
is charged. In addition, we provide engineering and support services to
accelerate the introduction of new wireless telephone models that contain
UP.Browser. These services are provided to manufacturers on an annual flat-fee
basis per digital wireless telephony standard.

As of May 1999, 23 wireless telephone manufacturers have licensed
UP.Browser, and the following manufacturers have publicly announced products
that will include UP.Browser:

<TABLE>
<S> <C>
. Alcatel . Panasonic (Matsushita)
. Casio . Qualcomm
. Hitachi . Sagem
. Hyundai Electronics . Samsung Electronics
. IGS . Sharp
. Kyocera . Siemens
. LG Information & Communications . Sony
. Mitsubishi . Toshiba
. Motorola
</TABLE>

Additionally, Nokia and Ericsson have announced that they will introduce
wireless telephones that will be compatible with our UP.Link Server Suite. As
of May 1999, five wireless telephone manufacturer customers had made commercial
shipments of telephones with the UP.Browser embedded. In addition, we are
currently providing engineering support services in connection with 45 browser
integration projects.

Our agreements with wireless telephone manufacturers generally provide these
customers with a non-exclusive, royalty-free license to sell wireless
telephones containing UP.Browser. These agreements typically provide for a 90-
day warranty, indemnification against intellectual property infringement claims
and a source code escrow. In addition, customers can elect to receive varying
levels of maintenance and support services for a fee.

45
<PAGE>

During the year ended June 30, 1998, AT&T Wireless Services and Matsushita
Communication Industrial accounted for approximately 22% and 18%, respectively,
of our total revenues. For the nine months ended March 31, 1999, AT&T Wireless
Services, DDI Corporation and a wireless telephone manufacturer accounted for
approximately 14%, 11% and 13%, respectively, of our total revenues.

RESEARCH AND PRODUCT DEVELOPMENT

We continue to enhance the features and performance of our existing products
and introduce new products. For example, in the second half of 1999, we expect
to release the fourth generation of our UP.Link Server Suite and UP.Browser
products. These products are expected to be compliant with version 1.1 of the
specifications promulgated by the WAP Forum. We are currently developing other
applications, including a secure provisioning server, which enables network
operators to automate customer provisioning, and compatibility with two-way
short messaging service systems. In addition, our Carrier Services Group
provides outsourced application development and services to our network
operator customers.

Our success depends on a number of factors, which include our ability to
identify and respond to emerging technological trends in our target markets,
develop and maintain competitive products, enhance our existing products by
adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive
prices. As a result, we have made, and we intend to continue to make,
significant investments in research and product development. Our research and
development expenses were $4.0 million and $5.7 million for the years ended
June 30, 1997 and 1998, respectively, and $8.4 million for the nine months
ended March 31, 1999. As of April 30, 1999, we had 86 employees engaged in
research and product development activities. We are recruiting additional
skilled engineers for research and product development, and our business could
be adversely affected if we are unable to hire these engineers on a timely
basis.

TECHNOLOGY

Our technology has contributed both to driving open standards for the
delivery of Internet-based services to mass-market wireless telephones and to
providing network operators and wireless telephone manufacturers with software
solutions that are robust and scalable, and take into account the specific
characteristics of wireless telephony networks and telephones.

Wireless Application Protocol and Wireless Markup Language

Phone.com, along with Ericsson, Motorola and Nokia, founded the WAP Forum in
1997, and published open standards-based technical specifications for
application and content development, as well as product interoperability based
on Internet technology and standards. Leading network operators,
telecommunications device and equipment manufacturers, and software companies
worldwide have joined the WAP Forum, which has grown to over 100 members as of
May 1999.

The WAP specifications consist of the following components:

. A Transport Specification, which defines the way in which data is
exchanged between the network operator's server and the wireless
telephone. The WAP Transport Specification mirrors the Internet-standard
secure HTTP protocol, but is optimized for wireless telephone networks.
For example, on a typical PC-based Internet connection, all functions
such as

46
<PAGE>

security provisioning and application downloading and interaction are
performed on the PC. In the WAP Transport Specification, functions are
divided between the wireless telephone and the network operator's server
because of the bandwidth constraints over the wireless network and the
wireless telephone's limited processing power.

. A Wireless Markup Language (WML), which optimizes the display of and
interaction with Web-based content on wireless telephones and allows
Internet applications to take advantage of the voice capabilities of the
wireless telephony network. WML is compliant with the Extensible Markup
Language, or XML, specification published by the World Wide Web
Consortium.

. WML Script, which enables a developer to add procedural logic to WML
pages.

In order to implement interoperability with Internet-based content, the WAP
Transport Specification and WML use the open standards-based Internet model of
interaction, in which content and applications reside on Web servers that are
physically distributed, and requests for the data on these servers are sent
via open-standard Internet addresses, commonly known as URLs.

On standard Internet Web servers, content typically resides in databases,
but is provided to users via a number of content formats, including HTML and
Java. WML and WML Script function as standard content formats, so Internet
content providers can add WML and WML Script access to their servers without
having to change the underlying data. WML and WML Script applications deliver
content in a format that is optimized for wireless telephone interfaces.

Components of UP.Link Technology

Our UP.Link Server Suite is designed to be modular, expandable, flexible,
scalable and reliable. Using an architecture based on scalable, object-
oriented technology, the UP.Link Server Suite typically runs on a large,
distributed set of servers. The UP.Link Server Suite, which runs on Sun
Microsystems' Solaris operating system, is designed to meet the stringent
performance, scalability and reliability requirements of network operators.

Server Side Agents. Since wireless networks have limited bandwidth and
wireless telephones have limited processing power and memory, programs called
agents that reside on the server are used to provide processing power and
other computing resources to UP.Browser-enabled wireless telephones. These
agents allow some operations to be offloaded from the wireless telephone to
the UP.Link server. This means that the duties that are typically performed by
the Web browser on standard personal computers can be divided between the
browser on the wireless telephone and a "proxy" running in the agent. The
exact split of functionality can vary depending on the particular capabilities
of the wireless telephone. The agent can perform many functions, including
translating wireline Internet protocols such as HTTP to wireless Internet
protocols such as WAP, as well as compiling Internet content so that it is
more compact to transmit and easier to display on the wireless telephone.

Dispatcher. At the core of our scalable server architecture is a dispatcher
that dynamically load balances user proxies between a number of agents. The
dispatcher is much like the line at a bank that funnels a queue of customers
to the next available teller. The dispatcher also provides a basic level of
protection against faults by automatically rerouting subscriber requests if a
proxy server malfunctions.

47
<PAGE>

Messenger. The UP.Link messenger server provides store-and-forward messaging
capabilities from Web servers to UP.Browser-enabled wireless telephones over a
wide range of wireless protocols such as Short Message Service and Cellular
Digital Packet Data. Store-and-forward means that if a wireless telephone is
turned off or out of its coverage area, the message will be stored and
delivered once the wireless telephone is connected to the network. The
messenger accepts data through standard Web interfaces such as HTTP and
converts the data for transmittal over the wireless network without requiring
modifications to the Web server.

Narrow Band Router. The Narrow Band Router provides a common interface to a
wide range of narrow band, or low-bandwidth, wireless networks. This feature
makes the protocol-specific components of message addressing, routing and
delivery transparent to Internet applications, enabling developers to easily
create applications for wireless networks without customizing their
applications to work with each individual protocol. Thus the same application
can work across a number of wireless data networks and protocols in a
transparent manner.

Translation Framework. Wireless telephones are different than personal
computers in that they are mass-market consumer devices with software that is
embedded in the wireless telephone at the factory and very difficult and costly
to modify in the field. The WML specification, however, is regularly evolving
as features and functionality are introduced and refined. To address this
issue, the translation framework enables the translation of content in real-
time. Software translators can be implemented that transparently translate
content based on newer versions of WML to make it compatible with wireless
telephones that contain older versions of UP.Browser, or vice versa.

SALES AND MARKETING

We sell our products through both a direct sales force and third-party
resellers, currently Alcatel, CTC, Sema Group and Siemens. In addition, we have
a joint sales and marketing relationship with Lucent Technologies. As of April
30, 1999, we had 34 persons in sales and marketing serving the United States
market, and 14 persons in sales and marketing outside the United States. We
plan to significantly expand this group over the next 12 months. In addition,
we have offices in London and Tokyo. Our direct sales force focuses on selling
products and consulting services and assists our indirect channel partners in
selling our products and services. International sales of products and services
accounted for 7% and 44% of our total revenues in the years ended June 30, 1997
and 1998, respectively, and 64% of our total revenues for the nine months ended
March 31, 1999. We expect international revenues to continue to account for a
significant portion of our revenues, although the percentage of our total
revenues derived from international sales may vary. Our international sales
strategy is to partner with leading distributors and systems integrators that
have strong industry backgrounds and market presence in their respective
markets and geographic regions.

Our success depends in part on our ability to increase sales of our products
and services through value-added resellers and to expand our indirect
distribution channels. Under the arrangements that we make with our value-added
resellers, a value-added reseller sells, installs and services our products to
wireless network operators. These agreements are not exclusive and do not have
territorial restrictions. Our value-added resellers generally are not
restricted from selling products that are competitive with our products, and
each of our partners can cease marketing our products and services at their
option.

We believe that customer service and ongoing technical support is an
essential part of the sales process in the wireless communications industry. In
order to provide high levels of customer service,

48
<PAGE>

senior management and assigned account managers play a role in ongoing account
management and relationships. We believe these customer relationships enable us
to improve customer satisfaction and develop products to meet specific customer
needs. Our agreements with our network operator customers provide for 24 hour
per day support seven days per week.

We actively recruit content and application developers to our platform and
provide to them free of charge our software developer's kit, UP.SDK. We also
provide them with free membership in our Developer Program, free email-based
support and the opportunity to participate in our Alliances Program. To date,
there are over 4,500 registered developers in our Developer Program who have
downloaded UP.SDK, including:

<TABLE>
<S> <C>
. 724 Solutions . Lotus
. biztravel.com . Mapquest.com
. BroadVision . NewsAlert
. CableData . Reuters
. Comverse Network Systems . SmartServOnline
. Data Broadcasting Corporation . Sportsfeed.com
. eDispatch.com . StockTips
. InfoSpace.com . Vantive
. Internet Travel Network . The Weather Underground
. KLELine . Webraska Mobile Technologies
. Lightbridge
</TABLE>

Our Alliances Program is comprised of a select group of our content and
application developers. We screen applications to our Alliances Program based
on the availability and quality of the content or applications produced by the
partner. We perform joint marketing activities with the partner, as well as
provide introductions between our wireless network operators and our Alliances
Program members.

Competition

The market for our products and services is becoming increasingly
competitive. The widespread adoption of open industry standards such as the WAP
specifications may make it easier for new market entrants and existing
competitors to introduce products that compete with our software products. We
expect that we will compete primarily on the basis of price, time-to-market,
functionality, quality and breadth of product and service offerings. Our
current and potential competitors include the following:

. Wireless equipment manufacturers, such as Ericsson and Nokia, which are
developing and marketing competitive server, browser and application
software products. These companies already sell billions of dollars of
wireless telephones and other telecommunications products to network
operators which are our existing and potential customers.
. Microsoft, which recently announced plans to deliver a wireless portal
designed to work with handheld devices, wireless telephones and
interactive pagers via Microsoft's MSN network of Internet services.
Nextel is Microsoft's first customer for these services. Nextel plans to
use a co-branded version of Microsoft's MSN portal to enable Nextel
customers to access a customized set of Internet services. This
arrangement also provides for Microsoft to invest $600 million in Nextel
to support Nextel's development of wireless Internet services. In
addition, Microsoft has announced that it intends to enable its Windows
CE operating system

49
<PAGE>

to run on wireless handheld devices, including wireless telephones, and to
develop and market its own browser for these devices.
. Wireless Knowledge, a joint venture of Microsoft and Qualcomm, which has
announced its intention to introduce products and services that may
compete directly with our UP.Link and UP.Browser products, as well as our
UP.Applications.
. Systems integrators, such as CMG and APiON, and software companies, such
as Oracle Corporation and Sendit, which are developing and marketing
server software that is compliant with the specifications promulgated by
the WAP Forum.
. Providers of Internet software applications and content, electronic
messaging applications and personal information management software
solutions, any of whom could offer products and services that compete
with ours.

Many of our existing competitors as well as potential competitors have
substantially greater financial, technical, marketing and distribution
resources than we do. Several of these companies also have greater name
recognition and more well-established relationships with our target customers.
Furthermore, these competitors may be able to adopt more aggressive pricing
policies and offer more attractive terms to customers than we can. We may face
increasing price pressure from our network operator customers. In addition,
current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to compete
more effectively. Finally, existing and potential competitors may develop
enhancements to, or future generations of, competitive products that will have
better performance features than our products.

Intellectual Property Rights

Our performance depends significantly on our ability to protect our
proprietary rights to the technologies used in our products. If we are not
adequately protected, our competitors could use the intellectual property that
we have developed to enhance their products and services, which could harm our
business. As of May 1999, we had two issued United States patents. The first
patent relates to two-way communications between browser-enabled wireless
devices and wireless networks and expires in 2015. Our second patent relates
to the storage of frequently used links to internet-based URLs, or bookmarks,
on a remote server. This patent expires in 2017. We also had one United States
patent application with allowed claims and 58 pending United States patent
applications, as well as foreign counterparts with respect to many of these
applications. In addition, we rely on a combination of copyright and trademark
laws, trade secrets, confidentiality provisions and other contractual
provisions to protect our proprietary rights, but these legal means afford
only limited protection. Despite any measures taken to protect our
intellectual property, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary. In
addition, the laws of some foreign countries may not protect our proprietary
rights as fully as do the laws of the United States. Thus, the measures we are
taking to protect our proprietary rights in the United States and abroad may
not be adequate. Finally, our competitors may independently develop similar
technologies.

The telecommunications and Internet software industries are characterized
by the existence of a large number of patents and frequent litigation based on
allegations of patent infringement. As the number of entrants into our market
increases, the possibility of an infringement claim against us grows. For
example, we may be inadvertently infringing a patent of which we are unaware.
In addition, because patent applications can take many years to issue, there
may be a patent application now pending of which we are unaware, which will
cause us to be infringing when it issues in the future. To address any patent
infringement claims, we may have to enter into royalty or licensing

50
<PAGE>

agreements on disadvantageous commercial terms. A successful claim of product
infringement against us, and our failure to license the infringed or similar
technology, would harm our business. In addition, any infringement claims, with
or without merit, would be time-consuming and expensive to litigate or settle
and could divert management attention from administering our core business.

We rely on a license of encryption technology from RSA Data Security, Inc.
The license from RSA is perpetual unless terminated by either party as the
result of a material breach or insolvency or, at our election, for convenience.

As a member of the WAP Forum, we have agreed to license our intellectual
property to other WAP members on fair and reasonable terms to the extent that
the license is required to develop noninfringing products under the
specifications promulgated by the WAP Forum. Each other member of the WAP Forum
has entered into a reciprocal agreement.

EMPLOYEES

As of April 30, 1999, we had a total of 157 employees. None of our employees
is covered by any collective bargaining agreements. We believe that our
relations with our employees are good.

FACILITIES

Our principal offices are located in Redwood City, California in a 41,000
square foot facility under a lease expiring in June 2005, with a renewal option
for an additional five-year term. We also lease space for our offices in London
and Tokyo.

LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.

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<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their ages as of April 30, 1999 are
as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Alain Rossmann....... 43 Chairman and Chief Executive Officer

Charles Parrish...... 52 Executive Vice President and Director

Alan Black........... 39 Vice President, Finance and Administration, Chief
Financial Officer and Treasurer

Andrew Laursen....... 40 Vice President, Product Development and Engineering

Benjamin Linder...... 33 Vice President, Marketing

Maurice Jeffery...... 35 Vice President, North America Sales

Tony Miranzadeh...... 36 Vice President of Sales and Business Development,
Asia Pacific and Latin America

Malcolm Bird......... 43 Managing Director, Phone.com (Europe) Ltd.

Roger Evans(1)(2).... 53 Director

Reed Hundt........... 50 Director

David Kronfeld(1).... 51 Director

Andrew Verhalen(2)... 42 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

ALAIN ROSSMANN. Mr. Rossmann is the founder, Chairman and Chief Executive
Officer of Phone.com. Prior to founding Phone.com in December 1994, he was
Chief Executive Officer of EO Corporation, a pioneer in personal digital
assistant devices, from 1991 to 1993, when it was sold to AT&T. Prior to his
involvement with EO, he was Vice President of Operations for C-Cube
Microsystems Inc., a semiconductor design company, from 1989 to 1991. From 1986
to 1989, Mr. Rossmann co-founded and served as Vice President of Marketing and
Sales at Radius, Inc., a developer of digital video products. From 1983 to
1986, Mr. Rossmann was manager of the third-party developer group at Apple
Computer, Inc. Mr. Rossmann holds an M.S. degree in Mathematics from the Ecole
Polytechnique, an M.S. degree in Civil Engineering from Ecole Nationale des
Ponts et Chaussees and an M.B.A. degree from Stanford University.

CHARLES PARRISH. Mr. Parrish joined Phone.com as President and a director in
June 1995, and was appointed Executive Vice President in June 1997. Mr. Parrish
was General Manager of the Mobile Data Division of GTE Mobile Communications, a
telecommunications company, from 1994 to June 1995, and Vice President of
Marketing for GTE, from 1991 to 1994. Prior to working for GTE, Mr. Parrish was
Senior Vice President of Operations for Contel Cellular, a telecommunications
company, from July 1990 to 1991, when Contel was acquired by GTE. Prior to
serving at Contel, he was the co-Founder, President and Chief Executive Officer
of AmeriCom Corporation, a telecommunications equipment company, from 1984 to
June 1990. Mr. Parrish served as Executive Assistant to the Secretary of the
United States Department of the Interior under the Carter Administration. Mr.
Parrish holds a B.S. degree in Industrial Management from the Georgia Institute
of Technology.

52
<PAGE>

ALAN BLACK. Mr. Black joined Phone.com as Vice President of Finance and
Administration and Chief Financial Officer in August 1997 and was appointed to
the additional office of Treasurer in September 1997. Mr. Black was Chief
Financial Officer of Vicor, Inc., a provider of Internet information capture
and delivery systems for financial services firms, from August 1992 to August
1997. Prior to his tenure at Vicor, Mr. Black was with KPMG LLP between 1982
and 1992, most recently with the firm's High Technology practice. Mr. Black
holds a Bachelor of Commerce and a graduate diploma in Public Accountancy from
McGill University. Mr. Black is a member of the California Society of Certified
Public Accountants and the Canadian Institute of Chartered Accountants.

ANDREW LAURSEN. Mr. Laursen joined Phone.com as Vice President of Product
Development and Engineering in June 1996, after working from August 1986 to
June 1996 at Oracle Corporation, most recently as the Vice President and
general manager of the Network Computer Division. Prior to this position, he
pioneered Oracle's efforts in the area of digital video and worked in various
management and development roles in the database server division. Before
working at Oracle, Mr. Laursen was employed with Tolerant Systems, a computer
systems company, where he was responsible for the development of their fault-
tolerant UNIX file system. Mr. Laursen began his career at AT&T Bell
Laboratories. He holds a B.S. degree in Computer Science from Michigan State
University and an M.S. degree in Computer Science from the University of
Illinois.

BENJAMIN LINDER. Mr. Linder joined Phone.com in January 1996 as Vice
President of Product Management and was appointed as Vice President of
Marketing in October 1996. From July 1987 to December 1995 Mr. Linder worked at
Oracle Corporation, where he most recently served as Vice President of
Marketing, co-founding Oracle's New Media Division in 1992. Prior to working in
the New Media division of Oracle, Mr. Linder was Director of Technical Services
for the massively parallel processing technology at Oracle. He holds B.S.
degrees in Electrical Engineering and Computer Science from the Massachusetts
Institute of Technology.

MAURICE JEFFERY. Mr. Jeffery joined Phone.com in August 1996 as Director of
Business Development and was promoted to Vice President of North American Sales
in August 1997. Prior to joining Phone.com, Mr. Jeffery held various management
positions, including European Managing Director, at General Magic, Inc., a
telecommunications software and services infrastructure company, from September
1994 to August 1996. Prior to working at General Magic, he held various
management positions in technical support, business development and marketing
at Hewlett-Packard Company from September 1984 to September 1994. Mr. Jeffery
holds a B.S. degree in Computer Science and Commercial Studies from GCAT,
England.

TONY MIRANZADEH. Tony Miranzadeh joined Phone.com as Vice President of Sales
and Business Development, Asia Pacific and Latin America in March 1999. From
April 1984 to February 1999, Mr. Miranzadeh held various management positions
with Lucent Technologies, including Director of Business Development and
Strategy in the United Kingdom, where he was responsible for the
commercialization and introduction of third generation wireless technologies.
Mr. Miranzadeh also held the position of Director of Sales and Business
Development for GSM and CDMA network technologies for the Asia Pacific region.
Mr. Miranzadeh holds a B.S. degree in Electrical Engineering from the
University of Illinois and an M.S. degree in Electrical and Computer
Engineering from the Illinois Institute of Technology.

MALCOLM BIRD. Prior to joining Phone.com as Vice President of Europe in
September 1997, Mr. Bird worked at Acorn Computer Group, Plc., a computer
company, from November 1989 to

53
<PAGE>

April 1997, serving most recently as divisional chief executive for the network
computing and online media divisions. While at Acorn, Mr. Bird directed the
design of Oracle's Network Computer, launched Acorn's entry into the emerging
interactive television market and co-founded Advanced RISC Machines, Ltd.
(ARM), a joint venture between Acorn, Apple Computer and VLSI Technology.
Before working at Acorn, Mr. Bird worked with the PA Consulting Group, a
consulting company. Mr. Bird holds a B.S. degree in Mechanical Engineering from
Imperial College, London University.

ROGER EVANS. Mr. Evans has been a director of Phone.com since September
1995. Mr. Evans has been associated with Greylock Management Corporation, a
Boston-based venture capital firm, since 1989, serving as a general partner
since January 1991. From 1985 to 1988, he served as President and Chief
Executive Officer of Micom Systems, Inc., a data communications equipment
manufacturer, which he co-founded in 1976. He also serves as a director of
Ascend Communications, Inc., a wide area networking company, Copper Mountain
Networks, a communications equipment company, Maker Communications, Inc., a
communications semiconductor company, and several other privately-held
companies. Mr. Evans holds a Master of Arts degree in Economics from Cambridge
University, England.

REED HUNDT. Mr. Hundt has been a director of Phone.com since April 1999.
Since November 1998, Mr. Hundt has been a senior advisor on information
industries to McKinsey & Company, a worldwide management consulting firm. He
has also been a principal of Charles Ross Partners, LLC, a Bethesda, Maryland
firm that provides consulting and investment advice on telecommunications,
since November 1997. From November 1993 to November 1997, Mr. Hundt was
Chairman of the Federal Communications Commission. Prior to joining the FCC,
Mr. Hundt was a partner at the law firm of Latham & Watkins. Mr. Hundt serves
on the boards of directors of Allegiance Telecom, Inc., Ascend Communications,
Inc., NorthPoint Communications, Inc., and Novell, Inc.

DAVID KRONFELD. Mr. Kronfeld has been a director of Phone.com since February
1998. Mr. Kronfeld founded JK&B Capital in January 1996 and is the managing
member. Mr. Kronfeld is also a general partner at Boston Capital Ventures,
where he specializes in the telecommunications and software industries. Before
joining Boston Capital Ventures in October 1989, Mr. Kronfeld was the Vice
President of Acquisitions and Venture Investments at Ameritech, a
telecommunications company, from October 1984 to October 1989. Prior to working
for Ameritech, Mr. Kronfeld was a Senior Manager at Booz Allen & Hamilton, an
international management consulting firm, from 1977 to 1981. Mr. Kronfeld is a
director of SCC Communications, Inc., a 911 service provider, MGC
Communications, Inc., a local exchange carrier, and 21st Century Telecom Group,
a telecommunications company. He holds a B.S. degree in Electrical Engineering
and an M.S. degree in Computer Science from Stevens Institute of Technology and
an M.B.A. degree from The Wharton School of Business.

ANDREW VERHALEN. Mr. Verhalen has been a director of Phone.com since
September 1995. Mr. Verhalen is a general partner of Matrix Partners, a venture
capital firm, which he joined in 1992. From 1986 to 1991, Mr. Verhalen worked
at 3Com Corporation, a network equipment manufacturer, initially as a Vice
President of Marketing, then as Vice President and General Manager of the
Network Adapter Division. Prior to joining 3Com, he worked for five years in
the Microprocessor Group at Intel Corporation, in various marketing, management
and strategic planning roles. He currently is a director of Copper Mountain
Networks, a network equipment manufacturer, WatchGuard Technologies, a network
security company, and several private technology companies. Mr. Verhalen holds
a B.S. degree in Electrical Engineering, an M. Eng. degree in Electrical
Engineering and an M.B.A. degree from Cornell University.

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<PAGE>

BOARD COMPOSITION

Our bylaws currently provide for a board of directors consisting of six
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the annual meeting of stockholders when we shall have
had at least 800 stockholders, the board of directors will be divided into
three classes, each serving staggered three-year terms: Class I, whose term
will expire at the first annual meeting of stockholders following the annual
meeting of stockholders when we shall have had at least 800 stockholders; Class
II, whose term will expire at the second annual meeting of stockholders
following the annual meeting of stockholders when we shall have had at least
800 stockholders; and Class III, whose term will expire at the third annual
meeting of stockholders following the annual meeting of stockholders when we
shall have had at least 800 stockholders. As a result, only one class of
directors will be elected at each annual meeting of stockholders of Phone.com,
with the other classes continuing for the remainder of their respective terms.
Messrs. Rossmann, Parrish, Evans, Verhalen and Kronfeld were elected to the
board of directors pursuant to a voting agreement by and among Phone.com and
some of its principal stockholders. This voting agreement will terminate upon
completion of this offering. Each of our current directors will continue to
serve on the board of directors upon completion of this offering.

BOARD COMPENSATION

Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
Phone.com are eligible to participate in our 1995 and 1996 stock plans and will
be eligible to participate in our employee stock purchase plan. Directors who
are not employees of Phone.com are eligible to participate in our 1996 stock
plan and will be eligible to participate in our directors' stock option plan.

1999 Directors' Stock Option Plan. The directors' stock option plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of common stock has been
reserved for issuance under the directors' stock option plan, all of which
remain available for future grants. The directors' stock option plan provides
for the grant of nonstatutory stock options to nonemployee directors of
Phone.com. The directors' stock option plan is designed to work automatically
without administration; however, to the extent administration is necessary, it
will be performed by the board of directors. To the extent they arise, it is
expected that conflicts of interest will be addressed by abstention of any
interested director from both deliberations and voting regarding matters in
which a director has a personal interest.

The directors' stock option plan provides that each person who becomes a
nonemployee director of Phone.com after the completion of this offering will be
granted a nonstatutory stock option to purchase 33,333 shares of common stock
on the date on which the individual first becomes a nonemployee director of
Phone.com. Thereafter, on the first board of directors meeting date of each
calendar quarter beginning on or after October 1, 2000, each nonemployee
director who was a member of the board of directors prior to the completion of
the offering will be granted an option to purchase 2,500 shares of common
stock. In addition, on the first board of directors meeting date of each
calendar quarter that begins at least one year following the initial option
grant to a nonemployee director who becomes a director after the completion of
this offering, but in no event earlier than October 1, 2000, the director will
be granted an option to purchase 2,500 shares of common stock.

55
<PAGE>

The directors' stock option plan sets neither a maximum nor a minimum
number of shares for which options may be granted to any one nonemployee
director, but does specify the number of shares that may be included in any
grant and the method of making a grant. No option granted under the directors'
stock option plan is transferable by the optionee other than by will or the
laws of descent or distribution or pursuant to a qualified domestic relations
order, and each option is exercisable, during the lifetime of the optionee,
only by the optionee. All options granted under the directors' stock option
plan shall vest in full immediately upon grant of the option. If a nonemployee
director ceases to serve as a director for any reason other than death or
disability, he or she may, but only within 90 days after the date he or she
ceases to be a director of Phone.com, exercise options granted under the
directors' stock option plan. If he or she does not exercise the option within
the 90-day period, the option shall terminate. The exercise price of all stock
options granted under the directors' stock option plan shall be equal to the
fair market value of a share of our common stock on the date of grant of the
option. Options granted under the directors' stock option plan have a term of
five years.

In the event of a sale of all or substantially all of our assets, our
merger with or into another corporation or any other reorganization of
Phone.com in which more than 50% of the shares of Phone.com entitled to vote
are exchanged, each nonemployee director shall have either (i) a reasonable
time within which to exercise the option prior to the effectiveness of the
dissolution, liquidation, sale, merger or reorganization, at the end of which
time the option shall terminate, or (ii) the right to exercise the option or
receive a substitute option with comparable terms, as to an equivalent number
of shares of stock of the corporation succeeding Phone.com or acquiring its
business. Our board of directors may amend or terminate the directors' stock
option plan as long as this action does not adversely affect any outstanding
option and we shall obtain stockholder approval for any amendment to the
extent required by applicable law.

BOARD COMMITTEES

The compensation committee currently consists of Messrs. Evans and
Verhalen. The compensation committee:

. reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans; and
. makes recommendations to the board of directors regarding executive
compensation matters.

The audit committee currently consists of Messrs. Kronfeld and Evans. The
audit committee:

. makes recommendations to the board of directors regarding the selection
of independent auditors.
. reviews the results and scope of the audit and other services provided by
our independent auditors; and
. reviews and evaluates our audit and control functions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the compensation committee of Phone.com's board of directors
are currently Messrs. Evans and Verhalen, neither of whom has at any time been
an officer or employee of Phone.com. We have issued and sold in private
placement transactions shares of preferred stock to Greylock Equity Limited
Partnership and to Matrix Partners IV, L.P. and Matrix IV Entrepreneurs

56
<PAGE>

Fund. Mr. Evans is a general partner of Greylock Equity GP Limited Partnership,
the general partner of Greylock Equity Limited Partnership, and Mr. Verhalen is
a general partner of Matrix Partners, the general partner of Matrix Partners
IV, L.P. and of Matrix IV Entrepreneurs Fund. The following summarizes these
transactions:

GREYLOCK EQUITY LIMITED PARTNERSHIP

. June 1995: 1,999,999 shares of Series A preferred stock at $0.50 per
share.
. January 1996: 786,566 shares of Series B preferred stock at $1.68 per
share.
. October 1996: 78,718 shares of Series C preferred stock at $3.81 per
share.
. January 1998: 78,716 shares of Series D preferred stock at $5.08 per
share.

ENTITIES AFFILIATED WITH MATRIX PARTNERS

. June 1995: 1,999,998 shares of Series A preferred stock at $0.50 per
share.
. January 1996: 786,565 shares of Series B preferred stock at $1.68 per
share.
. October 1996: 78,718 shares of Series C preferred stock at $3.81 per
share.
. January 1998: 78,715 shares of Series D preferred stock at $5.08 per
share.

EXECUTIVE COMPENSATION

Summary Compensation. The following table sets forth compensation awarded
to, earned by, or paid to our Chief Executive Officer and the four other most
highly compensated executive officers whose total cash compensation exceeded
$100,000 during the year ended June 30, 1998 (collectively, the "named
executive officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ------------------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Alain Rossmann
Chairman and Chief
Executive Officer...... $ 157,500 $ -- -- $ 806(1)

Charles Parrish
Executive Vice
President.............. 167,500 107,352(2) 106,667 935(1)

Maurice Jeffery
Vice President, North
America Sales.......... 118,508 56,667(3) 55,000 600(1)

Malcolm Bird
Managing Director,
Phone.com (Europe)
Ltd.................... 103,000(4) 137,224(3) 120,000 15,000(5)

Michael Matthys
former Vice President,
Asia Sales(6).......... 84,615 69,444 -- 497(1)
</TABLE>
- ---------------------
(1) Consists of life insurance premiums paid by Phone.com.
(2) Consists of sales commissions, payments for moving and relocation costs and
monthly payments for housing expenses pursuant to relocation agreement.

57
<PAGE>

(3) Consists of sales commissions.
(4) Includes auto allowance of approximately $3,000.
(5) Consists of contribution to pension plan.
(6) Mr. Matthys resigned from Phone.com in February 1999.

Option Grants. The following table shows information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 30,
1998. No stock appreciation rights were granted to these individuals during the
year.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE STOCK PRICE
SHARES OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM(1)
OPTIONS GRANTED TO PRICE PER EXPIRATION --------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann.......... -- -- -- -- -- --
Charles Parrish......... 106,667 8.6% $2.48 6/24/2008 $2,515,980 4,162,654
Maurice Jeffery......... 35,000(2) 2.8 0.60 2/18/2008 891,181 1,431,496
20,000(3) 1.6 2.48 6/24/2008 471,746 780,498
Malcolm Bird............ 100,000(2) 8.1 0.39 9/24/2007 2,567,231 4,110,988
20,000(3) 1.6 2.48 6/24/2008 471,746 780,498
Michael Matthys(4)...... -- -- -- -- -- --
</TABLE>
- ---------------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission and are based on the
assumption that the initial public offering price of $16.00 per share was
the fair market value of the common stock on the date of grant. There is no
assurance provided to any executive officer or any other holder of our
securities that the actual stock price appreciation over the 10-year option
term will be at the assumed 5% and 10% levels or at any other defined
level.
(2) These stock options, which were granted under the 1996 stock plan, become
exercisable at a rate of 1/4 of the total number of shares of common stock
subject to the option on the first anniversary of the date of grant, and
1/48 of the total number of shares monthly thereafter, as long as the
optionee remains an employee with, consultant to, or director of Phone.com.
(3) These options, which were granted under the 1996 Stock Plan, become
exercisable at a rate of 1/10 of the total number of shares of common stock
subject to the option on the second anniversary of the date of grant, 2/10
on the third anniversary, 3/10 on the fourth anniversary and 4/10 on the
fourth anniversary, as long as the optionee remains an employee with,
consultant to, or director of Phone.com.
(4) Mr. Matthys resigned from Phone.com in February 1999.

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<PAGE>

Aggregate Option Exercises and Holdings. The following table provides
certain summary information concerning the shares of common stock represented
by outstanding stock options held by each of the Named Executive Officers as of
June 30, 1998.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT JUNE 30, IN-THE-MONEY OPTIONS AT
SHARES 1998(#) JUNE 30, 1998($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alain Rossmann.......... -- -- -- -- -- --
Charles Parrish......... -- -- -- 106,667 -- $1,442,666
Maurice Jeffrey......... 14,581 $157,037 731 74,687 $11,523 1,127,308
Malcolm Bird............ -- -- -- 120,000 -- 1,831,496
Michael Matthys(2)...... -- -- -- -- -- --
</TABLE>
- ---------------------
(1) The amount set forth represents the difference between the fair market
value of the underlying common stock at June 30, 1998 (using the initial
public offering price of $16.00 per share as the fair market value) and the
exercise price of the option.
(2) Mr. Matthys resigned from Phone.com in February 1999.

We have entered into agreements with each of our executive officers which
provide that if the officer's employment is terminated involuntarily other than
for cause within 18 months following a change of control transaction, then
subject to limitations, the vesting of any stock option or restricted stock
held by the officer shall be automatically accelerated so that the option or
restricted stock becomes completely vested.

STOCK PLANS

1995 Stock Plan. Our 1995 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1995 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1995 stock plan was originally adopted by our
board of directors in October 1995 and approved by our stockholders in October
1995. Unless terminated earlier by the board of directors, the 1995 stock plan
shall terminate in October 2005. A total of 1,649,462 shares of common stock
have been reserved for issuance under the 1995 stock plan. As of March 31,
1999, options to purchase 445,166 shares of common stock were outstanding at a
weighted average exercise price of $0.16, 1,204,296 shares had been issued upon
exercise of outstanding options or pursuant to restricted stock purchase
agreements, and no shares remained available for future grant.

The administrator of the 1995 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1995 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. Incentive stock
options granted under the 1995 stock plan must have an exercise price of at
least 100% of the fair market value of the common stock on the date of grant
and at least 110% of the fair market value in the case of an optionee who holds
more than 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1995 stock plan must have an
exercise price of at least 85% of the fair market value of the common stock on
the date of grant (or at least 110% of the fair market value in the case of an
optionee who holds more than 10% of the total voting

59
<PAGE>

power of all classes of our stock). Payment of the exercise price may be made
in cash or other consideration as determined by the administrator.

The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by the optionee. The administrator determines when options become
exercisable. Options granted under the 1995 stock plan generally must be
exercised within 60 days after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1995
stock plan generally vest at the rate of 1/4 of the total number of shares
subject to the option 12 months after the date of grant, and 1/48 of the total
number of shares subject to the option each month thereafter.

In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
The administrator has the authority to amend or terminate the 1995 stock plan
provided that no action that impairs the rights of any holder of an outstanding
option may be taken without the holder's consent. In addition, stockholder
approval will be obtained for any amendment to the extent required by
applicable law.

In addition to stock options, the administrator may issue stock purchase
rights under the 1995 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1995 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase unvested shares at cost upon termination of the recipient's
relationship with us.

1996 Stock Plan. Our 1996 stock plan provides for the grant of incentive
stock options to employees and nonstatutory stock options and stock purchase
rights to employees, directors and consultants. The purposes of the 1996 stock
plan are to attract and retain the best available personnel, to provide
additional incentives to our employees and consultants and to promote the
success of our business. The 1996 stock plan was originally adopted by our
board of directors in September 1996 and approved by our stockholders in
October 1996. The 1996 stock plan was amended by our board of directors in
March 1999 to increase the total number of shares reserved for issuance by
4,250,000 shares and to incorporate other changes. This amendment to the 1996
stock plan was approved by our stockholders in May 1999. Unless terminated
earlier by the board of directors, the 1996 stock plan shall terminate in
September 2006. A total of 7,734,425 shares of common stock have been reserved
for issuance under the 1996 stock plan. In addition, the number of shares
reserved under the plan will automatically be increased each year, beginning on
July 1, 2000 in an amount equal to the lesser of (a) 1,500,000 shares, (b) four
percent of the shares outstanding on the last day of the preceding fiscal year
or (c) a lesser number of shares as is determined by the board of directors. As
of March 31, 1999, options to purchase 2,876,180 shares of common stock were
outstanding at a weighted average exercise price of $2.13, 385,438 shares had
been issued upon exercise of outstanding options or pursuant to restricted
stock purchase agreements, and 4,472,807 shares remained available for future
grant.

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<PAGE>

The administrator of the 1996 stock plan may be either the board of
directors or a committee of the board. The administrator determines the terms
of options granted under the 1996 stock plan, including the number of shares
subject to the option, exercise price, term and exercisability. In no event,
however, may an individual receive option grants for more than 1,000,000 shares
under the 1996 plan in any fiscal year. Incentive stock options granted under
the 1996 stock plan must have an exercise price of at least 100% of the fair
market value of the common stock on the date of grant and at least 110% of the
fair market value in the case of an optionee who holds more than 10% of the
total voting power of all classes of our stock. Nonstatutory stock options
granted under the 1996 stock plan must have an exercise price of at least 85%
of the fair market value of the common stock on the date of grant. Payment of
the exercise price may be made in cash or other consideration as determined by
the administrator.

The administrator determines the term of options, which may not exceed 10
years (or five years in the case of an option granted to a holder of more than
10% of the total voting power of all classes of our stock). No option may be
transferred by the optionee other than by will or the laws of descent or
distribution provided, however, that the administrator may in its discretion
provide for the transferability of nonstatutory stock options granted under the
1996 stock plan. Each option may be exercised during the lifetime of the
optionee only by the optionee or permitted transferee. The administrator
determines when options become exercisable. Options granted under the 1996
stock plan generally must be exercised within 30 to 90 days, as determined by
the administrator, after the termination of the optionee's status as an
employee, director or consultant of Phone.com, or within 12 months if
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1996
stock plan generally vest over a period of four or five years.

In the event of our merger with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to assume or substitute
the option, the option will terminate. The administrator has the authority to
amend or terminate the 1996 stock plan provided that no action that impairs the
rights of any holder of an outstanding option may be taken without the holder's
consent. In addition, stockholder approval is required to increase the number
of shares subject to the 1996 stock plan, to change the designation of the
class of persons eligible to be granted options or to increase the individual
grant limitation.

In addition to stock options, the administrator may issue stock purchase
rights under the 1996 stock plan to employees, directors and consultants. The
administrator determines the number of shares, price, terms, conditions and
restrictions related to a grant of stock purchase rights. The purchase price of
a stock purchase right granted under the 1996 stock plan must be at least 85%
of the fair market value of the shares as of the date of the offer. The period
during which the stock purchase right is held open is determined by the
administrator, but in no case shall this period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right
must execute a restricted stock purchase agreement granting Phone.com an option
to repurchase the unvested shares at cost upon termination of the recipient's
relationship with us.

1999 Employee Stock Purchase Plan. Our employee stock purchase plan was
adopted by the board of directors in March 1999 and was approved by our
stockholders in May 1999. A total of 600,000 shares of common stock has been
reserved for issuance under the employee stock purchase plan, plus an automatic
annual increase on the first day of each of our fiscal years beginning in 2000,
2001, 2002, 2003 and 2004 equal to the lesser of 500,000 shares or 1% of our
outstanding common

61
<PAGE>

stock on the last day of the immediately preceding fiscal year. The employee
stock purchase plan becomes effective upon the date of this offering. Unless
terminated earlier by the board of directors, the employee stock purchase plan
shall terminate in March 2019.

The employee stock purchase plan, which is intended to qualify under Section
423 of the Code, will be implemented by a series of overlapping offering
periods of approximately 24 months' duration, with new offering periods (other
than the first offering period) commencing on May 1 and November 1 of each
year. Each offering period will generally consist of four consecutive purchase
periods of six months' duration, at the end of which an automatic purchase will
be made for participants. The initial offering period is expected to commence
on the date of this offering and end on April 30, 2001; the initial purchase
period is expected to begin on the date of this offering and end on January 31,
2000, with subsequent purchase periods ending on April 30, 2000, October 31,
2000 and April 30, 2001. The employee stock purchase plan will be administered
by the board of directors or by a committee appointed by the board. Our
employees (including officers and employee directors), or of any majority-owned
subsidiary designated by the board, are eligible to participate in the employee
stock purchase plan if they are employed by us or a subsidiary of ours for at
least 20 hours per week and more than five months per year. The employee stock
purchase plan permits eligible employees to purchase common stock through
payroll deductions, which in any event may not exceed 20% of an employee's base
salary. The purchase price is equal to the lower of 85% of the fair market
value of the common stock at the beginning of each offering period or at the
end of each purchase period. Employees may end their participation in the
employee stock purchase plan at any time during an offering period, and
participation ends automatically on termination of employment.

An employee cannot be granted an option under the employee stock purchase
plan if immediately after the grant the employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or stock of our subsidiaries, or if
the option would permit an employee to purchase stock under the employee stock
purchase plan at a rate that exceeds $25,000 of fair market value of stock for
each calendar year in which the option is outstanding. In addition, no employee
may purchase more than 2,500 shares of common stock under the employee stock
purchase plan in any one purchase period. If the fair market value of the
common stock on a purchase date is less than the fair market value at the
beginning of the offering period, each participant in that offering period
shall automatically be withdrawn from the offering period as of the end of the
purchase date and re-enrolled in the new twenty-four month offering period
beginning on the first business day following the purchase date.

If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the
employee stock purchase plan will be assumed or an equivalent right substituted
by the successor corporation. However, the board of directors will shorten any
ongoing offering period so that employees' rights to purchase stock under the
employee stock purchase plan are exercised prior to the transaction in the
event that the successor corporation refuses to assume each purchase right or
to substitute an equivalent right of the acquiring corporation. The board of
directors has the power to amend or terminate the employee stock purchase plan
and to change or terminate offering periods as long as this action does not
adversely affect any outstanding rights to purchase stock thereunder. However,
the board of directors may amend or terminate the employee stock purchase plan
or an offering period even if it would adversely affect outstanding options in
order to avoid our incurring adverse accounting charges.

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<PAGE>

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of an individual's fiduciary duties as a director except for liability:

. for any breach of a director's duty of loyalty to Phone.com or to its
stockholders,
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law or
. for any transaction from which a director derives an improper personal
benefit.

Our bylaws provide that Phone.com shall indemnify its directors and
executive officers and may indemnify its officers, employees and other agents
to the full extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of an
indemnified party. Our bylaws also permit us to advance expenses incurred by an
indemnified party in connection with the defense of any action or proceeding
arising out of a party's status or service as a director, officer, employee or
other agent of Phone.com upon an undertaking by the party to repay the advances
if it is ultimately determined that he or she is not entitled to
indemnification.

We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to, among other things,
indemnify the director or officer against expenses (including attorney's fees),
judgments, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of the individual's status or service as
a director or officer of Phone.com (other than liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest)
and to advance expenses incurred by the individual in connection with any
proceeding against the individual with respect to which he or she may be
entitled to indemnification by us. We believe that our certificate of
incorporation and bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. Following
completion of this offering, we also will maintain directors' and officers'
liability insurance.

At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Phone.com where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.

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<PAGE>

CERTAIN TRANSACTIONS

Some stock option grants to directors and executive officers of Phone.com
are described herein under the caption "Management--Executive Compensation."

Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 4,731,997 shares of
Series A Preferred Stock at $0.50 per share in June 1995, an aggregate of
3,999,987 shares of Series B Preferred Stock at $1.68 per share in December
1995, January 1996 and February 1996, an aggregate of 2,538,766 shares of
Series C Preferred Stock at $3.81 per share in October 1996, an aggregate of
6,444,877 shares of Series D Preferred Stock at $5.08 per share in January and
February 1998 and an aggregate of 2,458,543 shares of Series E Preferred Stock
at $7.24 per share in March 1999. The share and per share data set forth herein
and in the table below assume the automatic conversion of our outstanding
preferred stock into common stock upon the completion of this offering. The
following table summarizes the shares of preferred stock purchased by named
executive officers, directors and 5% stockholders of Phone.com and persons and
entities associated with them in the private placement transactions:

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
PREFERRED PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK STOCK
- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Alain Rossmann........................ 132,000 -- -- --
Greylock Equity Limited Partnership
(Roger Evans)........................ 1,999,999 786,566 78,718 78,716
Entities Affiliated with Matrix
Partners (Andrew Verhalen)........... 1,999,998 786,565 78,718 78,715
Entities Affiliated with JK&B Capital,
L.P. (David Kronfeld)................ -- -- -- 590,370
</TABLE>

Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."

The following officers and one director issued full recourse promissory
notes to Phone.com to purchase restricted stock under the 1995 stock plan and
the 1996 stock plan. The full principal amount and accrued interest under each
note remain outstanding. The terms of the notes are summarized below:

<TABLE>
<CAPTION>
PRINCIPAL
NAME DATE OF NOTE AMOUNT DATE DUE INTEREST RATE
---- ---------------- --------- ---------------- -------------
<S> <C> <C> <C> <C>
Alan Black.............. October 31, 1997 $ 52,000 October 31, 2001 6.24%
July 20, 1998 $123,750 July 20, 2002 5.49%
Andrew Laursen.......... July 11, 1996 $ 85,000 July 11, 2000 6.48%
Benjamin Linder......... July 11, 1996 $ 23,800 July 11, 2000 6.48%
Reed Hundt.............. April 16, 1999 $200,000 April 16, 2004 5.28%
</TABLE>

We have entered into indemnification agreements with our officers and
directors containing provisions requiring us to, among other things, indemnify
our officers and directors against liabilities that may arise by reason of our
status or service as officers or directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified.

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<PAGE>

stock held by the officer shall be automatically accelerated so that the option
or restricted stock becomes completely vested.

We entered into a relocation agreement with Charles Parrish on December 23,
1996 pursuant to which we have agreed to pay Mr. Parrish a housing allowance of
$3,570 per month starting in September 1996 through the earlier of August 2003
or the date that Mr. Parrish's terminates employment with Phone.com. We have
also entered into a loan agreement with Mr. Parrish on December 23, 1996, under
which we have agreed to lend Mr. Parrish $300,000 less the aggregate amount of
all payments made to him under the relocation agreement upon Mr. Parrish's
request before August 1, 2003 in order to assist him in purchasing a residence.
In addition, we have agreed to pay Mr. Parrish a severance payment equal to six
months of his base salary if Mr. Parrish's employment with us is involuntarily
terminated. We have entered into a letter agreement with Malcolm Bird on August
18, 1997, which provides that if Mr. Bird's employment with us is involuntarily
terminated by us other than for cause, he will receive a severance payment
equal to six months of his base salary and continue to receive his medical
insurance benefits for a period of six months following his termination.

In connection with Mr. Hundt's appointment as a director in April 1999, he
received a stock option to purchase 33,333 shares of common stock at an
exercise price of $12.00 per share under our 1996 stock plan. This option is
fully exercisable as of the date of grant. In addition, in April 1999, we
issued and sold 16,667 shares of common stock to Mr. Hundt at a purchase price
of $12.00 shares under our 1996 stock plan. The aggregate purchase price of
$200,000 was paid by Mr. Hundt through the issuance of a full recourse
promissory note, which bears interest at the rate of 5.28% per annum. The
principal and interest under this note become due and payable on the earlier of
April 16, 2004 or the date of termination of Mr. Hundt's employment or
consulting relationship with Phone.com.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of our common stock as of April 16, 1999, and as adjusted
to reflect the sale of 4,000,000 shares of common stock offered in this
offering, as to:

. each person (or group of affiliated persons) known by us to own
beneficially more than 5% of our outstanding common stock,
. each of our directors,
. each of the executive officers named in the summary compensation table,
and
. all directors and executive officers of Phone.com as a group.

Except as indicated in the footnotes to this table and under applicable
community property laws, to our knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of common stock.
Options exercisable on or before June 15, 1999, are included as shares
beneficially owned. For the purposes of calculating percent ownership, as of
April 16, 1999, 26,527,267 shares were issued and outstanding, and, for any
individual who beneficially owns shares represented by options exercisable on
or before June 15, 1999, these shares are treated as if outstanding for that
person, but not for any other person. Unless otherwise indicated, the address
of each of the individuals named below is: c/o Phone.com, Inc., 800 Chesapeake
Drive, Redwood City, California 94063.

<TABLE>
<CAPTION>
PERCENT
BENEFICIALLY
OWNED OPTIONS
----------------- EXERCISABLE
NUMBER OF BEFORE AFTER ON OR BEFORE
NAME AND ADDRESS SHARES OFFERING OFFERING JUNE 15, 1999
- ---------------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C>
Alain Rossmann(1).................. 3,737,832 14.1% 12.3% --
Roger Evans(2)..................... 3,037,475 11.4% 10.0% 33,333
c/o Greylock Management
One Federal Street
Boston, MA 02110
Andrew Verhalen(3)................. 3,037,471 11.4% 10.0% 33,333
c/o Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Greylock Equity Limited 3,004,142 11.3% 9.8% --
Partnership.......................
c/o Greylock Management
One Federal Street
Boston, MA 02110
Entities affiliated with Matrix 3,004,138 11.3% 9.8% --
Partners(4).......................
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Charles Parrish.................... 752,822 2.8% 2.5%
David Kronfeld(5).................. 635,763 2.4% 2.1% 33,333
c/o JK&B Capital
205 North Michigan Avenue, Suite
808
Chicago, IL 60601
Reed Hundt(6)...................... 50,000 * * 33,333
Malcolm Bird(7).................... 43,750 * * 43,750
Maurice Jeffery(8)................. 34,270 * * 19,689
Michael Matthys(9)................. 29,166 * *
All directors and executive
officers as a group (13 persons).. 12,374,590 46.0% 40.1% 353,289
</TABLE>
- --------
* Less than 1%.

66
<PAGE>

(1) Includes 74,832 shares held by Platane Fund. Mr. Rossmann is the manager
of Platane Fund, and disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest therein.
(2) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before June 15, 1999 and 3,004,142 shares held by
Greylock Equity Limited Partnership. Mr. Evans is a director of Phone.com
and a general partner of Greylock Equity GP Limited Partnership, the
general partner of Greylock Equity Limited Partnership. Mr. Evans
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein. The other general partners of Greylock Equity
GP Limited Partnership with whom Mr. Evans shares voting and dispositive
powers over these shares are Henry F. McCance, Howard E. Cox, Jr., David
N. Strohm, William W. Helman and William S. Kaiser.
(3) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before June 15, 1999, 2,853,934 shares held by Matrix
Partners IV, L.P. and 150,204 shares held by Matrix IV Entrepreneurs Fund.
Mr. Verhalen is a director of Phone.com and a general partner of Matrix
Partners, the general partner of each of Matrix Partners IV, L.P. and
Matrix IV Entrepreneurs Fund. Mr. Verhalen disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest therein.
The other general partners of Matrix Partners with whom Mr. Verhalen
shares voting and dispositive powers over these shares are Paul J. Ferri,
W. Michael Humphreys, Timothy A. Barrows and Andrew Marcuvitz.
(4) Consists of 2,853,934 shares held by Matrix Partners IV, L.P. and 150,204
shares held by Matrix IV Entrepreneurs Fund. Mr. Verhalen is a director of
Phone.com and a general partner of Matrix Partners, the general partner of
each of Matrix Partners IV, L.P. and Matrix IV Entrepreneurs Fund.
Mr. Verhalen disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The other general partners of
Matrix Partners with whom Mr. Verhalen shares voting and dispositive
powers over these shares are Paul J. Ferri, W. Michael Humphreys, Timothy
A. Barrows and Andrew Marcuvitz.
(5) Consists of 33,333 shares issuable upon exercise of outstanding options
exercisable on or before June 15, 1999, 401,620 shares held by JK&B
Capital, L.P. and 200,810 shares held by JK&B Capital II, L.P. Mr.
Kronfeld is a director of Phone.com and general partner of JK&B Capital,
the general partner of JK&B Capital, L.P. and JK&B Capital II, L.P. Mr.
Kronfeld disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The other general partners of
JK&B Capital with whom Mr. Kronfeld shares voting and dispositive powers
over these shares are George Spencer and Eileen Richardson.
(6) Includes 16,667 shares held by Charles Ross Investment Fund Number 6,
which is affiliated with Charles Ross Partners, LLC, of which Mr. Hundt is
a principal. Mr. Hundt disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein. Also includes
33,333 shares issuable upon exercise of outstanding options exercisable on
or before June 15, 1999.
(7) Consists of 43,750 shares issuable upon exercise of outstanding options
exercisable on or before June 15, 1999.
(8) Includes 19,689 shares issuable upon exercise of outstanding options
exercisable on or before June 15, 1999.
(9) Mr. Matthys resigned from Phone.com in February 1999.

67
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Following the closing of the sale of the shares offered hereby, our
authorized capital stock will consist of 100,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.

COMMON STOCK

As of March 31, 1999, there were 26,506,858 shares of common stock
outstanding that were held of record by approximately 96 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio and assuming no exercise or conversion of outstanding
convertible securities after March 31, 1999. There will be 30,506,858 shares of
common stock outstanding (assuming no exercise of the underwriters' over-
allotment option and no exercise or conversion of outstanding convertible
securities after March 31, 1999) after giving effect to the sale of the shares
of common stock offered hereby.

The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of Phone.com, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.

PREFERRED STOCK

Effective upon the closing of this offering, Phone.com will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board of directors
will have the authority to issue the undesignated preferred stock in one or
more series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of a series, without any
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
Phone.com without further action by the stockholders and may adversely affect
the voting and other rights of the holders of common stock. At present, we have
no plans to issue any shares of preferred stock.

REGISTRATION RIGHTS OF STOCKHOLDERS

The holders of 20,174,170 shares of common stock or their transferees are
entitled to rights to register these shares, called "registrable securities,"
under the Securities Act. These rights are provided under the terms of an
agreement between Phone.com and the holders of registrable securities. Subject
to limitations in this agreement, the holders of the registrable securities may
require, on two occasions at any time after six months from the effective date
of this offering, that Phone.com use its best efforts to register the
registrable securities for public resale, provided that the proposed aggregate
offering price is in excess of $15,000,000. If we register any of our common
stock either for our own account or for the account of other security holders,
the holders of

68
<PAGE>

registrable securities are entitled to include their shares of common stock in
the registration. A holder's right to include shares in an underwritten
registration is subject to the ability of the underwriters to limit the number
of shares included in this offering. All fees, costs and expenses of these
registrations must be borne by Phone.com and all selling expenses (including
underwriting discounts, selling commissions and stock transfer taxes) relating
to registrable securities must be borne by the holders of the securities being
registered.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS

We are subject to the provisions of Section 203 of the Delaware Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's outstanding voting stock. This provision may have the
effect of delaying, deferring or preventing a change in control of Phone.com
without further action by the stockholders. In addition, upon completion of
this offering, provisions of our charter documents, including a provision
eliminating the ability of stockholders to take actions by written consent, may
have the effect of delaying or preventing changes in control or management of
Phone.com, which could have an adverse effect on the market price of our common
stock. Our stock option and purchase plans generally provide for assumption of
our plans or substitution of an equivalent option of a successor corporation
or, alternatively, at the discretion of the board of directors, exercise of
some or all of the options stock, including non-vested shares, or acceleration
of vesting of shares issued pursuant to stock grants, upon a change of control
or similar event. The board of directors has authority to issue up to 5,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further vote
or action by the stockholders. The rights of the holders of the common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock, thereby delaying, deferring or preventing a change in
control of Phone.com. Furthermore, this preferred stock may have other rights,
including economic rights senior to the common stock, and, as a result, the
issuance of preferred stock could have a material adverse effect on the market
value of the common stock. We have no present plan to issue shares of preferred
stock.

Commencing at the first annual meeting of stockholders following the date on
which we shall have had at least 800 stockholders, the board of directors will
be divided into three classes, each serving staggered three-year terms: Class
I, whose term will expire at the first annual meeting of stockholders following
the annual meeting of stockholders when we shall have had at least 800
stockholders; Class II, whose term will expire at the second annual meeting of
stockholders following the annual meeting of stockholders when we shall have at
least 800 stockholders; and Class III, whose term will expire at the third
annual meeting of stockholders following the annual meeting of stockholders
when we shall have had at least 800 stockholders. As a result, only one class
of directors will be elected at each annual meeting of stockholders of
Phone.com, with the other

69
<PAGE>

classes continuing for the remainder of their respective terms. These
provisions in our amended and restated certificate of incorporation may have
the effect of delaying or preventing changes in control or management of
Phone.com.

WARRANTS

As of March 31, 1999, warrants were outstanding to purchase an aggregate of
31,486 shares of common stock at a weighted average exercise price of $3.81 per
share.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation.

LISTING

Our common stock has been approved for listing on The Nasdaq Stock Market's
National Market under the trading symbol "PHCM."

70
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock.
A significant public market for the common stock may not develop or be
sustained after this offering. Future sales of substantial amounts of our
common stock in the public market, or the possibility of these sales occurring,
could adversely affect prevailing market prices for our common stock or our
future ability to raise capital through an offering of equity securities.

Upon completion of this offering, we will have outstanding 30,506,858 shares
of common stock. Of these shares, the 4,000,000 shares to be sold in this
offering (4,600,000 shares if the underwriters' over-allotment option is
exercised in full) will be freely tradable in the public market without
restriction under the Securities Act, unless the shares are held by
"affiliates" of Phone.com, as that term is defined in Rule 144 under the
Securities Act.

The remaining 26,506,858 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.

Pursuant to "lock-up" agreements, all the executive officers, directors and
stockholders of Phone.com, who collectively hold an aggregate of 26,506,858 of
these restricted securities, have agreed not to offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of any of these shares for a
period of 180 days from the date of this prospectus. We also have entered into
an agreement with the underwriters that we will not offer, sell or otherwise
dispose of common stock for a period of 180 days from the date of this
prospectus. However, Credit Suisse First Boston Corporation may in its sole
discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements.

Taking into account the lock-up agreements, and assuming Credit Suisse First
Boston does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:

. On the date of this prospectus, the 4,000,000 shares sold in the offering
will be immediately available for sale in the public market.
. 180 days after the effective date, approximately 18,144,062 shares will
be eligible for sale, 11,768,289 of which will be subject to volume,
manner of sale and other limitations under Rule 144.
. The remaining 8,362,796 shares will be eligible for sale under Rule 144
upon the expiration of various one-year holding periods after the
expiration of the lock-up period.

Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of these shares beginning 90 days
after the date of this prospectus. In general, under Rule 144, after the
expiration of the lock-up period, a person who has beneficially owned
restricted securities for at least one year would be entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of:

. 1% of the then-outstanding shares of common stock, or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.

71
<PAGE>

Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about
Phone.com. Under Rule 144(k), a person who has not been our affiliate at any
time during the three months before a sale and who has beneficially owned the
shares proposed to be sold for at least two years can sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

We intend to file, after the effective date of this offering, a registration
statement on Form S-8 to register approximately 8,994,153 shares of common
stock reserved for issuance under the 1995 stock plan, the 1996 stock plan, the
employee stock purchase plan and the directors' stock option plan. The
registration statement will become effective automatically upon filing. Shares
issued under the foregoing stock and option plans, after the filing of a
registration statement on Form S-8, may be sold in the open market, subject, in
the case of some holders, to the Rule 144 limitations applicable to affiliates,
the lock-up agreements and vesting restrictions imposed by us.

In addition, following this offering, the holders of 20,174,170 shares of
outstanding common stock will, under some circumstances, have rights to require
us to register their shares for future sale. See "Description of Capital
Stock--Registration Rights of Stockholders."

72
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated June 10, 1999, we have agreed to sell to the underwriters named
below the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation........................... 1,800,000
BancBoston Robertson Stephens Inc. .............................. 880,000
Hambrecht & Quist LLC............................................ 880,000
U.S. Bancorp Piper Jaffray Inc. ................................ 440,000
Total.......................................................... 4,000,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 600,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $0.67 per share. The
underwriters and selling group members may allow a discount of $0.10 per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
TOTAL
-----------------------------
PER WITHOUT WITH
SHARE OVER-ALLOTMENT OVER-ALLOTMENT
----- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
payable by Phone.com ................ $1.12 $4,480,000 $5,152,000
Expenses payable by Phone.com......... $0.28 $1,100,000 $1,100,000
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We, our officers and directors and our stockholders have agreed that we and
they will not offer, sell, contract to sell, announce an intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Securities Act relating to, any
additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock without the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus, except in the case of issuances
pursuant to the exercise of employee stock options outstanding on the date
hereof.

The underwriters have reserved for sale, at the initial public offering
price up to 230,000 shares of the common stock for employees, directors and
other persons associated with us who have

73
<PAGE>

expressed an interest in purchasing common stock in the offering. The number of
shares available for sale to the general public in the offering will be reduced
to the extent these persons purchase these reserved shares. Any reserved shares
not so purchased will be offered by the underwriters to the general public on
the same terms as the other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

Our common stock has been approved for listing on The Nasdaq Stock Market's
National Market under the symbol "PHCM."

Prior to this offering, there has been no public market for the common
stock. The initial public offering price has been determined by negotiation
between us and the underwriters. The principal factors that were considered in
determining the public offering price included: the information set forth in
this prospectus and otherwise available to the underwriters; the history and
the prospects for the industry in which we will compete; the ability of our
management; the prospects for our future earnings; the present state of our
development and our current financial condition; the general condition of the
securities markets at the time of this offering; and the recent market prices
of, and the demand for, publicly traded common stock of generally comparable
companies.

The representatives on behalf of the underwriters may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases
of the common stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
representatives to reclaim a selling concession from a syndicate member when
the common stock originally sold by the syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. These
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the common stock to be higher than it would otherwise be in
the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.

In March 1999, we issued an aggregate of 2,458,543 shares of our Series E
preferred stock at a per share price of $7.24. Credit Suisse First Boston
Corporation acted as the placement agent for this private placement of our
Series E preferred stock, for which it received a customary fee for its
services. In connection with this financing, a director of Credit Suisse First
Boston Corporation purchased 4,143 shares of Series E preferred stock in the
private placement and has agreed not to sell, pledge, transfer or hypothecate
his shares for a one year period after the date of this prospectus.

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<PAGE>

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, that the purchaser is purchasing as principal and not as
agent, and (iii) the purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission of rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that a purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

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<PAGE>

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
Phone.com by Venture Law Group, A Professional Corporation, Menlo Park,
California. Some legal matters in connection with this offering will be passed
upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Venture Law Group attorneys and an entity
affiliated with Venture Law Group hold an aggregate of 8,954 shares of our
common stock.

EXPERTS

The consolidated balance sheets as of June 30, 1997 and 1998, and March 31,
1999, and the consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended June 30, 1998,
and the nine months ended March 31, 1999, have been included in the
Registration Statement in reliance upon the report of KPMG LLP, independent
auditors, and upon the authority of said firm as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, some
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Phone.com and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof.
Statements made in this prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each document
filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved. The Registration Statement, including exhibits thereto and the
financial statements and notes filed as a part thereof, as well as reports and
other information filed with the Commission, may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of fees prescribed by the Commission. These reports
and other information may also be inspected without charge at a Web site
maintained by the Commission. The address of the site is http://www.sec.gov.

76
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of June 30, 1997 and 1998, and March 31,
1999..................................................................... F-3
Consolidated Statements of Operations for the years ended June 30, 1996,
1997, and 1998, and for the nine months ended March 31, 1998 (unaudited)
and 1999................................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1997, and 1998, and for the nine months ended March 31, 1999... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1997, and 1998, and for the nine months ended March 31, 1998 (unaudited)
and 1999................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Phone.com, Inc.:

We have audited the accompanying consolidated balance sheets of Phone.com,
Inc. (formerly Unwired Planet, Inc.) and subsidiaries (the Company) as of June
30, 1997 and 1998, and March 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the years in
the three-year period ended June 30, 1998, and for the nine months ended March
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Phone.com,
Inc. and subsidiaries as of June 30, 1997 and 1998, and March 31, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1998, and for the nine months ended March 31,
1999, in conformity with generally accepted accounting principles.

/s/ KPMG LLP

Mountain View, California
April 12, 1999, except as to Note 5(b) which is as of June 7, 1999

F-2
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, MARCH 31, 1999
------------------ ---------------------
1997 1998 ACTUAL PRO FORMA
-------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 4,090 $ 12,677 $ 20,230 $ 20,230
Short-term investments............. 3,924 20,787 27,601 27,601
Accounts receivable................ 126 2,724 5,461 5,461
Prepaid expenses and other current
assets............................ 128 352 833 833
-------- -------- -------- --------
Total current assets............. 8,268 36,540 54,125 54,125
Property and equipment, net.......... 1,226 1,336 1,710 1,710
Deposits and other assets............ 265 1,268 1,485 1,485
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of equipment loan
and capital lease obligations..... $ -- $ 424 $ 424 $ 424
Accounts payable................... 213 532 685 685
Accrued liabilities................ 565 1,877 4,857 4,857
Deferred revenue................... 856 7,003 18,749 18,749
-------- -------- -------- --------
Total current liabilities........ 1,634 9,836 24,715 24,715
Equipment loan and capital lease
obligations, less current portion... -- 915 607 607
-------- -------- -------- --------
Total liabilities................ 1,634 10,751 25,322 25,322
-------- -------- -------- --------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001
par value; actual-- 11,398,664,
17,843,550 and 20,329,720 shares
authorized as of June 30, 1997 and
1998, and March 31, 1999,
respectively; 11,270,750,
17,715,627 and 20,174,170 shares
issued and outstanding as of June
30, 1997 and 1998, and March 31,
1999, respectively; aggregate
liquidation preference of $18,759,
$51,299, and $69,299 as of June
30, 1997 and 1998, and March 31,
1999, respectively; pro forma--
5,000,000 shares authorized; no
shares issued and outstanding..... 12 18 20 --
Common stock, $0.001 par value;
32,000,000 shares authorized;
actual--5,712,250, 6,192,398 and
6,332,688 shares issued and
outstanding as of June 30, 1997
and 1998, and March 31, 1999,
respectively; pro forma--
100,000,000 shares authorized;
26,506,858 shares issued and
outstanding....................... 6 6 6 26
Additional paid-in capital......... 18,864 51,611 69,158 69,158
Deferred stock-based compensation.. -- (1,786) (1,545) (1,545)
Treasury stock..................... (46) (72) (196) (196)
Notes receivable from
stockholders...................... (147) (197) (285) (285)
Accumulated deficit................ (10,564) (21,187) (35,160) (35,160)
-------- -------- -------- --------
Total stockholders' equity....... 8,125 28,393 31,998 31,998
-------- -------- -------- --------
$ 9,759 $ 39,144 $ 57,320 $ 57,320
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.

F-3
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License................... $ -- $ 80 $ 522 $ 289 $ 1,530
Maintenance and support
services................. -- 212 1,683 635 3,786
Consulting services....... -- -- -- -- 1,401
------- ------- -------- ------- --------
Total revenues.......... -- 292 2,205 924 6,717
------- ------- -------- ------- --------
Cost of revenues:
License................... -- 87 95 59 172
Maintenance and support
services................. -- 266 1,063 715 1,876
Consulting services....... -- -- -- -- 646
------- ------- -------- ------- --------
Total cost of revenues.. -- 353 1,158 774 2,694
------- ------- -------- ------- --------
Gross profit (loss)..... -- (61) 1,047 150 4,023
------- ------- -------- ------- --------
Operating expenses:
Research and development.. 1,387 3,959 5,732 3,871 8,406
Sales and marketing....... 757 3,198 5,011 3,307 6,504
General and
administrative........... 522 1,237 1,801 1,185 2,731
Stock-based compensation.. -- -- 108 45 784
------- ------- -------- ------- --------
Total operating
expenses............... 2,666 8,394 12,652 8,408 18,425
------- ------- -------- ------- --------
Operating loss.......... (2,666) (8,455) (11,605) (8,258) (14,402)
Interest income, net........ 196 464 982 528 1,139
------- ------- -------- ------- --------
Loss before income
taxes.................. (2,470) (7,991) (10,623) (7,730) (13,263)
Income taxes................ -- -- -- -- 710
------- ------- -------- ------- --------
Net loss................ $(2,470) $(7,991) $(10,623) $(7,730) $(13,973)
------- ------- -------- ------- --------
Basic and diluted net loss
per share.................. $ (0.53) $ (1.67) $ (2.03) $ (1.50) $ (2.49)
======= ======= ======== ======= ========
Shares used in computing
basic and diluted net loss
per share.................. 4,704 4,776 5,221 5,142 5,618
======= ======= ======== ======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED RECEIVABLE TOTAL
----------------- ----------------- PAID-IN STOCK-BASED TREASURY FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCK STOCKHOLDERS DEFICIT EQUITY
---------- ------ --------- ------ ---------- ------------ -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
June 30, 1995... 4,731,997 $ 5 4,671,000 $ 5 $ 2,340 $ -- $ -- $ (4) $ (103) $ 2,243
Issuance of
common stock to
employees for
cash........... -- -- 72,806 -- 3 -- -- -- -- 3
Issuance of
Series B
convertible
preferred
stock, net of
$36 of issuance
costs.......... 3,999,987 4 -- -- 6,680 -- -- -- -- 6,684
Payment on notes
receivable from
stockholders... -- -- -- -- -- -- -- 4 -- 4
Net loss........ -- -- -- -- -- -- -- -- (2,470) (2,470)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1996... 8,731,984 9 4,743,806 5 9,023 -- -- -- (2,573) 6,464
Issuance of
common stock to
officers and
employees for
notes
receivable..... -- -- 1,065,000 1 192 -- -- (193) -- --
Issuance of
common stock to
consultant..... -- -- 10,360 -- 2 -- -- -- -- 2
Stock options
exercised...... -- -- 93,084 -- 9 -- -- -- -- 9
Issuance of
Series C
convertible
preferred
stock, net of
$32 issuance
costs.......... 2,538,766 3 -- -- 9,638 -- -- -- -- 9,641
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (200,000) -- -- -- (46) 46 -- --
Net loss........ -- -- -- -- -- -- -- -- (7,991) (7,991)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1997... 11,270,750 12 5,712,250 6 18,864 -- (46) (147) (10,564) 8,125
Issuance of
common stock to
officers and
employees for
notes
receivable..... -- -- 226,667 -- 88 -- -- (88) -- --
Repayment of
notes
receivable from
stockholders... -- -- -- -- -- -- -- 12 -- 12
Stock options
exercised...... -- -- 403,481 -- 87 -- -- -- -- 87
Issuance of
Series D
convertible
preferred
stock, net of
$2,056 issuance
costs.......... 6,444,877 6 -- -- 30,678 -- -- -- -- 30,684
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (150,000) -- -- -- (26) 26 -- --
Deferred
compensation
related to
stock option
grants......... -- -- -- -- 1,894 (1,894) -- -- -- --
Amortization of
stock-based
compensation... -- -- -- -- -- 108 -- -- -- 108
Net loss........ -- -- -- -- -- -- -- -- (10,623) (10,623)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
June 30, 1998... 17,715,627 18 6,192,398 6 51,611 (1,786) (72) (197) (21,187) 28,393
Issuance of
common stock to
officers and
employees for
notes
receivables.... -- -- 90,000 -- 223 -- -- (223) -- --
Stock options
exercised...... -- -- 154,457 -- 83 -- -- -- -- 83
Issuance of
Series E
convertible
preferred
stock, net of
$1,100 issuance
costs.......... 2,458,543 2 -- -- 16,698 -- -- -- -- 16,700
Repurchase of
common stock in
settlement of
notes
receivable from
stockholders... -- -- (104,167) -- -- -- (124) 124 -- --
Repayment of
notes
receivable from
stockholders... -- -- -- -- -- -- -- 11 -- 11
Deferred
compensation
related to
stock option
grants......... -- -- -- -- 543 (543) -- -- -- --
Amortization of
stock-based
compensation... -- -- -- -- -- 784 -- -- -- 784
Net loss........ -- -- -- -- -- -- -- -- (13,973) (13,973)
---------- --- --------- --- ------- ------- ----- ----- -------- -------
Balances as of
March 31, 1999.. 20,174,170 $20 6,332,688 $ 6 $69,158 $(1,545) $(196) $(285) $(35,160) $31,998
========== === ========= === ======= ======= ===== ===== ======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................... $(2,470) $(7,991) $(10,623) $ (7,730) $(13,973)
Adjustments to reconcile net
loss to net cash used for
operating activities:
Depreciation and
amortization.............. 108 447 630 442 699
Amortization of deferred
stock-based compensation.. -- -- 108 45 784
Changes in operating assets
and liabilities:
Accounts receivable....... -- (126) (2,598) (988) (2,737)
Prepaid expenses and other
assets................... (156) (233) (427) (107) (698)
Accounts payable.......... 175 38 319 166 153
Accrued liabilities....... 31 462 1,312 798 2,980
Deferred revenue.......... 25 831 6,147 5,050 11,746
------- ------- -------- -------- --------
Net cash used for
operating activities.... (2,287) (6,572) (5,132) (2,324) (1,046)
------- ------- -------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment, net............. (852) (914) (367) (41) (1,073)
Purchases of short-term
investments................ -- (3,924) (32,338) (21,912) (30,735)
Proceeds from sales and
maturities of short-term
investments................ -- -- 15,475 7,552 23,921
Other assets................ -- -- (800) -- --
------- ------- -------- -------- --------
Net cash used for
investing activities..... (852) (4,838) (18,030) (14,401) (7,887)
------- ------- -------- -------- --------
Cash flows from financing
activities:
Net proceeds from sale of
convertible preferred
stock...................... 6,680 9,641 30,684 30,684 16,700
Issuance of common stock.... 3 11 87 48 83
Repayment of notes
receivable from
stockholders............... 4 -- 12 12 11
Proceeds from equipment
loan....................... -- -- 1,300 1,300 --
Repayment of equipment loan
and capital lease
obligations................ -- -- (334) (239) (308)
------- ------- -------- -------- --------
Net cash provided by
financing activities..... 6,687 9,652 31,749 31,805 16,486
------- ------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents... 3,548 (1,758) 8,587 15,080 7,553
Cash and cash equivalents at
beginning of period......... 2,300 5,848 4,090 4,090 12,677
------- ------- -------- -------- --------
Cash and cash equivalents at
end of period............... $ 5,848 $ 4,090 $ 12,677 $ 19,170 $ 20,230
======= ======= ======== ======== ========
Supplemental disclosures of
cash flow information:
Property and equipment
acquired under capital
lease obligations.......... $ -- $ -- $ 373 $ 162 $ --
======= ======= ======== ======== ========
Common stock issued to
officers and employees for
notes receivable........... $ -- $ 193 $ 88 $ 88 $ 223
======= ======= ======== ======== ========
Repurchase of common stock
in settlement of notes
receivable from
stockholders............... $ -- $ 46 $ 26 $ 26 $ 124
======= ======= ======== ======== ========
Deferred stock-based
compensation............... $ -- $ -- $ 1,894 $ 431 $ 543
======= ======= ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1997, AND 1998, AND MARCH 31, 1999

(INFORMATION FOR THE NINE MONTHS ENDED
MARCH 31, 1998, IS UNAUDITED.)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

(A) ORGANIZATION

Phone.com, Inc. (the Company) was incorporated in Delaware in 1994 to
develop and market software that enables the delivery of Internet-based
services to mass-market wireless telephones. The Company was formerly known as
Unwired Planet, Inc., but changed its name to Phone.com, Inc. effective April
1999.

(B) BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Phone.com Japan, K.K. and
Phone.com (Europe) Limited. All significant intercompany accounts and
transactions have been eliminated in consolidation.

For agreements entered into prior to July 1, 1998, the Company recognized
revenues in accordance with the provisions of the American Institute of
Certified Public Accountants' Statement of Position ("SOP") No. 91-1, Software
Revenue Recognition. Effective July 1, 1998, the Company adopted SOP 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2, as
amended, generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on the relative fair
value of the elements. The adoption of SOP 97-2, as amended, did not have a
significant impact on the Company's accounting for revenues.

The Company licenses its UP.Link Server Suite products to network operators
through its direct sales force and indirectly through its channel partners. The
Company's license agreements do not provide for a right of return. Allowances
for future estimated warranty costs are provided at the time revenue is
recognized. Licenses can be purchased on an as-deployed basis or on a prepaid
basis. For licenses purchased on an as-deployed basis, license revenue is
recognized as subscribers are activated to use the services that are based on
the Company's UP.Link Server Suite Products. The Company has no obligation to
provide standards-compliant products once a subscriber has been activated. For
licenses purchased on a prepaid basis, prepaid license fees are recognized
under subscription accounting due to the Company's commitment to provide
standards-compliant products for each license covered by the prepaid
arrangement. This subscription revenue is recognized ratably over the
contractual term of the prepaid arrangement (i.e., the date the prepaid
licenses expire if not used), beginning after delivery and acceptance have
occurred. The prepaid license period is generally twelve to thirty months.
Licenses expire if not activated prior to the end of the prepaid license term.
The Company recognizes revenues from maintenance and support services provided
to network operators ratably over the term of the agreement, generally one
year, and recognizes revenues from consulting services provided to network
operators as the services are performed.

The Company recognizes revenues from UP.Browser agreements with wireless
telephone manufacturers ratably over the period during which the services are
performed, generally one year. The Company provides its wireless telephone
manufacturer customers with support associated with their efforts to port its
UP.Browser software to their wireless telephones, software error corrections
and new releases as they become available commercially.

(D) INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA BALANCE SHEET

In March 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission ("SEC") that
would permit the Company to sell shares of the Company's common

F-7
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

stock in connection with a proposed initial public offering ("IPO"). Following
the closing of the Company's IPO, the number of authorized shares of
convertible preferred stock and common stock will be 5,000,000 and 100,000,000,
respectively. If the offering is consummated under the terms presently
anticipated, all the then outstanding shares of the Company's convertible
preferred stock will automatically convert into shares of common stock on a
one-for-one basis upon the closing of the proposed IPO. The conversion of all
of the convertible preferred stock has been reflected in the accompanying
unaudited pro forma consolidated balance sheet as if it had occurred on March
31, 1999.

(E) CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments with
remaining maturities of less than 90 days at the date of purchase. The Company
is exposed to credit risk in the event of default by the financial institutions
or the issuers of these investments to the extent of the amounts recorded on
the balance sheet in excess of amounts that are insured by the FDIC. As of June
30, 1997 and 1998, and March 31, 1999 cash equivalents consisted principally of
money market funds and commercial paper.

(F) ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES

The Company classifies its investments in debt securities as available-for-
sale. Available-for-sale securities are carried at fair market value, which
approximates amortized cost.

(G) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

The carrying value of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable, and
equipment loans approximates fair market value. Financial instruments that
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade accounts receivable.

The Company sells its products and services principally to leading wireless
network operators and prominent wireless telephone manufacturers. Credit risk
is concentrated in North America and Japan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company has had no write-offs of accounts
receivable and, based on an ongoing evaluation of its accounts receivable
collectibility and customer creditworthiness, has recorded no allowance for
doubtful accounts receivable to date.

(H) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets, generally three to
five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the lease term.

(I) IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of any asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.

F-8
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(J) RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred until technological
feasibility has been established. To date, the Company's software has been
available for general release concurrent with the establishment of
technological feasibility and, accordingly, no development costs have been
capitalized.

(K) USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

(L) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts to be recovered.

(M) ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS

The Company uses the intrinsic-value method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in
Financial Accounting Standards Board ("FASB") Interpretation No. 28.

(N) FOREIGN CURRENCY TRANSACTIONS

The functional currency for the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, such entities remeasure monetary assets and liabilities
at exchange rates in effect as of each reporting date while nonmonetary items
are remeasured at historical rates. Income and expense accounts are remeasured
at the average rates in effect during each such period, except for
depreciation which is remeasured at historical rates. Remeasurement
adjustments and transaction gains and losses are recognized in income in the
period of occurrence and have not been significant to date.

(O) COMPREHENSIVE INCOME

The Company has no material components of other comprehensive income (loss)
for all periods presented.

(P) UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, the accompanying
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring

F-9
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

adjustments, necessary for the fair statement of the Company's results of
operations and its cash flows for the nine months ended March 31, 1998.

(Q) NET LOSS PER SHARE

Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock excluding shares of restricted stock subject
to repurchase summarized below. Diluted net loss per share is computed using
the weighted-average number of shares of common stock outstanding and, when
dilutive, potential common shares from options and warrants to purchase common
stock using the treasury stock method and from convertible securities using the
if-converted basis. The following potential common shares have been excluded
from the computation of diluted net loss per share for all periods presented
because the effect would have been antidilutive (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options.. 646 2,071 2,877 2,224 3,321
Shares of restricted stock subject to
repurchase.......................... -- 715 670 680 547
Shares issuable pursuant to warrants
to purchase convertible preferred
stock............................... -- -- 31 31 31
Shares of convertible preferred stock
on an "as if converted basis........ 8,732 11,271 17,716 17,716 20,174
</TABLE>

The weighted-average exercise price of stock options was $0.11, $0.28 and
$1.00 for the years ended June 30, 1996, 1997 and 1998, respectively, and
$0.34 and $1.87 for the nine months ended March 31, 1998 and 1999,
respectively. The weighted-average purchase price of restricted stock was $0.26
and $0.30 for the years ended June 30, 1997 and 1998, respectively, and $0.30
and $0.48 for the nine months ended March 31, 1998 and 1999, respectively. The
weighted-average exercise price of warrants was $3.81 for both the fiscal year
ended June 30, 1998 and the nine months ended March 31, 1999.

(R) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because the
Company does not currently hold any derivative instruments and does not engage
in hedging activities, the Company expects that the adoption of SFAS No. 133
will not have a material impact on its consolidated financial position, results
of operations, or cash flows. The Company will be required to adopt SFAS No.
133 in fiscal 2000.

2. BALANCE SHEET COMPONENTS

(A) SHORT-TERM INVESTMENTS

All of the Company's investments are considered available-for-sale
securities and consisted of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
-------------- MARCH 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Commercial paper.................................. $3,148 $13,594 $16,304
Corporate bonds................................... 3,006 9,213 22,380
Certificates of deposit........................... -- 7,238 --
------ ------- -------
$6,154 $30,045 $38,684
====== ======= =======
</TABLE>

F-10
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

As of June 30, 1997 and 1998 and March 31, 1999, $2,230,000, $9,258,000,
and $11,083,000, respectively, of the Company's investments are included in
cash and cash equivalents.

The contractual maturity for short-term investments as of March 31, 1999,
is as follows (in thousands):

<TABLE>
<S> <C>
Due within one year.............................................. $28,120
Due between one and two years.................................... 10,564
-------
$38,684
=======
</TABLE>

(B) PROPERTY AND EQUIPMENT

Property and equipment, consisted of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30
-------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Computer equipment and software................. $1,615 $2,214 $ 3,244
Furniture and equipment......................... 90 213 253
Leasehold improvements.......................... 77 95 98
------ ------ -------
1,782 2,522 3,595
Accumulated depreciation and amortization....... (556) (1,186) (1,885)
------ ------ -------
$1,226 $1,336 $ 1,710
====== ====== =======
</TABLE>

Equipment under capital leases aggregated $373,000 as of June 30, 1998 and
March 31, 1999. Accumulated amortization on the assets under capital leases
aggregated $42,000 and $136,000 as of June 30, 1998 and March 31, 1999,
respectively.

Accrued liabilities as of March 31, 1999, include approximately $1,000,000
related to the Company's issuance of its Series E convertible preferred stock.
This was payable to one of the Company's underwriters for its IPO and was paid
on April 12, 1999.

4. EQUIPMENT LOAN AND CAPITAL LEASE OBLIGATIONS

In May 1997, the Company entered into a $2,000,000 credit facility with a
business credit corporation that consisted of a $1,300,000 equipment term loan
and a $700,000 lease line of credit. The equipment loan bears interest at
7.5%, is collateralized by equipment, and is payable in 42 monthly
installments of $35,000 through January 2001. As of June 30, 1998 and March
31, 1999, $1,000,000 and $795,000 was outstanding under the term loan,
respectively. During fiscal 1998, the Company borrowed approximately $400,000
under the lease line of credit with $339,000 and $236,000 outstanding as of
June 30, 1998 and March 31, 1999, respectively, bearing interest at an
effective interest rate of 11.8%, and payable in 42 monthly installments of
$11,000 through December 2001. The unused portion of the lease line of credit
expired in July 1998.

As of March 31, 1999, aggregate maturities for the equipment loan and
capital lease obligations for the remainder of fiscal 1999 and fiscal 2000,
2001, and 2002 are $116,000, $450,000, $455,000 and $10,000, respectively.

In conjunction with the equipment loan and lease line of credit, the
Company issued warrants to purchase 20,466 and 11,020 shares, respectively, of
the Company's Series C preferred stock at an exercise price of $3.81

F-11
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

per share. These warrants expire the earlier of May 2007, or five years after
an initial public offering of the Company's common stock. The fair value of the
warrants issued, calculated using the Black-Scholes option pricing model, using
the following assumptions: no dividends; contractual life of 10 years; risk-
free interest rate of 6.33%; expected volatility of 60%, was not material.

5. STOCKHOLDERS' EQUITY

(A) CONVERTIBLE PREFERRED STOCK

Convertible preferred stock outstanding as of March 31, 1999, is as follows:

<TABLE>
<CAPTION>
SHARES DESIGNATED ISSUED AND OUTSTANDING CARRYING VALUE
----------------- ---------------------- --------------
<S> <C> <C> <C>
Series:
Series A........... 4,731,997 4,731,997 $ 2,334,000
Series B........... 4,000,000 3,999,987 6,684,000
Series C........... 2,666,667 2,538,766 9,641,000
Series D........... 6,444,886 6,444,877 30,684,000
Series E........... 2,486,170 2,458,543 16,700,000
---------- ---------- -----------
20,329,720 20,174,170 $66,043,000
========== ========== ===========
</TABLE>

The rights, preferences, and privileges of the holders of Series A, B, C, D,
and E convertible preferred stock are as follows:

. Dividends are noncumulative and payable only upon declaration by the
Company's Board of Directors at a rate of $0.05, $0.17, $0.38, $0.51,
and $0.72 per share for Series A, B, C, D, and E convertible preferred
stock, respectively.
. Holders of Series A, B, C, D, and E convertible preferred stock have a
liquidation preference of $0.50, $1.68, $3.81, $5.08, and $7.24 per
share, respectively, plus any declared but unpaid dividends over holders
of common stock.
. Each share of Series A, B, C, D, and E convertible preferred stock is
convertible at any time into one share of common stock subject to
certain antidilution provisions.
. Each holder of convertible preferred stock has voting rights equal to
the number of shares of common stock into which such shares could be
converted.

(B) REVERSE STOCK SPLIT

On June 7, 1999, the Company effected a two-for-three reverse stock split of
its convertible preferred stock and common stock. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
reverse stock split.

The Company is authorized to issue up to 9,383,887 shares of common stock in
connection with its 1995 and 1996 stock option plans (the Plans) to directors,
employees, and consultants. The Plans provide for the issuance of stock
purchase rights, incentive stock options, or nonstatutory stock options.

The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment

F-12
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

with the Company at the original issuance cost. The Company's repurchase right
lapses at a rate determined by the stock plan administrator, but at a minimum
rate of 20% per year. Through March 31, 1999, the Company has issued 1,381,667
shares under restricted stock purchase agreements, of which 454,167 shares have
been repurchased and 546,665 are subject to repurchase at a weighted-average
price of $0.48 per share. Certain of these restricted shares were issued to
officers of the Company for full recourse promissory notes with interest rates
ranging from 5.49% to 6.48% and terms of four to five years.

Under the Plans, the exercise price for incentive stock options is at least
100% of the stock's fair market value on the date of grant for employees owning
less than 10% of the voting power of all classes of stock, and at least 110% of
the fair market value on the date of grant for employees owning more than 10%
of the voting power of all classes of stock. For nonstatutory stock options,
the exercise price is also at least 110% of the fair market value on the date
of grant for employees owning more than 10% of the voting power of all classes
of stock and no less than 85% for employees owning less than 10% of the voting
power of all classes of stock.

Under the Plans, options generally expire in 10 years. However, the term of
the options may be limited to 5 years if the optionee owns stock representing
more than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Company's Board of Directors and generally provide for shares
to vest ratably over a 4- to 5-year period.

As of March 31, 1999, there were -0- and 4,472,807 additional shares
available for grant under the 1995 and 1996 stock option plans, respectively.

On March 26, 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the "Purchase Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder plus an automatic annual increase for
fiscal year 2000 through 2004 equal to the lesser of 500,000 shares or 1% of
the Company's outstanding common stock on the last day of the immediately
preceding fiscal year. The Purchase Plan permits eligible employees to purchase
common stock through payroll deductions at a purchase price of 85% of the lower
of the fair market value of the common stock at the beginning or end of each
offering period, generally 24 months in length.

On March 26, 1999, the Company adopted the 1999 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 600,000 shares of the Company's
common stock for issuance thereunder. Each non-employee director who becomes a
member of the Board of Directors will initially be granted an option for 33,333
shares of the Company's common stock and, thereafter, an option to purchase an
additional 2,500 shares of the Company's common stock quarterly commencing in
the fiscal quarter ending September 30, 2000. Options granted under the
Directors Plan vest immediately. The exercise price of the options granted
under the Directors Plan will be at the fair value of the Company's common
stock on the date of grant.

(D) STOCK-BASED COMPENSATION

The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from October 1997 through March 1999. With respect to the stock options
granted and restricted stock sold from October 1997 to March 1999, the Company
recorded deferred stock compensation of $2,437,000 for the difference at the
grant or issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the fair value of the
underlying common stock. This amount is being

F-13
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

amortized on an accelerated basis over the vesting period, generally four to
five years, consistent with the method described in FASB Interpretation No. 28.
Had compensation costs been determined in accordance with SFAS No. 123 for all
of the Company's stock-based compensation plans, net loss and basic and diluted
net loss per share would have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 31, NINE MONTHS
-------------------------- ENDED MARCH
1996 1997 1998 31, 1999
------- ------- -------- -----------
<S> <C> <C> <C> <C>
Net loss:
As reported...................... $(2,470) $(7,991) $(10,623) $(13,973)
======= ======= ======== ========
Pro forma........................ $(2,471) $(8,003) $(10,656) $(14,133)
======= ======= ======== ========
Basic and diluted net loss per
share:
As reported...................... $ (0.53) $ (1.67) $ (2.03) $ (2.49)
======= ======= ======== ========
Pro forma........................ $ (0.53) $ (1.68) $ (2.04) $ (2.52)
======= ======= ======== ========
</TABLE>

The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumptions: no
dividends; risk-free interest rate of 5.75%, 6.50%, 5.55% and 4.78% for the
year ended June 30, 1996, 1997 and 1998, and the nine months ended March 31,
1999, respectively; and expected life of 4.40, 3.84, 3.23 and 2.49 years for
the year ended June 30, 1996, 1997 and 1998, and the nine months ended March
31, 1999, respectively.

A summary of the status of the Company's options under the Plans, is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NINE MONTHS
---------------------------------------------------- ENDED
1996 1997 1998 MARCH 31, 1999
---------------- ----------------- ----------------- -----------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- 646 $0.11 2,071 $0.28 2,877 $1.00
Granted................. 684 0.11 1,630 0.34 1,422 1.73 762 4.72
Forfeited............... (38) 0.17 (112) 0.26 (213) 0.30 (164) 0.28
Exercised............... -- -- (93) 0.13 (403) 0.22 (154) 1.35
--- ----- ----- -----
Outstanding at end of
period................. 646 $0.11 2,071 $0.28 2,877 $1.00 3,321 $1.86
=== ===== ===== =====
Options exercisable at
end of period.......... 11 $0.11 235 $0.15 385 $0.28 885 $1.24
=== ===== ===== =====
Weighted-average fair
value of options
granted during the
period with exercise
prices equal to fair
value at date of
grant.................. $0.03 $0.07 $0.06 $0.87
Weighted-average fair
value of options
granted during the
period with exercise
prices less than fair
value at date of
grant.................. -- -- $1.82 $1.55
</TABLE>

F-14
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

As of March 31, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows (number of
options in thousands):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
WEIGHTED-
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
CONTRACTUAL AVERAGE AVERAGE
RANGE OF EXERCISE NUMBER LIFE EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING (YEARS) PRICE EXERCISABLE PRICE
----------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.05 -- $0.39........ 1,666 7.91 $0.32 713 $0.31
$2.30 -- $3.38........ 1,373 9.35 2.51 72 2.07
$7.25................. 247 9.93 7.25 100 7.25
$12.00................ 35 9.99 12.00 -- --
----- ---
3,321 8.68 1.86 885 1.24
===== ===
</TABLE>

6. LEASES

In fiscal 1998, the Company entered into a new noncancelable operating lease
for its facilities expiring in June 2005. As of March 31, 1999, the Company has
a letter of credit collateralized by a certificate of deposit in the amount of
$800,000, included in deposits and other assets in the accompanying
consolidated balance sheet as of March 31, 1999, related to the new facility
lease. The Company has an additional noncancelable operating lease for its
previous facility, which expires in April 2001. However, the Company has
entered into a sublease for this facility, which also expires in April 2001.

Future minimum lease payments under noncancelable operating leases, net of
sublease payments, as of March 31, 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
NET
MINIMUM MINIMUM MINIMUM
LEASE SUBLEASE LEASE
YEAR ENDING JUNE 30, PAYMENTS PAYMENTS PAYMENTS
-------------------- -------- -------- --------
<S> <C> <C> <C>
1999 (three months).............................. $ 542 $ (261) $ 281
2000............................................. 2,062 (722) 1,340
2001............................................. 2,014 (402) 1,612
2002............................................. 1,678 -- 1,678
2003............................................. 1,727 -- 1,727
Thereafter....................................... 3,445 -- 3,445
------- ------- -------
$11,468 $(1,385) $10,083
======= ======= =======
</TABLE>

Rent expense for the years ended June 30, 1996, 1997 and 1998, and for the
nine months ended March 31, 1998 and 1999, was approximately $105,000,
$451,000, $307,000, $246,000, and $1,328,000, respectively.

F-15
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES

The differences between the income tax expense (benefit) computed at the
federal statutory rate and the Company's tax provision for all periods
presented primarily relate to net operating losses not benefited. Income tax
expense for the nine months ended March 31, 1999 relates to foreign taxes.

The individual components of the Company's deferred tax assets are as
follows (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
---------------- MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Accruals and reserves not deductible for tax
purposes...................................... $ 83 $ 146 $ 352
Property and equipment......................... 58 15 91
Capitalized start-up expenditures.............. 583 406 307
Net operating loss carryovers.................. 3,761 7,600 12,565
Research and development credit carryforwards.. 169 666 646
Foreign tax credit carryforward................ -- -- 670
------- ------- --------
Total deferred tax assets.................... 4,654 8,833 14,631
Valuation allowance............................ (4,654) (8,833) (14,631)
------- ------- --------
Net deferred tax assets...................... $ -- $ -- $ --
======= ======= ========
</TABLE>

In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for all of its deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized.

As of March 31, 1999, the Company has a net operating loss carryover for
federal and California income tax purposes of approximately $31,000,000. In
addition, the Company had federal and California research and development
credit carryforwards of approximately $367,000 and $279,000, respectively. The
Company's federal net operating loss and research and development credit
carryforwards will expire in the year 2011 through 2019 if not utilized. The
Company's California net operating loss carryforwards will expire in the year
2004. The state research and development credit can be carried forward
indefinitely. The Company also has a foreign tax credit carryforward of
$670,000 which expires in the year 2004.

Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss and tax credit carryforwards in the event of
an "ownership change" as defined in Internal Revenue Code Section 382. If the
Company has an ownership change, the Company's ability to utilize the above
mentioned carryforwards could be significantly reduced.

8. GEOGRAPHIC, SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION

During 1999 the Company adopted the provision of SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance.

The Company's chief operating decision maker is considered to be the
Company's Chief Executive Officer ("CEO"). The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues by geographic region and by product for purposes of
making

F-16
<PAGE>

PHONE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

operating decisions and assessing financial performance. Therefore, the Company
operates in a single operating segment: Software that enables the delivery of
Internet-based services to mass-market wireless telephones and related
services. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------- -----------
1996 1997 1998 1998 1999
------ ------------- ---- ------
<S> <C> <C> <C> <C> <C>
Revenue:
UP.Link Server Suite........................ $ -- $ 187 $ 1,335 $718 $2,382
UP.Browser.................................. -- 105 870 206 2,934
Consulting services......................... -- -- -- -- 1,401
------ ----- ------- ---- ------
$ -- $ 292 $ 2,205 $924 $6,717
====== ===== ======= ==== ======
</TABLE>

The Company markets its products primarily from its operations in the United
States. International sales are primarily to customers in Asia Pacific and
Europe. Information regarding the Company's revenues in different geographic
regions is as follows (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------- -----------
1996 1997 1998 1998 1999
------ ------------- ---- ------
<S> <C> <C> <C> <C> <C>
North America............................... $ -- $272 $ 1,220 $811 $2,425
Europe...................................... -- 20 513 80 2,221
Asia Pacific................................ -- -- 472 33 2,071
------ ----- ------- ---- ------
$ -- $292 $ 2,205 $924 $6,717
====== ===== ======= ==== ======
</TABLE>

Significant customer information is as follows:
<TABLE>
<CAPTION>
% OF TOTAL REVENUE
-------------------------
YEAR NINE MONTHS % OF TOTAL
ENDED ENDED ACCOUNTS
JUNE 30, MARCH 31, RECEIVABLE
---------- ------------- --------------
1997 1998 1998 1999 MARCH 31, 1999
---- ---- ----- ----- --------------
<S> <C> <C> <C> <C> <C>
Customer A............................. 20% 22% 44% 14% 7%
Customer B............................. -- 18% 1% 8% 12%
Customer C............................. 30% -- -- -- --
Customer D............................. 19% 1% 3% -- --
Customer E............................. 10% 2% -- -- --
Customer F............................. -- 2% -- 11% 3%
Customer G............................. -- -- -- 13% --
</TABLE>

Revenues aggregating 41%, 37%, 64%, and 32% of total revenues for the years
ended June 30, 1997 and 1998, and the nine months ended March 31, 1998 and
1999, respectively, were generated from customers who are also stockholders of
the Company, and whose ownership percentages ranged from 0.3% to 3.9% as of
March 31, 1999.

F-17
<PAGE>

[Description of graphics and text on inside back cover page:]

Unwired Planet works with technology providers, wireless telephone
manufacturers, Internet content providers, corporate application developers and
value added resellers.

[Unwired Planet logo in the center of concentric circles. The concentric circles
are labeled "Value Added Resellers," "Technology Providers," "Wireless Telephone
Manufacturers," "Internet Content Providers" and "Corporate Application
Developers." Each circle contains the logos of companies in the labeled
category.]

<PAGE>

[LOGO OF PHONE.COM APPEARS HERE]