NETRO CORP, S-1/A, 1999-07-28

NETRO CORP
S-1/A, 1999-07-28
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1999

REGISTRATION NO. 333-81325

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

NETRO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
CALIFORNIA 3663 77-0395029
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

3860 N. FIRST STREET
SAN JOSE, CA 95134
(408) 216-1500

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

-------------------------
GIDEON BEN-EFRAIM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NETRO CORPORATION
3860 N. FIRST STREET
SAN JOSE, CA 95134
(408) 216-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------------

COPIES TO:

<TABLE>
<S> <C>
TAE HEA NAHM LAIRD H. SIMONS III
LAURA A. GORDON WILLIAM L. HUGHES
SANJAY K. KHARE FENWICK & WEST LLP
J.D. FAY TWO PALO ALTO SQUARE
GENE YOON PALO ALTO, CA 94306
VENTURE LAW GROUP (650) 494-0600
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CA 94025
(650) 854-4488
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------------

CALCULATION OF REGISTRATION FEE

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<S> <C> <C> <C> <C>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT PRICE(1) REGISTRATION FEE(2)
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Common Stock........... 5,750,000 $9.00 $51,750,000 $14,387
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</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act.

(2) $15,985 has been previously paid by the Registrant in connection with the
filing of the Registration Statement on June 22, 1999.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JULY 28, 1999

PROSPECTUS

5,000,000 SHARES

[NETRO LOGO]

COMMON STOCK

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

This is Netro Corporation's initial public offering of common stock.

We expect the public offering price to be between $7.00 and $9.00 per
share. Currently, no public market exists for the shares. After pricing of this
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "NTRO."

INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price.................................... $ $
Underwriting discount.................................... $ $
Proceeds, before expenses, to Netro Corporation.......... $ $
</TABLE>

The underwriters may also purchase up to an additional 750,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.

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

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

MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS

DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER
INCORPORATED

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

The date of this prospectus is , 1999.
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[INSIDE FRONT COVER]

[COLOR ARTWORK]
<PAGE> 4

TABLE OF CONTENTS

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PAGE
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<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 12
Use of Proceeds............................................. 13
Dividend Policy............................................. 13
Capitalization.............................................. 14
Dilution.................................................... 15
Selected Consolidated Financial Data........................ 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 27
Management.................................................. 39
Certain Transactions........................................ 50
Principal Shareholders...................................... 52
Description of Capital Stock................................ 54
Shares Eligible for Future Sale............................. 56
Underwriting................................................ 58
Legal Matters............................................... 61
Experts..................................................... 61
Where You Can Find More Information......................... 61
Index to Consolidated Financial Statements.................. F-1
</TABLE>

INFORMATION IN PROSPECTUS

Unless specifically stated, the information in this prospectus has been
adjusted to reflect the automatic conversion of all outstanding shares of our
preferred stock into shares of our common stock, but does not take into account
the possible sale of additional shares of common stock to the underwriters to
cover over-allotments.

You should rely only on the information contained in this prospectus.
Neither we nor the underwriters have authorized any person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. Information contained on our Web site is
not part of this prospectus. We and the underwriters are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.

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PROSPECTUS SUMMARY

This summary is not complete and does not contain all the information that
may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision.

NETRO CORPORATION

We are a leading provider of high-speed, wireless, point-to-multipoint
telecommunications access equipment to competitive communications service
providers worldwide. Our AirStar system allows service providers to rapidly and
cost effectively offer integrated voice and high-speed packet data services to
their business subscribers. We have engineered AirStar to support broad service
rollouts and to operate at a number of different licensed frequencies worldwide.
AirStar derives its price-performance benefits from dynamic bandwidth allocation
and a hub and spoke architecture that allows multiple subscribers to communicate
with a single base station radio. We refer to this architecture as a
point-to-multipoint architecture. We believe that AirStar, which we recently
began shipping in limited quantities, is one of the first commercially available
high-speed wireless access systems providing integrated voice and high-speed
packet data services using a point-to-multipoint architecture.

We began shipping a trial version of the AirStar system to service
providers in the third quarter of 1998. The AirStar system is currently deployed
in trials or limited commercial deployments in 17 service providers and
enterprises worldwide. Most of these service providers are served through our
relationships with Lucent and Siemens/Italtel.

In recent years, the volume of high-speed data traffic across
communications networks worldwide has grown dramatically as the public Internet
and private corporate intranets have become essential for communications and
e-commerce. This traffic growth has created demand for cost-effective,
high-speed network access, as business users increasingly rely on applications
and content that require higher bandwidth. Increased deregulation has enabled a
number of competitive service providers to provide local network access that has
historically been offered exclusively by a local incumbent. There are a number
of alternatives to deliver high-speed access through wireline infrastructures,
but technical, performance, cost or availability issues often limit the ability
of these alternatives to satisfy the needs of service providers and businesses
worldwide. High-speed, wireless, point-to-multipoint technology offers
competitive service providers the ability to provide service rapidly to large
numbers of businesses without the constraints of a legacy wireline
infrastructure.

Competitive service providers deploying high-speed wireless networks today
must differentiate their services to a wide base of business users and compete
effectively with services offered through fiber optic cable, dedicated lines
leased from the incumbent carrier, digital subscriber lines and cable modems.
Our system is designed to address these needs and deliver the following benefits
to service providers:

Service Integration and Bandwidth on Demand. Service providers using
AirStar's flexible wireless transport can support both voice and high-speed
packet data services on the same system, enabling them to increase revenue from
their licensed spectrum. AirStar allows service providers to offer symmetrical
high-speed services, with on-demand peak transmission rates of up to 8 Mbps.

Cost-Effective Deployment and Operation. AirStar allows a competitive
service provider to compete effectively in the high-speed access market. AirStar
is designed to provide for low overall system costs and to enable service
providers to invest capital in additional equipment only when subscribers are
added. Additionally, the AirStar system allocates capacity dynamically based on
usage patterns. This feature allows a service provider to optimize the use of
radio frequencies and the deployment of equipment by expanding effective
transmission capacity.

Quality of Service and Reliability. Service providers using AirStar can
deploy voice and high-speed packet data services at different price points to
different market segments with the option for guaranteed quality of service
levels and up to 99.999% availability. The AirStar system is engineered to
enable competitive service providers to offer the same high reliability and
availability for services that incumbent service providers have historically
offered for voice services.

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Rapid Time to Market. Service providers using AirStar can achieve rapid
time to market for integrated voice and high-speed packet data services through
AirStar's efficient installation, end-to-end network management integration and
flexible wireless transport. By installing a single AirStar base station, the
service provider can attain coverage of many potential subscribers. For example,
a typical base station at frequencies of 10 GHz or 26 GHz can cover ranges from
110 to 275 square miles or 5 to 15 square miles, respectively, depending on
local conditions, and has an aggregate transmission capacity of over 600 Mbps.

We intend to capitalize on early design wins with key service providers to
increase sales as these service providers deploy high-speed services more
widely. Furthermore, as this occurs, we intend to utilize reference sales and
new product offerings to drive sales in new markets. We intend to leverage our
architecture to offer new features that will provide competitive advantages to
service providers. We are currently developing new products at new frequencies
to meet the needs of service providers worldwide. Additionally, we intend to
build upon the success that we have achieved through our relationships with
Lucent and Siemens/Italtel to meet the needs of service providers seeking to
deploy large-scale networks and to expand our customer base.

Netro was incorporated in California in November 1994. Our principal
executive offices are located at 3860 N. First Street, San Jose, California
95134, and our telephone number is (408) 216-1500.

THE OFFERING

Common stock offered................ 5,000,000 shares

Common stock to be outstanding after
this offering....................... 43,913,772 shares. The number of shares
that will be outstanding after the
offering is based on the actual number
outstanding as of June 30, 1999. It
excludes:

- options to purchase 5,784,667
shares of common stock outstanding
as of June 30, 1999 at a weighted
average exercise price of $2.56 per
share; and

- 57,028 shares of preferred stock
issuable upon exercise of
outstanding warrants at a weighted
average exercise price of $7.39 per
share that will convert into the
same number of shares of common
stock upon completion of this
offering.

Use of proceeds..................... We intend to use the offering proceeds
for general corporate purposes,
including research and development,
expansion of our sales and marketing
organizations and working capital.

Proposed Nasdaq National Market
symbol.............................. NTRO

2
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data below should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the related notes
included elsewhere in this prospectus. The information as of June 30, 1999 and
for the six months ended June 30, 1998 and 1999 is derived from unaudited and
audited consolidated financial statements included elsewhere in this prospectus.

Basic and diluted net loss per
share......................... $(10.61) $ (4.66) $ (5.11) $ (4.07) $ (2.11) $ (1.72)
Shares used to compute basic and
diluted net loss per share.... 195 2,610 4,798 7,087 6,475 8,315

Pro forma basic and diluted net
loss per share................ $ (0.84) $ (0.38)
Shares used to compute pro forma
basic and diluted net loss per
share......................... 34,391 37,628
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $19,887 $56,087
Working capital............................................. 16,435 52,635
Total assets................................................ 32,910 69,110
Long-term debt and capital leases, net of current portion... 4,282 4,282
Total shareholders' equity.................................. 17,341 53,541
</TABLE>

For an explanation of the determination of the number of shares used to
compute basic and diluted net loss per share and pro forma basic and diluted net
loss per share, see note 2 of notes to consolidated financial statements.

The consolidated balance sheet data as of June 30, 1999, as adjusted,
reflects our sale of the 5,000,000 shares of common stock offered by this
prospectus at an assumed initial public offering price of $8.00 per share, after
deducting the estimated underwriting discount and offering expenses that we will
pay. See "Use of Proceeds" and "Capitalization."

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<PAGE> 8

RISK FACTORS

Before investing in our common stock, you should be aware that there are
various risks inherent in our business, including those described below. The
value of your investment may increase or decline and could result in a loss. You
should carefully consider the following factors as well as other information
contained in this prospectus before deciding to invest in our common stock.

WE HAVE A HISTORY OF LOSSES, EXPECT FUTURE LOSSES AND MAY NEVER ACHIEVE
PROFITABILITY

As of June 30, 1999, we had an accumulated deficit of $82.0 million, and
we expect to continue to incur net losses. We anticipate continuing to incur
significant sales and marketing, research and development and general and
administrative expenses and, as a result, we will need to generate significantly
higher revenues to achieve and sustain profitability. Our financial results to
date are largely based on sales of AirMAN, a predecessor product, which we
discontinued in September 1998 and customer trials of AirStar. Although our
AirStar revenues have grown in recent quarters, our past results should not be
relied on as indications of future performance. We cannot be certain that we
will realize sufficient revenues to achieve and sustain profitability. We
incurred net losses of approximately $12.2 million, $24.5 million, $28.8 million
and $14.3 million in 1996, 1997 and 1998 and the six months ended June 30, 1999.

OUR BUSINESS IS SUBJECT TO MANY FACTORS THAT COULD CAUSE OUR QUARTERLY OPERATING
RESULTS TO FLUCTUATE AND OUR STOCK PRICE TO BE VOLATILE

Our quarterly and annual operating results have fluctuated in the past and
are likely to fluctuate significantly in the future due to the risk factors
described in this section. It is likely that in some future quarter our
operating results will fall below the expectations of securities analysts and
investors. In this event, the market price of our common stock could
significantly decline.

DUE TO OUR LIMITED OPERATING HISTORY AND OUR PRIOR DEPENDENCE ON A DISCONTINUED
PRODUCT, IT IS DIFFICULT TO PREDICT FUTURE OPERATING RESULTS OR OUR STOCK PRICE

We have generated only limited revenues to date, most of which have come
from sales of AirMAN. Due to our limited operating history and our prior
dependence on AirMAN, it is difficult for us to predict future results of
operations. Investors in our common stock must consider our business and
prospects in light of our historical dependence on a discontinued product line.

WE HAVE NOT MANUFACTURED OUR PRODUCTS IN SUBSTANTIAL VOLUMES. IF WE ARE UNABLE
TO DO SO IN A COST-EFFICIENT WAY, OUR BUSINESS WILL BE ADVERSELY AFFECTED

Our products are commercially available only in limited quantities. We
have only recently begun low volume manufacturing runs with two contract
manufacturers. If we or our manufacturers are unable to develop processes by
which we can manufacture substantial volumes of our products at the required
quality and expected costs in relatively short periods of time, our financial
results will suffer. Manufacturing our products, particularly the radio elements
of our products, is complex and difficult. One of our contract manufacturers
does not have a history of producing radio elements on a large scale. In
addition, many of our contracts with distributors and system integrators provide
for financial penalties in the event of a delay in delivery of products.

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IF WE ARE UNABLE TO DEPLOY OUR PRODUCTS ON A LARGE SCALE OR INTEGRATE THEM INTO
A LARGE-SCALE NETWORK ENVIRONMENT, WE COULD LOSE SALES OPPORTUNITIES, SUFFER
INJURY TO OUR REPUTATION, OR EXPERIENCE WARRANTY CLAIMS

To date, we have launched our products only in small-scale installations
and trial deployments. If our products fail, or do not function adequately, in a
large-scale deployment or in a network environment, we could experience:

- delays in or losses of sales opportunities;

- diversion of development resources;

- injury to our reputation; and

- increased service, warranty and replacement costs.

In addition, our products may contain undetected or unresolved errors when
they are first introduced or as a result of changes we make to reduce
manufacturing costs. Our products are integrated with other network elements.
There may be incompatibilities between these elements and our products that
adversely affect the service provider or its subscribers.

IF WE CANNOT REDUCE OUR PRODUCT COSTS, POTENTIAL CUSTOMERS WILL NOT PURCHASE OUR
PRODUCTS AND OUR RESULTS OF OPERATIONS WILL SUFFER

Market acceptance of our products will depend in part on reductions in the
unit cost of our products. If we cannot reduce the cost of our products, our
product sales, and consequently our results of operations, will suffer. If
prices for high-speed access alternatives continue to decline, we may not become
profitable. We believe that the price for high-speed wireless access equipment
is driven by the prevailing price for other high-speed access technologies,
especially leased lines. Recently, the price of leased lines has declined
significantly in many countries. In addition, if this trend continues, service
providers might be more likely to use leased lines than to introduce new
technology such as our products, which would adversely affect our market share
and pricing. Our cost reduction efforts may not allow us to keep pace with
competitive pricing pressures or may not lead to improved gross margins.

WE DEPEND ON TWO CONTRACT MANUFACTURERS. IF THESE MANUFACTURERS ARE UNABLE TO
FILL OUR ORDERS ON A TIMELY BASIS, AND WE ARE UNABLE TO FIND ALTERNATIVE
SOURCES, WE MAY BE UNABLE TO DELIVER PRODUCTS TO MEET CUSTOMER ORDERS

We currently have relationships with two contract manufacturers of our
products. We manufacture only small quantities of products at our own
facilities. If our manufacturers are unable or unwilling to continue
manufacturing our components in required volumes, we would have to identify and
train acceptable alternative manufacturers, which could take as long as six
months and cause our results of operations to suffer.

Our experience with these manufacturers provides us with no basis to
project their delivery schedules, yields or costs. In addition, few
manufacturers produce radios like ours on a large scale. It is possible that a
source may not be available to us when needed, and we may not be able to satisfy
our production requirements at acceptable prices and on a timely basis, if at
all. Any significant interruption in supply would affect the allocation of
products to customers, which in turn could have an adverse effect on our
business.

BECAUSE SOME OF OUR KEY COMPONENTS ARE FROM SOLE SOURCE SUPPLIERS OR REQUIRE
LONG LEAD TIMES, OUR BUSINESS IS SUBJECT TO UNEXPECTED INTERRUPTIONS, WHICH
COULD CAUSE OUR OPERATING RESULTS TO SUFFER

Many of our key components have long lead times, are purchased from sole
source vendors for which alternative sources are not currently available and are
complex to manufacture. In the event of a reduction or interruption of supply,
or a degradation in quality, as many as six months could be required before we
would begin receiving adequate supplies from alternative suppliers, if any. As a
result, product shipments could be delayed and our revenues and results of
operations would suffer.

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<PAGE> 10

For example, we purchase our base station shelf from Cisco Systems, Inc.
under an agreement that terminates in February 2000. Cisco has recently acquired
interests in companies with high-speed wireless technology, and we cannot be
certain that Cisco will continue to supply us after the termination of the
current agreement. In addition, we purchase most of our electronic boards from
Solectron, one of our contract manufacturers, and other components from other
sole source and long lead time vendors.

IF WE DO NOT DEVELOP NEW PRODUCTS AND PRODUCT FEATURES IN RESPONSE TO CUSTOMER
REQUIREMENTS OR IN A TIMELY WAY, CUSTOMERS WILL NOT BUY OUR PRODUCTS

Our inability to develop on a timely basis new products or product
features, or the failure of new products or product features to achieve market
acceptance, could adversely affect our business. We may experience design or
manufacturing difficulties that could delay or prevent our development,
introduction or marketing of new products and enhancements, any of which could
cause us to incur unexpected expenses or lose revenues. For example, the first
trial shipments of AirStar were delayed for almost one year due to technical
problems. In addition, some of our customers have conditioned their future
purchases of our products on the addition of product features. Furthermore, in
order to compete in many markets, we will have to develop different versions of
our existing products that operate at different frequencies and comply with
diverse, new or varying governmental regulations in each market.

WE DEPEND ON TWO SYSTEM INTEGRATORS FOR MOST OF OUR REVENUES. IF THESE SYSTEM
INTEGRATORS DO NOT PROMOTE OR PURCHASE OUR PRODUCTS, OUR BUSINESS WILL BE
ADVERSELY AFFECTED

We sell most of our products through two system integrators. The loss of
either of these system integrators or the delay of significant orders from these
system integrators, even if only temporary, could, among other things:

- reduce or delay our revenues;

- harm our reputation in the industry; or

- reduce our ability to predict our cash flow accurately.

Aggregate sales through these two system integrators accounted for
approximately 31% of our revenues for 1998, and approximately 80% of our
revenues for the six months ended June 30, 1999. Accordingly, unless and until
we diversify and expand our customer base, our future success will significantly
depend on the timing and size of future purchase orders, if any, from these two
system integrators. There is a limited number of system integrators that have
the financial resources or technical expertise to sell, or to integrate, our
products globally. If one or both of our system integrators will not sell,
service or integrate our products, and we cannot identify other system
integrators as replacements, we would be limited in our ability to sell our
products.

Our relationships with our system integrators are non-exclusive and do not
contain minimum purchase commitments. Should either of our system integrators
cease to emphasize systems that include our products, choose to emphasize
alternative access technologies or promote products of our competitors, our
revenues and consequently results of operations would be adversely affected. For
example, Siemens has an equity interest in, and a commercial relationship with,
one of our competitors, which may motivate Siemens to select this competitor's
solutions over our own in the future.

IF HIGH-SPEED WIRELESS TELECOMMUNICATIONS TECHNOLOGY OR OUR IMPLEMENTATION OF
THIS TECHNOLOGY IS NOT ACCEPTED BY SERVICE PROVIDERS, WE WILL NOT BE ABLE TO
SUSTAIN OR GROW OUR BUSINESS

Our future success is substantially dependent on whether high-speed
wireless telecommunications access equipment gains market acceptance. All of our
products are based on this technology. In the event that service providers adopt
technologies other than the high-speed wireless technology that we offer, we may
not be able to sustain or grow our business. Service providers continuously
evaluate alternative high-speed access technologies, including wireline
technologies such as digital subscriber line, cable modem, optical fiber cable
and dedicated lines leased from incumbent carriers, as well as different
wireless

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<PAGE> 11

technologies. In addition, widespread acceptance of our technology may be
hindered by inherent technological limitations, such as a need for a clear
line-of-sight for transmissions and a reduction in coverage radius in areas that
experience heavy rain.

THE MAJORITY OF SERVICE PROVIDERS USING OUR PRODUCTS ARE EMERGING COMPANIES WITH
UNPROVEN BUSINESS MODELS. IF THESE SERVICE PROVIDERS DO NOT SUCCEED, THERE WILL
BE NO MARKET FOR OUR PRODUCTS

Most communications service providers using our products are emerging
companies with unproven business models. If these new service providers do not
succeed, there will be no market for our products. Neither they nor we have
experience in integrating an end-to-end service network. The inability of
emerging service providers to acquire and keep customers, acquire spectrum
licenses, successfully raise needed funds or respond to any trends such as price
reductions for their services or diminished demand for communications services
generally, could cause them to reduce their capital spending on network
buildouts. If competitive service providers defer or curtail their capital
spending programs, sales of our products might be impacted, which would have an
adverse effect on our business.

WE HAVE A LONG SALES CYCLE, WHICH COULD CAUSE OUR RESULTS OF OPERATIONS AND
STOCK PRICE TO FLUCTUATE

We believe our sales cycles are long and unpredictable. As a result, our
revenues may fluctuate from quarter to quarter and fail to correspond with our
expenses. This would cause our operating results and stock price to fluctuate.
System integrators and service providers typically perform numerous tests and
extensively evaluate products before incorporating them into networks. The time
required for testing, evaluation and design of our products into the service
provider's network typically ranges from six to twelve months. If a service
provider decides to supply commercial service with our products, it can take an
additional six to twelve months before a service provider commences deployment
of our products. Some additional factors that affect the length of our sales
cycle include:

- testing and evaluation;

- acquisition of roof rights;

- deployment and planning of network infrastructure;

- complexity of a given network;

- scope of a given project;

- availability of spectrum; and

- regulatory issues.

In addition, the delays inherent in our sales cycle raise additional risks
of service provider decisions to cancel or change their product plans. Our
business could be adversely affected if a significant customer reduces or delays
orders during our sales cycle or chooses not to deploy networks incorporating
our products.

INTENSE COMPETITION IN THE MARKET FOR COMMUNICATIONS EQUIPMENT COULD PREVENT US
FROM INCREASING OR SUSTAINING REVENUES OR ACHIEVING OR SUSTAINING PROFITABILITY

The market for high-speed, point-to-multipoint access products is rapidly
evolving and highly competitive. Increased competition is likely to result in
price reductions, shorter product life cycles, reduced gross margins, longer
sales cycles and loss of market share, any of which would adversely affect our
business. As a provider of high-speed wireless access products, we compete with
a number of large telecommunications equipment suppliers, including Alcatel,
Bosch, Ericsson, Hughes, Newbridge, Nortel and Spectrapoint, a newly formed
joint venture between Cisco and Motorola, as well as with smaller start-up
companies. In addition, well capitalized companies such as Nokia are potential
entrants into the market. As a technology, high-speed wireless access products
compete with other high-speed access solutions, such as digital subscriber
lines, fiber optic cable, cable modem technologies, leased lines and satellite
technologies.

7
<PAGE> 12

We expect our competitors to continue to improve the performance of their
current products and to introduce new products or new technologies that may
supplant or provide lower cost alternatives to our products. To be competitive,
we must continue to invest significant resources in research and development,
sales and marketing and customer support. We cannot be sure that we will have
sufficient resources to make these investments or that we will be able to make
the technological advances necessary to be competitive. As a result, we may not
be able to compete effectively against our competitors.

OUR FUTURE OPERATING RESULTS ARE DEPENDENT ON THE SALES OF A SINGLE PRODUCT; IF
THERE ARE UNEXPECTED CHANGES IN REVENUES FROM THIS PRODUCT, WE WILL NOT HAVE
OTHER PRODUCTS TO OFFSET THE NEGATIVE IMPACT ON OUR OPERATING RESULTS

We currently derive substantially all of our revenues from our AirStar
products and expect that this will continue for the foreseeable future. If there
are unexpected changes in revenues from this product, we will not have other
products to offset the negative impact on our operating results. Any reduction
in the demand for our current products or our failure to successfully develop,
market and introduce new or enhanced products could adversely affect our
business. Many of the risk factors listed in this section could negatively
affect sales of our current or new products.

IF WE CANNOT DEVELOP PRODUCTS THAT WORK WITH DIFFERENT STANDARDS, WE WILL BE
UNABLE TO SELL OUR PRODUCTS

Many countries require communications equipment used in their country to
comply with specific regulations, including safety regulations, spectrum
allocation schemes and standards. If we cannot develop products that work with
different standards we will be unable to sell our products. If compliance proves
to be more expensive or time consuming than we anticipate, our business would be
adversely affected. Some countries have not completed their spectrum allocation
process. We have not completed all activities necessary to comply with existing
regulations and requirements in most of the countries in which we intend to sell
our products. Furthermore, standards and regulatory requirements are subject to
change. For example, standards for antenna design promulgated by the European
Telecommunications Standards Institute are in flux.

IF WE ARE UNABLE TO MANAGE OUR INTERNATIONAL OPERATIONS EFFECTIVELY, OUR
BUSINESS WOULD BE ADVERSELY AFFECTED

Sales in foreign countries accounted for 76% of our revenues in 1998 and
36% in the six months ended June 30, 1999. In addition, most equipment purchased
by domestic customers has been shipped to international service providers. Our
international operations are subject to a number of risks and uncertainties,
including:

- the difficulties and costs of obtaining regulatory approvals for our
products;

- unexpected changes in regulatory requirements; and

- legal uncertainties regarding liability, tariffs and other trade
barriers.

Any of these factors could have an adverse impact on our existing
international operations and business or impair our ability to expand into
international markets.

WE DEPEND ON A SMALL NUMBER OF CUSTOMERS. CHANGES IN TIMING AND SIZE OF THESE
CUSTOMERS' ORDERS MAY CAUSE OUR OPERATING RESULTS AND STOCK PRICE TO FLUCTUATE

We sell our products to a small number of customers. Unless and until we
diversify and expand our customer base, our future success will significantly
depend on:

- the timing and size of future purchase orders, if any, from our
largest customers;

- the product requirements of these customers;

- the financial and operational success of these customers; and

- the success of service providers that have deployed our products.

Sales to our largest customers have in the past fluctuated and may in the
future fluctuate significantly from quarter to quarter and year to year.

8
<PAGE> 13

MANY PROJECTS THAT INCLUDE OUR PRODUCTS REQUIRE SYSTEM INTEGRATION EXPERTISE AND
THIRD-PARTY FINANCING, WHICH WE ARE UNABLE TO PROVIDE. IF SOURCES FOR SYSTEM
INTEGRATION OR FINANCING CANNOT BE OBTAINED AS NEEDED, SERVICE PROVIDERS MAY NOT
SELECT OUR PRODUCTS

Some service providers using our products purchase them as a part of a
larger network deployment program that can require capital expenditures in the
hundreds of millions of dollars. In some circumstances, these service providers
require their equipment vendors to integrate their equipment and finance the
deployment of these networks. We will be unable to provide this integration or
financing and therefore will have to rely on the ability of our system
integrators or third parties to integrate or finance these transactions. In the
event that we are unable to identify distributors and system integrators that
are able to provide this integration or financing on our behalf, we would be
unable to compete for the business of some service provider accounts and our
business might be adversely affected.

IF WE ARE UNABLE TO HIRE OR RETAIN OUR PERSONNEL, WE MIGHT NOT BE ABLE TO
OPERATE OUR BUSINESS SUCCESSFULLY

Given our early stage of development, we are dependent on our ability to
attract, retain and motivate high caliber personnel. The loss of the services of
any key personnel or our inability to hire new personnel could restrict our
ability to compete effectively. Competition for qualified personnel in our
industry and in the Silicon Valley is intense, and we may not be successful in
attracting and retaining these personnel. For example, in 1998, both our Senior
Vice President, Research and Development and Engineering and our Chief Scientist
resigned to pursue another opportunity. There are only a limited number of
people with the requisite skills, particularly people with millimeter wave radio
expertise. We are also dependent on the continued contributions of our principal
sales, engineering and management personnel, many of whom would be difficult to
replace. We currently do not maintain key person life insurance on any of our
key executives.

IF WE FAIL TO MANAGE OUR GROWTH, OUR BUSINESS WILL BE ADVERSELY AFFECTED

We anticipate that expansion in our personnel, office locations and
systems will be required to address future growth. If we fail to implement new
management, accounting and control systems effectively, our business will be
adversely affected.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY ADVERSELY AFFECT
OUR BUSINESS

Our success and ability to compete is dependent in part on our proprietary
technology. Any infringement of our proprietary rights could require litigation
and result in significant litigation costs, and any failure to protect our
proprietary rights adequately could result in our competitors offering similar
products, potentially resulting in loss of a competitive advantage and decreased
revenues. Existing patent, copyright, trademark and trade secret laws afford
only limited protection. In addition, the laws of some foreign countries do not
protect our proprietary rights to the same extent as do the laws of the United
States. Furthermore, policing the unauthorized use of our products is difficult.

CLAIMS THAT WE INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS COULD RESULT IN
SIGNIFICANT EXPENSES OR RESTRICTIONS ON OUR ABILITY TO SELL OUR PRODUCTS IN
PARTICULAR MARKETS

From time to time, third parties may assert patent, copyright, trademark
and other intellectual property rights to technologies and in various
jurisdictions that are important to our business. Any claims could be
time-consuming, result in costly litigation, divert the efforts of our technical
and management personnel, cause product shipment delays or require us to enter
into royalty or licensing agreements, any of which could have an adverse effect
on our operating results. Royalty or licensing agreements, if required, may not
be available on terms acceptable to us, if at all. In addition, in our sales
agreements, we agree to indemnify our customers for any expenses or liabilities
resulting from claimed infringements of patents, trademarks or copyrights of
third parties.

9
<PAGE> 14

IF WE, OUR SUPPLIERS, SYSTEM INTEGRATORS, RESELLERS OR SERVICE PROVIDERS FAIL TO
BE YEAR 2000 COMPLIANT, OUR BUSINESS MIGHT BE SEVERELY DISRUPTED

The risk that software or hardware inaccurately processes dates following
the year 2000 presents several areas of risk for our business. In particular, we
are subject to:

- costs associated with the failure of our products to be year 2000
compliant, including potential warranty or other claims from our
customers, which may result in significant expenses to us;

- business shutdowns or slowdowns as a result of a failure of the
internal management systems we use to run our business, which could
disrupt our business operations;

- interruption of product or component supplies, or a reduction in
product quality, as a result of the failure of systems used by our
suppliers; and

- reductions or deferrals in sales activities as a result of year 2000
compliance issues of our distributors and system integrators.

CONTROL BY OUR EXISTING SHAREHOLDERS COULD DISCOURAGE POTENTIAL ACQUISITIONS OF
OUR BUSINESS THAT OTHER SHAREHOLDERS MAY CONSIDER FAVORABLE

Upon completion of this offering, our executive officers, directors and 5%
or greater shareholders and their affiliates will own 19,337,585 shares or
approximately 44% of the outstanding shares of common stock. Acting together,
these shareholders would be able to control all matters requiring approval by
shareholders, including the election of directors. This concentration of
ownership could have the effect of delaying or preventing a change in our
control or otherwise discouraging a potential acquirer from attempting to obtain
control of us, which in turn could have an adverse effect on the market price of
our common stock or prevent our shareholders from realizing a premium over the
market price for their shares of common stock.

OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DISCOURAGE POTENTIAL ACQUISITIONS
OF OUR BUSINESS BY THIRD PARTIES THAT SHAREHOLDERS MAY CONSIDER FAVORABLE

Some provisions of our Articles of Incorporation and Bylaws and of
California law may discourage, delay or prevent a merger or acquisition that
shareholders may consider favorable. This may reduce the market price of our
common stock. A summary of these provisions is included in "Description of
Capital Stock -- Anti-Takeover Provisions."

SUBSTANTIAL NUMBERS OF SHARES OF OUR COMMON STOCK WILL BECOME AVAILABLE FOR SALE
IN THE PUBLIC MARKET SIMULTANEOUSLY, WHICH COULD CAUSE THE MARKET PRICE OF OUR
STOCK TO DECLINE

Sales of substantial amounts of common stock in the public market
following this offering, or the appearance that a large number of shares is
available for sale, could cause the market price of our common stock to decline.
Upon the expiration of lock-up agreements between our shareholders and us or
Merrill Lynch 38,212,364 shares of common stock will become eligible for sale
simultaneously. Also, Merrill Lynch may, in its sole discretion and at any time,
release all or any portion of the securities subject to lock-up agreements. In
addition to the adverse effect a price decline could have on holders of common
stock, that decline would likely impede our ability to raise capital through the
issuance of additional shares of common stock or other equity securities.

WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL TO FUND OUR OPERATIONS ON
REASONABLE TERMS

If our capital requirements vary from those currently planned, we may
require additional financing sooner than anticipated. If we raise additional
funds through the issuance of equity securities, the percentage ownership of our
shareholders will be reduced, shareholders may experience additional dilution,
or these equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If we raise additional funds through
the issuance of debt securities, those securities would

10
<PAGE> 15

have rights, preferences and privileges senior to holders of common stock, and
the terms of this debt could impose restrictions on our operations. Additional
financing may not be available when needed on terms favorable to us or at all.
If adequate funds are not available or are not available on acceptable terms, we
may be unable to develop or enhance our services, take advantage of future
opportunities or respond to competitive pressures, which could adversely affect
our business.

OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY BE UNABLE TO RESELL YOUR SHARES AT
OR ABOVE THE OFFERING PRICE

There previously has been no public market for our common stock. We cannot
predict the extent to which investor interest in us will lead to the development
of a liquid trading market. The initial public offering price for the shares
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. The market price of our common stock could be subject to wide
fluctuations in response to many risk factors listed in this section.

11
<PAGE> 16

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including:

- uncertainty regarding the commercial acceptance of high-speed wireless
technologies;

- uncertainty regarding our future operating results;

- our ability to introduce new products;

- delays or losses of sales due to long sales and implementation cycles
for our products;

- the possibility of lower prices, reduced gross margins and loss of
market share due to increased competition; and

- increased demands on our resources due to anticipated growth.

In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information or future events.

12
<PAGE> 17

USE OF PROCEEDS

We estimate our net proceeds from the sale of the 5,000,000 shares of our
common stock offered in this offering to be approximately $36.2 million, or
approximately $41.8 million if the underwriters' over-allotment option is
exercised in full, based on an assumed initial public offering price of $8.00
per share and after deducting the estimated underwriting discount and offering
expenses.

We intend to use the net proceeds from this offering for general corporate
purposes, including research and development, expansion of our sales and
marketing organizations and working capital. Pending these uses, we intend to
invest the net proceeds from this offering in short-term, investment-grade,
interest-bearing securities.

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, under our loan agreement with Silicon
Valley Bank, subject to limited exceptions, we may not pay dividends on our
capital stock.

13
<PAGE> 18

CAPITALIZATION

The following table summarizes our capitalization as of June 30, 1999 as
follows:

- on an actual basis;

- on a pro forma basis to give effect to the conversion of all
outstanding shares of preferred stock into common stock; and

- on a pro forma, as adjusted basis to reflect the receipt of the net
proceeds from our initial public offering and the conversion of all
outstanding shares of preferred stock into common stock.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments........... $ 19,887 $ 19,887 $ 56,087
======== ======== ========
Long-term debt and capital leases, net of current portion... $ 4,282 $ 4,282 $ 4,282
-------- -------- --------
Shareholders' equity:
Preferred stock, 32,692,517 shares authorized, 29,902,283
shares outstanding, actual; no shares outstanding, pro
forma; 5,000,000 shares authorized and no shares
outstanding, pro forma as adjusted..................... 97,908 -- --
Common stock, 60,000,000 shares authorized, 9,011,489
shares outstanding, actual; 38,913,772 shares
outstanding, pro forma; 100,000,000 shares authorized,
43,913,772 shares outstanding, pro forma as
adjusted(1)............................................ 6,451 104,359 140,559
Note receivable from shareholder.......................... (800) (800) (800)
Deferred stock compensation............................... (4,325) (4,325) (4,325)
Accumulated deficit....................................... (81,893) (81,893) (81,893)
-------- -------- --------
Total shareholders' equity............................. 17,341 17,341 53,541
-------- -------- --------
Total capitalization.............................. $ 21,623 $ 21,623 $ 57,823
======== ======== ========
</TABLE>

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

(1) The number of shares of common stock outstanding is based on the actual
number of shares outstanding as of June 30, 1999. It excludes:

- 5,784,667 shares of common stock issuable upon exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price
of $2.56 per share; and

- 57,028 shares of preferred stock issuable upon exercise of warrants
outstanding as of June 30, 1999 at a weighted average exercise price
of $7.39 per share that will convert into the same number of shares of
common stock upon completion of this offering.

For more information regarding our equity benefit plans, see
"Management -- Stock Plans" and note 9 of notes to consolidated financial
statements.

14
<PAGE> 19

DILUTION

As of June 30, 1999, our net tangible book value was approximately $17.3
million, or $0.45 per share of common stock, after giving effect to the
conversion of all outstanding shares of preferred stock into common stock. Net
tangible book value represents the total amount of our tangible assets less
total liabilities divided by the number of shares of common stock outstanding.
Without taking into account any other changes in net tangible book value after
June 30, 1999, other than to give effect to the receipt by us of the net
proceeds from the sale of the 5,000,000 shares of common stock in this offering
at an assumed initial public offering price of $8.00 per share, our pro forma
net tangible book value as of June 30, 1999 would have been approximately $53.5
million, or $1.22 per share. This represents an immediate increase in net
tangible book value of $0.77 per share to existing shareholders and an immediate
dilution of $6.78 per share to new investors purchasing shares in this offering.
The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $8.00
Net tangible book value per share as of June 30, 1999..... $0.45
Increase per share attributable to new investors.......... 0.77
-----
Pro forma net tangible book value per share after this
offering.................................................. 1.22
-----
Dilution per share to new investors......................... $6.78
=====
</TABLE>

The following table summarizes, on a pro forma basis, as of June 30, 1999:

- the number of shares of common stock purchased from us;

- the total consideration paid to us;

- the average price per share paid by existing shareholders; and

- the average price per share paid by new investors, before deducting
the estimated underwriting discount and offering expenses payable by
us.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 38,913,772 88.6% $ 98,786,000 71.2% $2.54
New investors..................... 5,000,000 11.4 40,000,000 28.8 8.00
---------- ----- ------------ -----
Total........................... 43,913,772 100.0% $138,786,000 100.0%
========== ===== ============ =====
</TABLE>

If the underwriters' over-allotment option is exercised in full, the
number of shares held by new investors will increase to 5,750,000, or 12.9% of
the total shares of common stock outstanding after this offering.

The information in the above table excludes:

- 5,784,667 shares of common stock issuable upon exercise of options
outstanding as of June 30, 1999 at a weighted average exercise price
of $2.56 per share;

- an aggregate of 3,293,981 shares available for future issuance under
our 1996 Stock Option Plan, 1997 Directors' Stock Option Plan, 1999
Executive Stock Plan and 1999 Employee Stock Purchase Plan as of June
30, 1999. See "Management -- Stock Plans" and note 9 of notes to
consolidated financial statements.

15
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The statement of operations
data for the years ended December 31, 1996, 1997 and 1998 and the six months
ended June 30, 1999, and the balance sheet data as of December 31, 1997 and 1998
and June 30, 1999, are derived from and are qualified in their entirety by our
consolidated financial statements that have been audited by Arthur Andersen LLP,
independent public accountants, which are included elsewhere in this prospectus.
The statement of operations data set forth below for the period from November
14, 1994 (inception) to December 31, 1995 and the balance sheet data as of
December 31, 1995 and 1996 are derived from our audited consolidated financial
statements not included in this prospectus. The statement of operations data for
the six months ended June 30, 1998 is derived from unaudited consolidated
financial statements, was prepared on the same basis as the audited consolidated
financial statements and includes in the opinion of our management all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth in those financial statements.
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>
PERIOD FROM
NOVEMBER 14,
1994 SIX MONTHS
(INCEPTION) TO YEAR ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, -------------------------------- -------------------
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............................... $ -- $ 731 $ 5,601 $ 5,438 $ 3,273 $ 5,338
Cost of revenues....................... -- 619 8,273 9,640 4,273 4,171
------- -------- -------- -------- -------- --------
Gross profit (loss).................... -- 112 (2,672) (4,202) (1,000) 1,167
------- -------- -------- -------- -------- --------
Operating expenses:
Research and development............. 1,598 10,446 15,289 16,143 8,769 9,183
Sales and marketing.................. -- 1,293 3,776 4,819 2,330 2,563
General and administrative........... 664 1,189 3,500 3,968 1,900 3,103
Amortization of deferred stock
compensation....................... -- -- -- -- -- 509
------- -------- -------- -------- -------- --------
Total operating expenses........... 2,262 12,928 22,565 24,930 12,999 15,358
------- -------- -------- -------- -------- --------
Loss from operations................... (2,262) (12,816) (25,237) (29,132) (13,999) (14,191)
Other income (expense), net:
Interest income...................... 193 669 1,001 1,260 736 454
Interest expense..................... -- (26) (298) (956) (418) (552)
------- -------- -------- -------- -------- --------
Total other income (expense),
net.............................. 193 643 703 304 318 (98)
------- -------- -------- -------- -------- --------
Net loss............................... $(2,069) $(12,173) $(24,534) $(28,828) $(13,681) $(14,289)
======= ======== ======== ======== ======== ========
Basic and diluted net loss per share... $(10.61) $ (4.66) $ (5.11) $ (4.07) $ (2.11) $ (1.72)
Shares used to compute basic and
diluted net loss per share........... 195 2,610 4,798 7,087 6,475 8,315
Pro forma basic and diluted net loss
per share............................ $ (0.84) $ (0.38)
Shares used to compute pro forma basic
and diluted net loss per share....... 34,391 37,628
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------- JUNE 30,
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ $14,350 $13,913 $25,706 $15,128 $19,887
Working capital.......................................... 13,821 12,687 25,657 12,523 16,435
Total assets............................................. 15,114 19,833 37,708 26,788 32,910
Long-term debt and capital leases, net of current
portion................................................ -- 556 4,209 4,547 4,282
Total shareholders' equity............................... 14,538 16,127 27,005 13,893 17,341
</TABLE>

16
<PAGE> 21

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

This section contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ substantially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read together with our consolidated financial
statements and related notes included elsewhere in this prospectus.

OVERVIEW

We are a leading provider of high-speed, wireless, point-to-multipoint
telecommunications access equipment to competitive communications service
providers worldwide. We were incorporated in 1994 and introduced our first
product, the AirMAN system, in 1996. Recognizing the competitiveness of the
market of AirMAN products, we decided to devote substantially all of our product
development efforts to the AirStar product from 1996 onward. The AirMAN system
was designed to provide a dedicated link to connect two high traffic nodes in a
network. Unlike the AirMAN system, the AirStar system allows multiple
subscribers to communicate with a single base station radio in a
point-to-multipoint, or hub and spoke, architecture requiring more advanced
technology. We began initial sales of an early 26 GHz AirStar system in Europe
in early 1998. With the successful trial shipments of the AirStar system, we
discontinued AirMAN in September 1998. We shipped the first trial AirStar
systems for 26 GHz in the third quarter of 1998. We then shipped a trial version
of a 10 GHz AirStar product in November 1998. Based on our success in field
trials and the receipt of limited quantities of AirStar subsystems from our
first contract manufacturer, Solectron California Corporation, we made the 26
GHz AirStar product commercially available in January 1999. However, the product
was, and continues to be, available only in limited quantities due to
manufacturing and capacity constraints.

All of our 1996 and 1997 revenues and approximately 47% of our 1998
revenues were derived from sales of the AirMAN system. Due to the product
transition, revenues declined to $5.4 million in 1998 from $5.6 million in 1997.
We had negative gross margins in each quarter of 1997 and 1998 as a result of
declining average selling prices in the market for the AirMAN system.

Currently, our revenues are generated from sales of AirStar systems
through system integrators that integrate our products, local resellers and our
direct sales force. In the first quarter of 1998, we entered into a product
supply agreement with Siemens/Italtel. In the third quarter of 1998, we signed a
product supply and joint development agreement with Lucent. For 1998 and the six
months ended June 30, 1999, international revenues represented approximately 76%
and 36% of total revenues. In addition, a substantial portion of our domestic
revenues is derived from systems intended for installation in international
locations.

Although we have historically assembled our products in-house, we are
currently in the process of outsourcing manufacturing and assembly to contract
manufacturers. Solectron began providing us with AirStar subsystems in the first
quarter of 1999. In January 1999, we also signed a manufacturing agreement with
Microelectronic Technology Inc. to obtain a second source for the AirStar radios
and to increase our manufacturing capacity. We expect these contract
manufacturers to be responsible for most of our volume production in the future.

System integrators and service providers typically perform numerous tests
and extensively evaluate products before incorporating them into networks. The
time required for testing, evaluation and design of our products into the
service provider's network typically ranges from six to twelve months. If a
service provider decides to supply commercial service with our products, it can
take an additional six to twelve months before a service provider commences
deployment of our products. During the trial period, we sell to service
providers a limited number of hubs, consisting of a base station and base radio
units, and corresponding subscriber equipment, consisting of the subscriber
access system and the subscriber radio unit. The successful completion of this
trial phase often results in another sale of additional hubs and subscriber
equipment intended for commercial service.

17
<PAGE> 22

Revenues. Our current revenues primarily consist of product revenues from
the sale of the AirStar system. Revenues from product sales are generally
recognized when:

- the product has shipped;

- we have the right to invoice the customer;

- collection of the receivable is probable; and

- we have fulfilled all contractual obligations to the customer.

Cost of Revenues. Our cost of revenues consists of contract manufacturing
costs, material costs, compensation costs, manufacturing overhead, warranty
reserves and other direct product costs.

Research and Development. Research and development expenses consist of
compensation costs, the cost of certain software development tools, consultant
fees and prototype expenses related to the design, development and testing of
our products. Our policy is to expense all research and development expenses as
incurred. For certain projects we receive third-party research and development
funding, which is offset against the related expenses. Gross research and
development expenses are costs incurred before offset from third-party research
and development funding.

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation costs, commissions, travel and related expenses for marketing,
sales and field service support personnel, as well as product management, trade
show and promotional expenses.

General and Administrative. General and administrative expenses consist
primarily of compensation costs and related expenses for executive, finance,
management information systems, human resources and administrative personnel.
These expenses also include professional fees, facilities and other general
corporate expenses.

Amortization of Deferred Stock Compensation. Amortization of deferred
stock compensation results from the granting of stock options to employees with
exercise prices per share determined to be below the estimated fair values per
share of our common stock at dates of grant. The deferred compensation that
results is being amortized to expense over the vesting periods of the individual
options, generally four years. We have recorded total deferred stock
compensation of $4.8 million through June 30, 1999.

Other Income (Expense), Net. Other income (expense), net consists
primarily of interest income earned on low-risk, short-term investments and
interest paid on outstanding debt.

Income Taxes. We have not recorded any provision for income taxes for any
of the periods presented because we have generated net losses since inception.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND 1999

Revenues. Revenues increased 63% from $3.3 million for the six months
ended June 30, 1998 to $5.3 million for the six months ended June 30, 1999. This
increase was primarily due to an increase in the number of sales of the 26 GHz
AirStar system and was partially offset by a decrease in sales of AirMAN
systems. Sales to three customers, Alpine-Energie, Italtel and Nortel,
represented 41%, 22% and 13% of revenues for the six months ended June 30, 1998.
Sales to two customers, Lucent and Italtel, represented 60% and 20% of revenues
for the six months ended June 30, 1999. Substantially all of the revenues for
these periods were generated from installations in international locations.

18
<PAGE> 23

Gross Profit. Gross profit increased from a loss of $1.0 million for the
six months ended June 30, 1998 to a profit of $1.2 million for the six months
ended June 30, 1999. This increase in gross profit was primarily due to lower
unit costs and lower labor costs associated with higher volume product sales and
greater product maturity of the AirStar system. Gross profit, as a percentage of
revenues, improved from negative 31% for the six months ended June 30, 1998 to
22% for the six months ended June 30, 1999. We anticipate that gross profit will
vary significantly from period to period until our sales and production volumes
stabilize.

Research and Development. Research and development expenses increased from
$8.8 million for the six months ended June 30, 1998 to $9.2 million for the six
months ended June 30, 1999. This increase was primarily due to an increase in
our research and development personnel, number of development projects and
related third-party design and consulting charges. These projects primarily
consisted of the development of the AirStar system at 26, 10 and 38 GHz. Gross
research and development expenses increased from $8.8 million for the six months
ended June 30, 1998 to $9.6 million for the six months ended June 30, 1999.

Sales and Marketing. Sales and marketing expenses increased from $2.3
million for the six months ended June 30, 1998 to $2.6 million for the six
months ended June 30, 1999. This increase was due to the continued expansion in
sales, technical assistance and field support personnel necessary to support
both the pre-sale and post-sale activities associated with the AirStar system.
Increased spending includes compensation costs, travel and increased sales
commissions due to higher sales.

General and Administrative. General and administrative expenses increased
from $1.9 million for the six months ended June 30, 1998 to $3.1 million for the
six months ended June 30, 1999. This increase was due to an increase in rent
expense resulting from additional office space assumed and the growth in general
and administrative personnel from 11 to 17.

Amortization of Deferred Stock Compensation. Amortization of deferred
stock compensation was $509,000 for the six months ended June 30, 1999. This
amortization is due to deferred compensation of approximately $4.8 million,
related to stock options granted in the year ended December 31, 1998 and the six
months ended June 30, 1999, which we are amortizing over the vesting periods of
the applicable options beginning in 1999.

Other Income (Expense), Net. Interest income decreased from $736,000 for
the six months ended June 30, 1998 to $454,000 for the six months ended June 30,
1999. This decrease was primarily due to less interest earned on lower average
cash balances. Interest expense increased from $418,000 for the six months ended
June 30, 1998 to $552,000 for the six months ended June 30, 1999. This increase
was primarily due to interest expense incurred due to greater utilization of
secured equipment loans and lease and bank financing for working capital.

Net Loss. Net loss increased from $13.7 million for the six months ended
June 30, 1998 to $14.3 million for the six months ended June 30, 1999. This
increase was primarily due to increases in operating expenses and other
expenses, which were offset in part by an increase in gross profit.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

Revenues. Revenues increased from $731,000 in 1996 to $5.6 million in 1997
due to increased sales of AirMAN in 1997 after its introduction in late 1996.

Revenues decreased from $5.6 million in 1997 to $5.4 million in 1998. This
decrease was primarily due to the discontinuation of the AirMAN system, which
resulted in declining revenues that more than offset the revenues generated from
the launch of the AirStar system. Substantially all of the revenues for

19
<PAGE> 24

these years were generated from installations in international locations. Sales
to major customers are as follows:

<TABLE>
<CAPTION>
REVENUES % OF TOTAL REVENUES
-------------------------- --------------------
1996 1997 1998 1996 1997 1998
------ ------ ------ ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Alpine-Energie...................... $ -- $ 655 $1,480 --% 12% 27%
Italtel............................. -- -- 799 -- -- 15
Lucent.............................. -- -- 873 -- -- 16
o.tel.o............................. 89 1,092 * 13 20 *
PanDacom............................ 580 2,181 * 79 39 *
Pele-Phone.......................... -- 1,172 541 -- 21 10
</TABLE>

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

* Sales less than 10%.

Gross Profit (Loss). Gross profit decreased from $112,000 in 1996 to a
loss of $2.7 million in 1997 due to sales discounts and inventory write-downs
related to the AirMAN system.

Gross loss increased from $2.7 million in 1997 to $4.2 million in 1998.
This increase was primarily due to pricing pressures for the AirMAN system in
its market and increased warranty reserves for the AirMAN system.

Research and Development. Research and development expenses increased from
$10.4 million in 1996 to $15.3 million in 1997. The increase was primarily due
to increases in personnel and related compensation costs, prototype material
expenses and third-party engineering charges. There were no offsets from
third-party funding in 1996 and 1997.

Research and development expenses increased from $15.3 million in 1997 to
$16.1 million in 1998. The increase was primarily due to increases in personnel
and related compensation costs, prototype material expenses, third-party
engineering charges and expenses related to the trial release of the initial
AirStar system. Gross research and development expenses increased from $15.3
million in 1997 to $17.0 million in 1998.

Sales and Marketing. Sales and marketing expenses increased from $1.3
million in 1996 to $3.8 million in 1997. This increase was primarily due to the
significant expansion in sales, technical assistance and field support personnel
necessary to support the increase in customers. Increased spending also included
compensation costs, travel and increased sales commissions due to higher sales.

Sales and marketing expenses increased from $3.8 million in 1997 to $4.8
million in 1998. The increase was primarily due to the significant expansion in
sales, technical assistance and field support personnel necessary to support
both the pre-sale and post-sale activities associated with the AirStar system.

General and Administrative. General and administrative expenses increased
from $1.2 million in 1996 to $3.5 million in 1997. The increase in general and
administrative expenses was primarily due to expansion in facilities expenses as
a result of relocating and, to a lesser extent, increases in personnel.

General and administrative expenses increased from $3.5 million in 1997 to
$4.0 million in 1998. The increase was primarily due to increased rent expense
due to relocation to larger facilities, as well as an increase in personnel from
8 to 15.

Other Income (Expense), Net. Interest income increased from $669,000 in
1996 to $1.0 million in 1997 principally due to higher average cash balances
than in 1996. Interest expense increased from $26,000 in 1996 to $298,000 in
1997 due to greater utilization of secured equipment loans and lease financing.

Interest income increased from $1.0 million in 1997 to $1.3 million in
1998 primarily due to higher average cash balances and greater short-term
investments than in 1997. Interest expense increased from $298,000 in 1997 to
$956,000 in 1998 principally due to greater utilization of secured equipment
loans and lease and bank financing for working capital.

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<PAGE> 25

Net Loss. Net loss increased from $12.2 million in 1996 to $24.5 million
in 1997 primarily due to increases in operating expenses and negative gross
profit.

Net loss increased from $24.5 million in 1997 to $28.8 million in 1998
primarily due to increases in operating expenses and negative gross profit.

QUARTERLY RESULTS OF OPERATIONS

The following tables present unaudited quarterly operating results, in
dollars and as a percentage of revenues, for the six quarters ended June 30,
1999. We believe this information reflects all adjustments (consisting only of
normal recurring adjustments) that we consider necessary for a fair presentation
of such information in accordance with generally accepted accounting principles.
The results for any quarter are not necessarily indicative of results for any
future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30,
1998 1998 1998 1998 1999 1999
------- -------- -------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
AirStar................................ $ 585 $ 650 $ 103 $ 1,574 $ 2,133 $ 3,072
AirMAN................................. 411 1,627 463 25 9 124
------- ------- ------- ------- ------- -------
Total revenues.................. 996 2,277 566 1,599 2,142 3,196
Cost of revenues......................... 1,310 2,963 2,523 2,844 1,649 2,522
------- ------- ------- ------- ------- -------
Gross profit (loss)...................... (314) (686) (1,957) (1,245) 493 674
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............... 4,257 4,512 4,430 2,944 4,224 4,959
Sales and marketing.................... 1,051 1,279 1,262 1,227 1,332 1,231
General and administrative............. 913 987 990 1,078 1,752 1,351
Amortization of deferred stock
compensation......................... -- -- -- -- 168 341
------- ------- ------- ------- ------- -------
Total operating expenses........ 6,221 6,778 6,682 5,249 7,476 7,882
------- ------- ------- ------- ------- -------
Loss from operations..................... (6,535) (7,464) (8,639) (6,494) (6,983) (7,208)
Other income (expense), net:
Interest income........................ 412 324 301 223 233 221
Interest expense....................... (194) (224) (263) (275) (272) (280)
------- ------- ------- ------- ------- -------
Total other income (expense),
net........................... 218 100 38 (52) (39) (59)
------- ------- ------- ------- ------- -------
Net loss................................. $(6,317) $(7,364) $(8,601) $(6,546) $(7,022) $(7,267)
======= ======= ======= ======= ======= =======
PERCENT OF TOTAL REVENUES:
Revenues:
AirStar................................ 59% 29% 18% 98% 99% 96%
AirMAN................................. 41 71 82 2 1 4
------- ------- ------- ------- ------- -------
Total revenues.................. 100 100 100 100 100 100
Cost of revenues......................... 132 130 446 178 77 79
------- ------- ------- ------- ------- -------
Gross profit (loss)...................... (32) (30) (346) (78) 23 21
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............... 427 198 783 184 197 155
Sales and marketing.................... 105 56 223 77 62 39
General and administrative............. 92 43 175 67 82 42
Amortization of deferred stock
compensation......................... -- -- -- -- 8 11
------- ------- ------- ------- ------- -------
Total operating expenses........ 625 297 1,181 328 349 247
------- ------- ------- ------- ------- -------
Loss from operations..................... (656) (327) (1,527) (406) (326) (226)
Other income (expense), net.............. 22 4 7 (3) (2) (1)
------- ------- ------- ------- ------- -------
Net loss................................. (634)% (323)% (1,520)% (409)% (328)% (227)%
======= ======= ======= ======= ======= =======
</TABLE>

Revenues increased for the quarters ended March 31 and June 30, 1998 due
to increased sales volumes driven by AirMAN system discounts. During these
quarters, revenues also increased due to AirStar system sales to customers for
preliminary stages of our testing program. Revenues decreased for the quarter
ended September 30, 1998 primarily due to the discontinuation of the AirMAN
system. Revenues increased for the quarters ended December 31, 1998, March 31,
1999 and June 30, 1999 due to

21
<PAGE> 26

AirStar system sales. Gross profit increased for the quarters ended September
30, 1998, December 31, 1998, March 31, 1999 and June 30, 1999 primarily due to
increased sales of AirStar systems. AirStar systems have a higher profit margin
than AirMAN systems. Research and development expenses decreased in the quarter
ended December 31, 1998 primarily due to third-party engineering funding and
fluctuations in third-party design and consulting charges and usage of prototype
material. Research and development expenses increased in the quarter ended June
30, 1999 due to fluctuations in third-party design, consulting charges and usage
of prototype materials with no offset from third-party engineering funding.
Sales and marketing expenses fluctuate on a quarterly basis due to seasonal
promotional and marketing expenses for trade shows. General and administrative
expenses increased in the quarter ended March 31, 1999 due to an increase in
rent expense resulting from additional office space assumed and one-time vendor
contract fees. Interest income decreased from the quarter ended March 31, 1998
through the quarter ended June 30, 1999, due to the decline in average cash
balances. Interest expense increased for the quarters ended June 30 and
September 30, 1998 primarily due to greater utilization of secured equipment
loans and lease financing and bank financing for working capital.

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 telecommunications
and data communications equipment industries. We may not be able to address
these risks and difficulties successfully. 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 and annual operating results have fluctuated in the past and
are likely to fluctuate significantly in the future. It is likely that in some
future quarter our operating results will fall below the expectations of
securities analysts and investors. In this event, the market price of our common
stock could significantly decline.

Some of the factors that could affect our quarterly or annual operating
results include:

- our ability to reach the required production volumes and quality
levels for our products;

- our ability to obtain sufficient supplies of sole source or long
lead-time components for our products;

- our ability to achieve cost reductions;

- the size, timing and frequency of network buildouts, which are
typically large and infrequent;

- the timing and amount of, or cancellation or rescheduling of, orders
for our products, particularly large orders from system integrators;

- our ability to introduce and support new products and to manage
product transitions; and

- a decrease in the average selling prices of our products.

Our sales cycle, which is typically between six and twelve months,
contributes to fluctuations in our quarterly operating results. Further, the
emerging and evolving nature of the market for systems such as AirStar 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 the near term. 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.

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<PAGE> 27

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through the
sale of preferred equity securities and more recently through the use of secured
loans and leases for the purchase of capital equipment and bank financing for
working capital. As of June 30, 1999, we have raised aggregate cash proceeds of
$98.0 million, before offering expenses of $220,000, through the sale of
preferred stock.

As of June 30, 1999, cash and cash equivalents were $3.0 million and
short-term investments were $16.9 million. We have a $6.0 million bank line of
credit. As of June 30, 1999, borrowings outstanding were $3.3 million and
amounts utilized for outstanding letters of credit were $400,000 under this
agreement. The line of credit is secured by eligible outstanding accounts
receivable and inventory. The borrowings under the line are due in January 2000
and accrue interest at the 30-day LIBOR plus 2.25% or the bank's prime rate, at
our option. In addition, we have secured equipment financing with three lenders
which allows a maximum borrowing of $11.8 million of which $1.7 million was
available as of June 30, 1999. As of June 30, 1999, $4.3 million remained
outstanding under these arrangements. See note 6 of notes to consolidated
financial statements.

Cash used in operating activities was $12.7 million for the six months
ended June 30, 1999 and $13.7 million for the same period in 1998. Cash used for
operations for both periods was primarily due to the net loss, partially offset
by non-cash charges.

Cash used in investing activities was $8.9 million for the six months
ended June 30, 1999, primarily due to excess cash invested in short-term
investments. Cash used in investing activities was $9.5 million for the six
months ended June 30, 1998, primarily due to excess cash invested in short-term
investments and capital equipment purchases.

Cash provided by financing activities was $18.5 million for the six months
ended June 30, 1999. Cash provided by financing activities was $12.3 million for
the six months ended June 30, 1998. Cash provided by financing activities for
both periods was primarily due to issuances of preferred stock and, to a lesser
extent, capital lease and bank financing.

We have no material commitments other than obligations under our credit
facilities and operating and capital leases. See notes 6 and 7 of notes to
consolidated financial statements. Our future capital requirements will depend
upon many factors, including the timing of research and product development
efforts and expansion of our marketing efforts. We expect to continue to expend
significant but smaller amounts on property and equipment related to the
expansion of our facilities, and on research and development laboratory and test
equipment, as the capital required for volume manufacturing is being committed
by our contract manufacturers. We provide six or twelve month forecasts to our
contract manufacturers. We generally commit to purchase products to be delivered
within the most recent 60 days covered by these forecasts with cancellation
fees. In addition, in specific instances we may agree to assume liability for
limited quantities of specialized components with lead times beyond this 60-day
period.

In future periods, we generally anticipate significant increases in our
working capital needs on a period-to-period basis primarily as a result of
planned increased product revenues. In conjunction with the expected increases
in revenues, we expect higher levels of inventory and trade accounts receivable.
While we also expect an increase in trade accounts payable and other
liabilities, we do not expect that they will offset the increases in inventory
and trade accounts receivable.

We believe that continued substantial investment in research and
development is critical to attaining our strategic product and cost-reduction
objectives. We also expect to expand our field sales and customer support
organizations as customers move from trials to large scale deployments, which
will in turn increase sales and marketing expenses. The growth of our business
and operation as a public company will require additional personnel and costs
resulting in increases in our general and administrative expenses.

We believe that the net proceeds from this offering together with our cash
and cash equivalents balances, short-term investments and funds available under
our existing line of credit will be sufficient to satisfy

23
<PAGE> 28

our cash requirements for at least the next twelve months. Our management
intends to invest our cash in excess of current operating requirements in
short-term, interest-bearing, investment-grade securities.

IMPACT OF YEAR 2000

Many currently installed computer systems and software products are coded
to accept only two-digit entries in date code fields. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. Any of our computer
programs or hardware that have date-sensitive software or embedded chips and
have not been upgraded to comply with these year 2000 requirements may recognize
a date using "00" as the year 1900 rather that the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

General Readiness Assessment. The year 2000 problem affects the
computers, software and other equipment that we use, operate or maintain for our
operations. As a result, we have formalized our year 2000 compliance plan, to be
implemented by a team of our internal information technology staff responsible
for monitoring the assessment and remediation status of our year 2000 projects
and reporting that status to our executive staff. This project team is currently
assessing the potential effect and costs of remediating the year 2000 problem
for our internal systems. To date, we have not obtained verification or
validation from any independent third parties of our processes to assess and
correct any of our year 2000 problems or the costs associated with these
activities.

Assessment of Netro's Products. Beginning in 1998, we began assessing the
ability of our products to operate properly in the year 2000. We believe that
our current products are year 2000 compliant, other than software used in our
AirMAN product. We are in the process of notifying all of our customers that are
using our AirMAN product that we have a software upgrade that fixes the
non-compliant software. Additionally, as we design and develop new products, we
subject them to testing for year 2000 compliance and the ability to distinguish
between various date formats. We expect to continue to test our software and
products for year 2000 compliance and compliance when used with other standard
operating systems or computer platforms. Accordingly, we do not believe that the
year 2000 issue presents a material exposure as it relates to our products

Assessment of Internal Infrastructure. We believe that we have identified
most of the major computers, software applications and related equipment used in
connection with our internal operations that will need to be evaluated to
determine if they must be modified, upgraded or replaced to minimize the
possibility of a material disruption to our business. Based on a review of our
computer systems, we have determined that we will be required to modify or
replace some portions of our software so that those systems will properly
utilize dates beyond December 31, 1999. We presently believe that with
modifications or replacements of existing software through our maintenance
contracts with third-party vendors, year 2000 issues can be mitigated. We expect
to complete this process before December 31, 1999.

Systems Other than Information Technology Systems. In addition to
computers and related systems, the operation of office and facilities equipment,
such as fax machines, telephone switches, security systems and other common
devices, may be affected by the year 2000 problem. We are currently assessing
the potential effect and costs of remediating the year 2000 problem on our
office equipment and our facilities in San Jose, California. We expect to
complete this process before December 31, 1999.

Costs of Remediation. We estimate the total cost to us of completing any
required modifications, upgrades or replacements of our internal systems will
not exceed $100,000, most of which we expect to incur during calendar 1999. This
estimate is being monitored, and we will revise it as additional information
becomes available. Based on the activities described above, we do not believe
that the year 2000 problem will have a material adverse effect on our business
or operating results. In addition, we have not deferred any material information
technology projects or equipment purchases as a result of our year 2000 problem
activities.

24
<PAGE> 29

Suppliers. As part of our year 2000 plan, we have contacted third-party
suppliers of components and key subcontractors used in the delivery of our
products to identify and, to the extent possible, resolve issues involving the
year 2000 problem. However, we have limited or no control over the actions of
these third-party suppliers and subcontractors. Thus, while we expect that we
will be able to resolve any significant year 2000 problems with these third
parties, if these suppliers fail to resolve any year 2000 problems a material
disruption to the operation of our business may occur. Any failure on the part
of these third parties to resolve year 2000 problems with their systems in a
timely manner could have a material adverse effect on our business. We expect to
complete this process before December 31, 1999.

Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all year 2000 problems that could materially adversely affect our
business operations before December 31, 1999. However, we believe that it is not
possible to determine with complete certainty that all year 2000 problems
affecting us have been identified or corrected. The number of devices and
systems that could be affected and the interactions among these devices and
systems are too numerous to address. In addition, no one can accurately predict
which year 2000 problem-related failures will occur or the severity, timing,
duration or financial consequences of these potential failures. As a result, we
believe that the following consequences are possible:

- a significant number of operational inconveniences and inefficiencies
for us, our contract manufacturers and our customers that will divert
management's time and attention and financial and human resources from
ordinary business activities;

- possible business disputes and claims, including claims under our
product warranty, due to year 2000 problems experienced by our
customers and incorrectly attributed to our products or performance,
which we believe will be resolved in the ordinary course of business;
and

- a few serious business disputes alleging that we failed to comply with
the terms of contracts or industry standards of performance, some of
which could result in litigation or contract termination.

Contingency Plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct year 2000 problems affecting
our internal systems are not effective. We expect to complete our contingency
plans before December 31, 1999. Depending on the systems affected, these plans
could include:

- accelerated replacement of affected equipment or software;

- short- to medium-term use of backup equipment and software or other
redundant systems;

- increased work hours for our personnel or the hiring of additional
information technology staff; and

- the use of contract personnel to correct, on an accelerated basis, any
year 2000 problems that arise or to provide interim alternate
solutions for information system deficiencies.

Our implementation of any of these contingency plans could have a material
adverse effect on our business.

Disclaimer. The discussion of our efforts and expectations relating to
year 2000 compliance are forward-looking statements. Our ability to achieve year
2000 compliance, and the level of incremental costs associated therewith, could
be adversely affected by, among other things, the availability and cost of
contract personnel and external resources, third-party suppliers' abilities to
modify proprietary software and unanticipated problems not identified in the
ongoing compliance review.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

25
<PAGE> 30

been material. Basically, all of our revenues are earned in U.S. dollars.
Operating expenses incurred by our German subsidiary are denominated primarily
in European currencies. We currently do not use financial instruments to hedge
these operating expenses. 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.

Fixed Income Investments. Our exposure to market risks from 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.

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 held-to-maturity and considered to be
short-term investments.

26
<PAGE> 31

BUSINESS

INDUSTRY BACKGROUND

In recent years, the volume of high-speed data traffic across
communications networks worldwide has grown dramatically as the public Internet
and private corporate intranets have become essential for communications and
e-commerce. International Data Corporation forecasts that the number of Internet
users worldwide will grow from approximately 142 million in 1998 to
approximately 502 million by the end of 2003. Network traffic volume is
increasing not only as a result of this growing user base, but also due to the
development of sophisticated multimedia content and the deployment of
bandwidth-consuming network applications such as e-commerce. International Data
Corporation estimates that 87% of worldwide e-commerce revenue will be generated
from business users or business-to-business transactions by 2003. These forms of
content and network applications require the transmission of large,
bandwidth-intensive files across networks. As users increasingly rely on
higher-bandwidth network applications and content for business and personal use,
they require cost-effective high-speed network access, which is often
unavailable or inadequate over the existing wireline access network
infrastructure.

Telecommunications deregulation worldwide is creating greatly expanded
opportunities for a larger group of service providers to meet the increasing
demand for high-speed network access. Increased deregulation has enabled a large
number of competitive telecommunications service providers to provide local
network access that historically was offered only by an incumbent, often
monopolistic, provider in a given geographical region. This opportunity is
increasingly global as Europe, Latin America and Japan join the U.S. and the
United Kingdom in promoting a competitive local access environment. Many of
these competitive telecommunications service providers are focusing on the
deployment of wireless high-speed networks because of the inherent ability of
wireless technology to offer service quickly to a large number of subscribers.
Furthermore, regulators and local service providers are focused on high-speed,
wireless, point-to-multipoint access products as a key technology enabler for
future high-speed networks, especially in countries where existing wireline
infrastructure quality would require substantial investment to enable it to
carry high-speed services. The Strategis Group estimates that the potential
market for wireless broadband, defined as licensed frequencies from 2.5 GHz to
43 GHz, services is approximately 60% of the total broadband revenues from urban
areas.

In order to enable greater local competition and accelerate the deployment
of high-speed networks, the FCC and similar regulators abroad have recently
opened up various bands of wireless spectrum at frequencies of 10 GHz and above.
These frequency bands have been allocated or awarded in large contiguous blocks
and have the potential to support both high-speed data and traditional voice
services. In comparison, other lower frequency bands are used for lower
transmission capacity cellular phone services. To obtain the rights to
frequencies suitable for high-speed services, many service providers have either
paid substantial upfront fees, committed to large capital deployments for
high-speed wireless network buildouts or acquired companies that control these
frequencies. Additionally, some cellular phone service operators are seeking to
leverage their existing infrastructure by acquiring spectrum to deploy
high-speed services. These spectrum acquisitions have given competitive
telecommunications service providers and cellular phone service operators an
alternative means to provide high-speed services.

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<PAGE> 32

Although increased demand and deregulation have generated new
opportunities for service providers using both wireline and wireless networks,
bandwidth limitations of the last mile have constrained service providers from
exploiting these opportunities. The last mile generally represents the link
between the network backbone and the subscriber. Although many wide area network
backbones have been upgraded with fiber optic cable and have utilized
technologies that allow operation at speeds up to 9 Gbps, the local access
telephone network typically consists of legacy copper lines originally designed
to transmit fixed-speed voice signals at a fraction of that speed. This access
bottleneck is frustrating a broad base of business users, many of which require
symmetrical access to high-speed data that requires transmission at varying
speeds.

Wireline technologies attempt to solve these bandwidth constraints, but
they do not meet the needs of many service providers that are seeking to offer
high-speed services to businesses worldwide. Digital subscriber lines and cable
modem services have recently been launched by incumbent owners of copper or
coaxial cable infrastructures, or by selected service providers in the U.S. that
have been granted regulatory access to those infrastructures. Most digital
subscriber line and cable modem deployments, however, offer high-speed,
asymmetrical services or slower speed symmetrical services. In the case of
digital subscriber lines, speeds can vary with distance and infrastructure
quality. Neither of these services satisfies the needs of many businesses that
require access to symmetrical high-speed packet data. Additionally, because
coaxial cable passes more residences than businesses, and is not deployed in
many countries, it is not an alternative for many business users worldwide.
Dedicated lines leased from the incumbent service provider are available to
business users in many countries, but the prices associated with these
high-speed lines are often prohibitive, especially outside the U.S. Similarly,
fiber optic technology is typically only deployed to solve the bandwidth needs
of the largest businesses, where high installation costs can be spread over many
users. In short, these wireline technologies are not cost-effective for many
businesses, or they require either substantial upfront capital investment or a
high-quality existing infrastructure.

Competitive telecommunications service providers and cellular phone
operators with licenses to spectrum suitable for high-speed wireless networks
worldwide are now seeking to capitalize on deregulation and increased demand to
offer high-speed network access to subscribers. Many of these service providers
target business customers for which alternate high-speed access services are
unavailable, inadequate or not cost-effective. High-speed wireless technologies
can offer immediate coverage of a metropolitan area and can be deployed rapidly
without dependence on the quality of or access to a legacy network.

Although many service providers with spectrum suitable for high-speed
wireless networks recognize the opportunity to meet new demand for integrated
voice and high-speed packet data services, many have been constrained from cost
effectively offering these services to a wide base of business users.
Historically, most high-speed wireless access technologies were only
cost-effective for providing a dedicated link to connect two high traffic nodes
in a network such as large office buildings where high radio costs can be spread
over many users.

Competitive telecommunications service providers and cellular phone
operators deploying high-speed wireless networks today must differentiate their
services to a wide base of business users while effectively competing with
services offered by fiber optic cable, leased lines, digital subscriber lines
and cable modems. For example, a service provider deploying a high-speed
wireless network could offer multiple integrated voice and data services with
guaranteed quality levels to maximize revenue from its spectrum. A service
provider that could rapidly offer these services to a broad base of business
customers would often have an early-mover advantage in a particular metropolitan
market. High-speed wireless solutions implemented by these service providers,
however, would need to be reliable and cost-effective to deploy. Although a
large market opportunity exists to provide solutions that allow service
providers to deploy differentiated services, very few vendors commercially offer
high-speed, wireless, point-to-multipoint products to serve this market.

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THE NETRO SOLUTION

We are a leading provider of high-speed, wireless, point-to-multipoint
telecommunications access equipment to competitive communications service
providers worldwide. Our AirStar system allows service providers to rapidly and
cost effectively offer integrated voice and high-speed packet data services to
their business subscribers. We have engineered AirStar to support broad service
rollouts and to operate at a number of different licensed frequencies worldwide.
AirStar derives its price-performance benefits from dynamic bandwidth allocation
and a point-to-multipoint architecture. We believe that AirStar, which is
currently available in limited quantities, is one of the first commercially
available high-speed wireless access systems providing integrated voice and
high-speed packet data services using a point-to-multipoint architecture. We
believe our AirStar system provides the following benefits to service providers:

Service Integration and Bandwidth on Demand. Our AirStar system employs
our proprietary software protocol, CellMAC, which enables flexible and dynamic
sharing of bandwidth on a packet-by-packet basis among a number of subscribers
and service types. Many existing access network implementations are optimized
for either voice or data traffic. Voice traffic requires fixed-speed, low-
capacity transmissions, while data traffic requires variable-speed,
high-capacity transmissions. Consequently, network operators wishing to carry
both types of traffic often must choose among setting aside capacity to service
peak transmission data traffic requirements, allowing degradation of service
during heavy usage or servicing a smaller number of subscribers. In contrast,
service providers using the AirStar system can support voice and high-speed
packet data from the same system without these performance compromises.
Additionally, AirStar allows service providers to offer symmetrical high-speed
services, with peak transmission rates of up to 8 Mbps to meet the needs of many
business users that send and receive large files for e-mail, application
hosting, intranet access and e-commerce.

Cost-Effective Deployment and Operation. AirStar's cost-effective
deployment allows a service provider to compete effectively in the high-speed
access market. By employing a point-to-multipoint architecture, one AirStar hub
radio can serve multiple subscriber radios, which results in lower total radio
costs than architectures in which each radio can only communicate with one other
radio. AirStar also uses time division multiple access technology, which allows
voice and data traffic to be transmitted in adjacent time slots. This
architecture reduces duplicate network hardware components such as modems, and
thus further lowers overall system costs. In addition, a significant portion of
the cost to build an AirStar network is directly related to subscriber growth,
allowing the service provider to incur costs concurrently with the subscriber
growth. To add subscribers in a sector, a provider simply installs equipment at
the subscriber's premises and activates the service remotely. Finally, the
AirStar system allows a service provider to optimize the use of radio
frequencies and the deployment of equipment by expanding effective transmission
capacity.

Quality of Service and Reliability. Service providers using AirStar can
deploy voice and data services at different price points to different market
segments with the option for guaranteed quality of service levels and up to
99.999% availability. AirStar can prioritize transmissions based on different
traffic priority levels, and fill available transmission capacity with packets
of lower priority data traffic. Furthermore, the AirStar system is engineered to
enable competitive service providers to offer the same high reliability and
availability for services that incumbent service providers have historically
offered for voice services. Reliability is accomplished through an error
correction algorithm, redundancy and comprehensive network management software.

Rapid Time to Market. Service providers using AirStar can achieve rapid
time to market for integrated voice and high-speed data services through
AirStar's efficient installation, end-to-end network management and flexible
wireless transport. Competitive service providers that we target have typically
committed a high level of capital investment to enter the high-speed wireless
access market, and thus are focused on quickly realizing return on their
investment. Our AirStar system is scalable and allows service providers to
rapidly offer new services to existing or incremental subscribers within a
coverage area by a simple software command and a radio installation that is
automatically configured by the base station with little technician
intervention. By installing one AirStar base station, the service provider can
attain

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<PAGE> 34

coverage of many potential subscribers. For example, a typical cell at 10 GHz or
26 GHz can cover ranges from 110 to 275 square miles or 5 to 15 square miles,
respectively, depending on local conditions, and has a transmission capacity of
over 600 Mbps. Compared to other high-speed access wireline technologies that
often require lengthy and expensive plant upgrades before offering service or do
not support integrated voice and symmetrical data services, AirStar allows a
service provider to rapidly deploy integrated voice and high-speed data services
as demand warrants.

STRATEGY

Our objective is to be the leading worldwide supplier of high-speed,
wireless, point-to-multipoint telecommunications access equipment used by
competitive service providers. Key elements of our strategy include the
following:

Increase Deployments within Our Existing Service Provider Base. As the
needs of service providers evolve, we intend to extend product features to
leverage the success achieved at key service providers. We believe that,
although we have only recently begun shipping the AirStar in limited quantities,
it is one of the first commercially available high-speed access systems with a
point-to-multipoint architecture. To date, service providers have deployed the
AirStar system in limited commercial rollouts or trials. We intend to convert
early design wins within our existing service provider base into large-scale
commercial deployments. We expect the average time between trial and commercial
rollout to decrease as these service providers successfully deploy service to
subscribers and become more familiar with the system.

Drive Deployments by New Service Providers. We believe that our
visibility as a leading provider of high-speed, wireless, point-to-multipoint
access products will provide additional customer trials and reference sales. We
intend to utilize successful deployments at existing service providers, once
completed, as reference accounts for new service providers. Our products are
designed to provide price and performance advantages that will help generate new
revenues rapidly for service providers with high-speed wireless spectrum
worldwide. Consequently, we intend to expand aggressively our product marketing
and development beyond existing service providers that use the 10 GHz and 26 GHz
frequencies and into new markets domestically and internationally to serve a
broader service provider base. For example, we intend to conduct 38 GHz trial
installations in 1999, allowing us to serve service providers that operate at
this frequency in the U.S. market.

Provide Competitive Advantages to Service Providers. We intend to
continue to focus our product development efforts on features that would enable
service providers to deploy differentiated, profitable services to their
business subscribers. The AirStar system allows service providers to deploy
voice and data services rapidly and cost effectively when demand warrants. As
service providers begin to deploy AirStar on a broader basis, we expect they
will demand support for additional data and voice services and higher bandwidth
interfaces to increase their market share. We intend to offer new features that
will enable service providers to further differentiate their services. For
example, we expect to introduce support for additional data and voice services
and peak transmission rates of up to 16 Mbps later in 1999.

Strengthen and Expand Relationships with Leading Communications Equipment
Vendors. We intend to build on our success with Lucent and Siemens/Italtel to
meet the needs of service providers seeking to deploy large-scale networks and
to expand our service provider base. Our relationships with these two vendors
enable service providers deploying AirStar to access turnkey services, such as
system integration, and to receive an increased level of customer service. We
believe the provision of these turnkey services can facilitate broader
deployments worldwide. We further believe that leading communications equipment
vendors with a global sales presence are in the strongest position to provide
service providers with system integration and comprehensive services and
support. Thus, we believe strengthening these relationships and selectively
establishing new relationships will facilitate increased volume deployments of
our products in the global market.

Capitalize on Technology Leadership to Introduce New Products Rapidly and
Cost Effectively. Our platform enables dynamic bandwidth allocation by
integrating a number of technical capabilities, including millimeter wave radio
design, data networking and network management software. We believe

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<PAGE> 35

integrating these capabilities is highly complex, and we intend to leverage our
technology expertise to introduce new products and features rapidly and cost
effectively. AirStar's modular architectural design enables us to reuse many
common networking elements and protocol software. As a result, the introduction
of products in a new frequency typically requires only relatively simple
modifications in the radio elements rather than the extensive development time
and costs of entirely redesigned equipment.

Leverage Third-Party Customer Support to Scale Rapidly. We are actively
training our system integrators, our other resellers and service providers
themselves in the operation and maintenance of the AirStar system. Many of our
service providers and system integrators have extensive experience in deploying
and provisioning high-speed access networks on a large scale. We plan to work
closely with our system integrators and service providers to enable them to
provide their own primary and secondary tiers of support for the AirStar system
while our engineers and customer service personnel will provide backup support
on a 24-hour, 7-day basis. By educating our system integrators' and service
providers' personnel about support, we intend to place ourself in a position to
scale our business rapidly as service providers worldwide transition from trials
to commercial deployments.

PRODUCTS

The AirStar system is typically deployed in a hub and spoke architecture.
Each cell has a central hub that can provide immediate coverage of a particular
area, with coverage depending on the licensed frequency, local conditions and
the level of service availability chosen by the service provider. The AirStar
system consists of integrated network and millimeter wave radio components
located at a central hub and at multiple subscriber locations within a cell.
Components of this system, which are described below, are the base station, the
base radio unit, the subscriber radio unit and the subscriber access system, all
of which are managed by the AirView Link Explorer network management software.
Equipment at the hub consists of the base station and the base radio unit.
Equipment at a subscriber's premises consists of a subscriber access system and
a subscriber radio unit. The AirView LE is typically used at the service
provider's switching center, where it is used to remotely monitor the subscriber
and the hub equipment. The table below shows the coverage statistics for a
typical installation and configuration under common local conditions in the
geographic regions where we expect many of our products to be deployed.

<TABLE>
<CAPTION>
COVERAGE AREA
FREQUENCY (SQUARE MILES)
--------- --------------
<S> <C> <C> <C>
10 GHz 110 - 275
26 GHz 5 - 15
38 GHz 2 - 6
</TABLE>

The base radio units at the hub site send and receive simultaneous
high-speed transmissions from multiple subscriber radio units. The system
schedules transmissions from each subscriber on a packet-by-packet basis. The
base station prioritizes the transmissions and allocates just enough bandwidth
or time slots to complete the transfer of each packet. The base station and the
subscriber access system process and manage the information transmitted by the
radio components over the air. Security of the transmissions over the air is
achieved through discrete identifiers for each of the subscriber access systems
and scrambling of the digital transmission through our air interface protocol.
This traffic is processed and delivered to the service provider's switching
center, where the voice and data traffic is interconnected with the public
switched telephone network for voice networks, the Internet backbone or other
public networks.

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<PAGE> 36

The following diagram depicts a high-speed wireless access network using
our AirStar system.

[CHART]

Diagram and captions on page 35 of the S-1 form:
1. Left: A diagram depicting the "Subscriber Premises" with a "Netro AirStar
Subscriber Radio Unit" connected to a "Netro AirStar Subscriber Access System"
connected to a PBX (which in turn is connected to three telephones and a fax), a
Router (Frame Relay) and a Computer "LAN". We believe the Subscriber Radio Unit
points to a Netro AirStar Base Radio Unit in the adjacent Left Central Station.
2. Left Central Section A diagram depicting a "Netro AirStar Base Radio Unit"
connected to a Netro AirStar Base Station (with arrows noting the BMU, the BSC
and the BSS). The diagram depicts the "Central Hub". The Base Station is
connected through "fiber" to a cloud and a computer monitor. "Netro AirView Link
Explorer Network Management Software" is in the right Central Section.
3. Right Central Section and Right Section. A diagram depicting the
"backbone" with a cloud depicting traffic from the Base Station being converted
into several networks depicted by clouds: Internet, Frame Relay, PSTN, TDM,
Mobile Switching Center and ATM.

Base Station. Each hub can be configured to provide full redundancy, as
required by telecom service providers, for each of the base station components
and the base radio units. A typical base station configuration requires a single
base station shelf, which houses several base sector controllers, and is
connected to several base modem units. We believe the design of the base station
allows more redundant configurations compared to competing solutions that
require much more space.

- The base station shelf is a chassis that houses the base sector
controllers and is connected to the base modem unit. The base station
shelf aggregates traffic from multiple base sector controllers and
enables them to interface with the various public wide area networks.
It provides network interfaces to these wide area networks at rates
from 34 Mbps or 45 Mbps to 155 Mbps.

- The base sector controller controls activity within each sector by
managing traffic received from multiple subscribers. These functions
combine to provide network management and routing within sectors. The
base station controller supports the CellMAC protocol in hardware and
software and multiplexes and concentrates traffic to the external
network. It has built-in remote management agents that use the simple
network management protocol to manage and monitor network devices. The
base station controller also enables redundancy support and switching.

- The base modem unit works together with the base radio unit that
covers a particular sector. It converts air signals into a digital bit
stream.

Base Radio Unit. The base radio unit is a radio transceiver with a single,
built-in sector antenna. It is compact and lightweight, has a low profile and is
easy to install and align. The base radio unit transmits to and receives signals
from the subscriber radio unit. A typical base station configuration would
include four base radio units to cover the whole cell area. We are currently
testing a new release that supports

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<PAGE> 37

smaller sectors that will enable higher transmission capacity in some
configurations. We expect this release to be available to our customers in 1999.

Subscriber Radio Unit. The subscriber radio unit is a radio transceiver
with a single directional antenna. We offer the subscriber radio unit with
built-in or external antennas. It is compact and lightweight, has a low profile
and is easy to install and align. The subscriber radio unit transmits to and
receives signals from the base radio unit.

Subscriber Access System. The subscriber access system provides the
subscriber premises interfaces and translates voice and data traffic into
packets for air transmission in a CellMAC format to and from the base station.
It supports the following features:

- Software interfaces to a variety of communications protocols such as
full and fractional T1/E1 and Ethernet for IP over ATM. We are
currently testing a new release that adds dynamic voice processing for
a variety of additional protocols, such as ISDN-PRI and DASS2, a 100
BaseT interface and Frame Relay. We expect this release to be
available to our customers in 1999.

- Ability to request, through the CellMAC air interface protocol, and
support high-speed sustained transmission up to rates in excess of 500
Kbps to and from the base station and peak transmission rates of up to
8 Mbps. We are currently testing a new release that supports high-
speed sustained transmission up to rates in excess of 3 Mbps and peak
transmission rates of up to 16 Mbps. We expect this release to be
available to our customers in 1999.

- Remote monitoring of the subscriber radio units.

AirView LE. All components of the AirStar network are managed remotely by
our AirView Link Explorer software. With AirView LE, a subscriber radio unit can
be added to the network independently, saving configuration and installation
time, and subscriber access system software upgrades can be supported remotely.
AirView LE provides remote monitoring of all configuration items and alarms. We
are currently testing a new release that enables AirView to interface with
leading third-party network management systems, enabling service provisioning,
fault management, performance monitoring and simultaneous access by multiple
network operators. We expect this release to be available to our customers in
1999. This remote and simultaneous access capability supports the management of
regional or national networks.

TECHNOLOGY

We believe we have developed industry-leading technologies, including
CellMAC software and hardware implementations, an advanced networking
architecture, radio transmission technology and networking software
capabilities. We first commercialized these technologies in the form of our
AirStar family of products by focusing on the service provider's needs.

CellMAC Protocol. We believe our proprietary CellMAC protocol maximizes
the benefit of our point-to-multipoint architecture, and advanced peak traffic
management techniques. CellMAC schedules transmissions from each subscriber on a
packet-by-packet basis. It allows subscribers to request additional bandwidth
from the base station for peak demand data services through a bandwidth
reservation mechanism that requires little wasted spectrum. The base station can
prioritize the requests according to service level agreements and allocates just
enough bandwidth or time slots to complete the transfer of each packet. Traffic
from each subscriber terminal shares the bandwidth on a packet-by-packet basis,
as necessary, to fulfill the quality of service for each subscriber.

ATM Architecture. We have implemented an air interface that utilizes
asynchronous transfer mode, a communications protocol, to efficiently combine
voice and data onto a single bit stream. CellMAC is our implementation of this
protocol over the air. We believe that asynchronous transfer mode is the only
standardized technology that can transport voice and data traffic simultaneously
and maintain a guaranteed quality of service for each traffic type. Using this
architecture, bandwidth for services can be provided based on average throughput
requirements rather than peak throughput requirements. As a result,

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<PAGE> 38

the capacity of the transmission is increased, resulting in better use of radio
frequency and thus lower equipment expenditures.

Peak Demand Modulation and Millimeter Wave Radio Technology. Since our
inception, we have worked extensively on radio designs and volume manufacturing
processes to create robust yet cost-effective radios that support advanced radio
technology and peak demand transmission capabilities. The current AirStar radios
are our third generation design.

System and Services Software. Our software architecture and use of
object-oriented design principles for both real-time and network management
software are key to making our AirStar software modular and adjustable to
additional communications protocols. Our software extends the ability of the
AirStar system to enable the inter-working of voice protocols and support
statistical multiplexing of voice services. In a release we are currently
testing, our software extends the capabilities of the CellMAC protocol to
provide dynamic bandwidth allocation to voice services.

SALES AND MARKETING

We have sales representatives in France, Germany and the United Kingdom,
as well as in Atlanta, Georgia and in our corporate headquarters in San Jose,
California. We sell our products through worldwide system integrators, our
direct sales force and local resellers. We have established relationships with
two leading system integrators, Lucent and Siemens/Italtel. We have worked with
these system integrators in development of end-to-end network management systems
and radio planning tools. Our system integrators typically have the means to
provide vendor financing of equipment and may do so in situations where our
equipment is purchased as part of the total network. For some service providers,
this financing is a necessary part of the total solution.

We also target key strategic accounts with our direct sales force. In
determining which accounts to service directly, we try to identify those that
are key early adopters that can help drive our product feature sets in a manner
that will better address the needs of the marketplace as a whole. Regardless of
the actual distribution channel that services the account, our direct sales
force maintains contact with the service provider and the system integrator
account team. This contact keeps us close to the evolving needs of the service
providers and helps ensure that we are well positioned within each account. In
some markets, we have established distribution relationships with local
resellers that also provide support and maintenance to the service providers
they cover.

Our marketing group provides marketing support services for our executive
staff, our direct sales force and our for system integrators and resellers.
Through our marketing activities, we provide technical and strategic sales
support to our direct sales personnel and system integrators or resellers
including in-depth product presentations, technical manuals, sales tools,
pricing, marketing communications, marketing research, trademark administration
and other support functions.

Our marketing group is also responsible for product management activities
throughout each product's lifecycle. These include the definition of product
features, approval of product releases, specification of enhancements to our
product and service offerings, and determination of future product platforms.

SYSTEM INTEGRATOR ALLIANCES

We have established important relationships with two worldwide system
integrators to facilitate the deployment of our products and to meet the
requirements of service providers with end-to-end network integration as they
seek to deploy our high-speed wireless access solution.

- Lucent. Under a product supply agreement we signed with Lucent in
October 1998 after extensive qualifying and testing of our AirStar
product, Lucent will sell and market our AirStar equipment on a
non-exclusive basis for a period of up to three years, with an option
to extend this initial period. Lucent is currently marketing the
AirStar product under the name Lucent OnDemand. We have agreed to
manufacture and sell our products to Lucent and to provide

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<PAGE> 39

Lucent with technical support and assistance in the development of
customer proposals. Lucent plans to offer the OnDemand solution as
part of an end-to-end solution with a complete suite of support
services, NetCare(R), that includes planning, design and consulting,
network implementation and integration and administration services and
tools as well as comprehensive support. We have also entered into an
accelerated development agreement with Lucent to collaborate on the
development of the 38 GHz version of the AirStar.

- Siemens/Italtel. Italtel is an entity that is owned 50% by Siemens
and 50% by Telecom Italia. Siemens has advised us that Italtel serves
as the center of competence of radio technology in the Siemens group
of affiliated companies. Under a product supply agreement we entered
into with Italtel in January 1998, Siemens and some of its affiliates
will sell and market our products on a non-exclusive basis for a
period of up to five years and we will manufacture and sell these
products. Siemens is currently marketing the AirStar product under the
name Siemens SRA MP. Siemens/Italtel plans to sell our products as
part of an integrated network solution. Italtel has also made an
equity investment in Netro.

CUSTOMERS

We target service providers worldwide that have rights to wireless
spectrum suitable for high-speed services or are planning to acquire rights to
deliver high-speed services to subscribers. We began shipping the trial AirStar
system to service providers in the third quarter of 1998. Our direct sales in
most cases are to our system integrators, Lucent and Siemens/Italtel, or to
distributors that in turn sell to service providers. The following is a partial
list of service providers or enterprises that have purchased or deployed our
AirStar system, either as a trial system or to carry traffic to subscribers, and
the locations of their deployments. In each case, we have recognized revenues in
excess of $90,000.

<TABLE>
<S> <C>
Advanced Radio Telecom (Norway)
Airtel (Spain)
Albacom (Italy)
Broadnet (Belgium)
BTOcean (Ireland)
Byblos Bank (Lebanon)
COMSAT Peru, S.A.(Peru)
CTI Movil (Argentina)
Formus Communications, Inc. (Hungary)
Future Communications Company (Kuwait)
Infostrada (Italy)
KG Telecommunication Co. Ltd. (Taiwan)
Medunet (Saudi Arabia)
NTL (U.K.)
OTE (Greece)
Retevision (Spain)
RSL Communications (Austria)
TechTel (Argentina)
Winstar (Holland)
</TABLE>

In addition, we have trials with service providers in the U.S., Germany
and Japan and system integrators in the U.S. and Europe.

During 1996, 1997, 1998 and the first six months of 1999, our five largest
customers accounted for more than 50% of our revenues. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

OPERATIONS AND MANUFACTURING

Our manufacturing activities, based in our San Jose facility, consist
primarily of low-volume production and procurement. Our strategy is to outsource
manufacturing to contract manufacturers, which have the expertise and ability to
achieve cost reductions associated with volume manufacturing and to respond
quickly to customer orders while maintaining high quality standards. This also
serves to turn some of our fixed costs into variable costs and enables us to
enjoy the purchasing efficiencies of these larger manufacturers. We have
manufacturing contracts in place with Solectron California Corporation and
Microelectronic Technology Inc. of Taiwan. Microelectronic Technology Inc. will
manufacture millimeter wave radio equipment, and Solectron will manufacture both
millimeter wave radio equipment and digital

35
<PAGE> 40

system components. Our agreement with Microelectronic Technology Inc. makes us
their exclusive customer for terrestrial point-to-multipoint millimeter wave
radio equipment, provided we meet annual purchase minimums.

Our operations and manufacturing groups will facilitate technology
transfer between our research and development group and the contract
manufacturers. We may also use our manufacturing operation to expedite the sales
cycle before the full product release to external manufacturers.

RESEARCH AND DEVELOPMENT

We believe that our extensive experience designing and implementing
high-quality network and radio components and system software has enabled us to
develop high-value integrated systems solutions. As a result of these
development efforts, we believe we have created an industry-leading platform for
cost-effective high-speed wireless voice and data delivery with dynamic
bandwidth allocation.

We believe that our future success depends on our continued investment in
research and development in core radio, networking and software technologies,
and we expect to continue to invest a significant portion of revenues in this
area. Our research and development expenses for 1996, 1997, 1998 and the six
months ended June 30, 1999 were $10.4 million, $15.3 million, $16.1 million and
$9.2 million. We are committed to an ongoing new product development program
that is based on an assessment of service providers' needs and technological
changes in the communications market. We are currently investing significant
resources in enhancing our network management software, integrating base station
components, extending the capabilities, frequencies and capacity of AirStar's
transmission, improving performance and accelerating cost reduction.

CUSTOMER SERVICE

A high level of continuing service and support is critical to our
objective of developing long-term customer relationships. Our customer support
organization is based in our San Jose headquarters. We also have a customer
support presence in the United Kingdom and Germany. Our headquarters support
organization serves as the interface to our research and development group to
escalate certain problems and also provides information about customers' needs
to the marketing and research and development organizations. Our customer
support model consists of three tiers of support:

- local problem isolation, which provides for on-site problem
identification and resolution of relatively simple issues;

- fault isolation and repair, which provides for consultation and
instruction by technicians trained by product experts; and

- expert level support from product engineering experts for the
resolution of problems not remedied by the first two levels of
support.

Our main focus is to provide system integrators with the ability to
provide local support worldwide to service providers, including training, spare
parts, maintenance and installation. As most of the hands-on support is provided
through system integrators, local resellers or the service providers themselves,
we focus on offering various training courses to enable system integrators and
service providers to perform both local problem isolation and fault isolation
and repair. When the sale is direct to the service provider, the service
provider typically assumes responsibilities for both local problem isolation and
fault isolation and repair tiers. Currently, the majority of our service and
support activities are related to training and installation support for service
providers. These services are provided directly at customer installations by our
customer support group or remotely by our San Jose headquarters team.

We have a number of flexible hardware and software maintenance and support
programs available for products beyond the applicable warranty period, depending
on our customer preferences. In the case of trials, we offer an evaluation
support package, where training, installation and acceptance testing are
delivered within specific time frames. These activities are usually performed
on-site by our personnel. As

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<PAGE> 41

more trials begin carrying commercial traffic, we will migrate the support
capabilities to off-hours, 24-hour, 7-day support, and continue to provide
expert level support for service providers and system integrators.

COMPETITION

The market for high-speed, wireless, point-to-multipoint access products
is rapidly evolving and highly competitive. Increased competition is likely to
result in price reductions, shorter product life cycles, reduced gross margins,
longer sales cycles and loss of market share, any of which would adversely
affect our business. As a provider of high-speed wireless access products, we
compete with a number of large telecommunications equipment suppliers including
Alcatel, Bosch, Ericsson, Hughes, Newbridge, Nortel and Spectrapoint, a newly
formed joint venture between Cisco and Motorola, as well as with smaller start-
up companies. In addition, well capitalized companies such as Nokia are
potential entrants into the market. As a technology, high-speed wireless access
products compete with other high-speed access solutions, such as digital
subscriber line, fiber optic cable, cable modem technologies, leased lines and
satellite technologies.

We expect competition to persist and intensify in the future. Many of our
competitors are substantially larger than we are and have significantly greater
financial, sales and marketing, technical, manufacturing and other resources and
more established distribution channels. These competitors may be able to respond
more rapidly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion, sale
and financing of their products than we can. Furthermore, some of our
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties to increase their ability
to gain customer market share rapidly. These competitors may enter our existing
or future markets with solutions that may be less expensive, provide higher
performance or additional features or be introduced earlier than our solutions.
We also expect that other companies may enter our market with better products
and technologies. If any technology that is competing with ours is more
reliable, faster or less expensive or has other advantages over our technology,
then the demand for our products and services would decrease, which would
seriously harm our business.

INTELLECTUAL PROPERTY

We rely on a combination of patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements and licensing arrangements, to
establish and protect our proprietary rights. We presently have two issued U.S.
patents, and two patent applications pending, with more in process. AirView and
AirMAN are our registered trademarks. AirStar, CellMAC, Netro and the Netro logo
are our trademarks. Every other trademark, trade name or service mark appearing
in this prospectus belongs to its holder.

Despite our efforts to protect our proprietary rights, existing copyright,
trademark and trade secret laws afford only limited protection. In addition, the
laws of some foreign countries do not protect our proprietary rights to the same
extent as do the laws of the United States. Attempts may be made to copy or
reverse engineer aspects of our products or to obtain and use information that
we regard as proprietary. Accordingly, we may not be able to protect our
proprietary rights against unauthorized third-party copying or use. Furthermore,
policing the unauthorized use of our products is difficult. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. This litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our future
operating results.

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<PAGE> 42

PROPERTIES

We sublease an approximately 66,000 square foot facility in San Jose,
California, approximately 47,000 square feet of which we currently use for
executive offices and for administrative, engineering, product development,
manufacturing and sales and marketing purposes. The remaining space is available
for our use for general offices, light manufacturing, storage or other related
uses. The sublease for this facility expires in September 2001.

EMPLOYEES

As of June 30, 1999, we employed approximately 152 full-time employees and
23 contract personnel. Our full-time employees include 51 people in operations
and manufacturing, 62 in engineering, 22 in sales, marketing and customer
service, and 17 in finance and administration. None of our employees is
represented by collective bargaining agreements, and we consider relations with
our employees to be good.

LEGAL PROCEEDINGS

In March 1999, one of our former contract manufacturers, Quadrus
Manufacturing, at that time a division of Bell Microproducts Inc., filed for
binding arbitration in Santa Clara County, California with respect to a dispute
with us. The arbitration involves claims by Quadrus for approximately $950,000
for amounts allegedly owed by us for inventory purchased by Quadrus in
anticipation of our projected demand. In June 1999, we filed an answer and
counterclaim alleging damages of approximately $275,000 for product failures. We
believe we have meritorious defenses to their claim, and we intend to defend
this arbitration vigorously. However, we may not prevail in this arbitration.
The arbitration process is inherently uncertain. Our defense of this
arbitration, regardless of its eventual outcome, has been, and will likely
continue to be, time-consuming, costly and a diversion for our personnel. A
failure to prevail could result in our having to pay monetary damages to
Quadrus.

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<PAGE> 43

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers, directors and other key employees and their ages as
of July 15, 1999 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Richard M. Moley.......................... 60 Chairman of the Board of Directors
Gideon Ben-Efraim......................... 56 President, Chief Executive Officer and
Director
Michael T. Everett........................ 50 Executive Vice President and Chief
Financial Officer
Matthew Powell............................ 44 Senior Vice President, Worldwide Sales
John Perry................................ 51 Chief Technology Officer and Vice
President, Engineering
Cynthia M. Hillery........................ 45 Vice President, Marketing
Francis Ngai.............................. 47 Vice President, Customer Service
Man Wong.................................. 47 Vice President, Operations
Zohar Lotan............................... 51 Vice President, Technical Support
Stuart Feeney............................. 34 Vice President, Radio Engineering
James Hannigan............................ 54 Vice President, Software Engineering
Thomas R. Baruch.......................... 60 Director
Neal Douglas.............................. 40 Director
Irwin Federman............................ 63 Director
John L. Walecka........................... 39 Director
</TABLE>

Richard M. Moley has been a director since November 1997 and Chairman of
the Board of Directors since March 1998. Since August 1997, Mr. Moley has been a
private investor. From July 1996 to August 1997, he served as Senior Vice
President, Networking and as a director of Cisco Systems, Inc., following Cisco
Systems' purchase of StrataCom, Inc., where he was, from June 1986 to July 1996,
Chairman of the Board, Chief Executive Officer and President. Mr. Moley serves
on the boards of directors of Linear Technology Corporation, a designer and
manufacturer of linear integrated circuits, CIDCO Incorporated, a designer and
developer of subscriber telephone equipment, Echelon Corporation, a developer of
control network hardware and software products, CMC Industries, a manufacturer
of telecommunications systems and equipment, and several privately held
companies.

Gideon Ben-Efraim has served as our President, Chief Executive Officer and
a director since founding Netro in November 1994. From November 1994 to March
1998, Mr. Ben-Efraim was also Chairman of the Board of Directors. Prior to
joining Netro, Mr. Ben-Efraim was a founder of and Executive Vice President,
Engineering and Business Development at P-Com Inc., a digital microwave radio
company, from June 1991 to November 1994. Mr. Ben-Efraim received a B.S. in
Industrial Engineering and Management from Tel Aviv University.

Michael T. Everett has served as our Chief Financial Officer since joining
Netro in March 1997, at which time he was appointed Senior Vice President. He
has served as our Executive Vice President since January 1999. From December
1996 to February 1997, he served as Executive Vice President and Chief Financial
Officer at Diva Communications Inc. Mr. Everett spent ten years at Raychem
Corporation, a telecommunication and electronic components supplier, from April
1987 to November 1996, as General Counsel and Chief Financial Officer, and most
recently, Senior Vice President, Asia. Mr. Everett received a B.A. from
Dartmouth College and a J.D. from the University of Pennsylvania Law School.

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<PAGE> 44

Matthew Powell has served as our Senior Vice President, Worldwide Sales
since March 1998. Prior to joining Netro, Mr. Powell served as Director of
Marketing at Cisco Systems from February 1997 to March 1998 and in various sales
management positions at StrataCom from 1986 to February 1997. Mr. Powell
received a B.A. from Tulane University and an M.B.A. from The Wharton School,
University of Pennsylvania.

John Perry has served as our Chief Technology Officer and Vice President,
Engineering since joining Netro in September 1998. Prior to joining Netro, Mr.
Perry served as Vice President, Engineering at Diva Communications Inc. from
January 1996 to September 1998, and Vice President, Engineering at Ericsson
Raynet from October 1993 to December 1995. Mr. Perry received a Bachelor's
degree in Electrical Engineering and Device Electronics from the University of
Hertfordshire, England.

Cynthia M. Hillery has served as our Vice President, Marketing since April
1997. From May 1996 until April 1997, Ms. Hillery served as our Vice President,
Networking Products. Prior to joining Netro, Ms. Hillery served in various sales
and marketing positions at Network Equipment Technologies, a networking products
manufacturer, from January 1987 to May 1996, including as Senior Director of
Product Management from September 1994 to May 1996. Ms. Hillery received a B.A.
from the University of California, Berkeley and a Ph.D. from the University of
Chicago.

Man Wong has served as our Vice President, Operations since joining Netro
in May 1999. Prior to joining Netro, Mr. Wong was Director of Operations at
GaSonics International Corporation, a microwave plasma semiconductor equipment
manufacturing company, from March 1996 to May 1999. From October 1993 to March
1996, Mr. Wong was the Manufacturing Engineering and Advanced Development
Manager at Litton Electron Devices Division. Mr. Wong received a B.S. in Physics
from The Chinese University, Hong Kong, an M.B.A. from Golden Gate University,
and an M.Sc. and Ph.D. in Physics from the University of Waterloo (Canada).

Francis Ngai has served as our Vice President, Customer Service since July
1999. Prior to joining Netro, Mr. Ngai was Director of Customer Support at
Heuristic Physics Laboratory, from October 1998 to June 1999. From September
1995 to September 1998, he was the Director of Customer Satisfaction at GaSonics
International, a semiconductor equipment manufacturer. From October 1989 to
August 1995, Mr. Ngai was a Manager of Service Business for IBM. Mr. Ngai
received a B.Sc. from the University of South Carolina and a M.Sc. from Stanford
University in electrical engineering.

Zohar Lotan joined Netro in April 1995 as Director of Engineering and
acting Vice President, Engineering. In May 1996, he joined the marketing team as
Senior Director for Program Management and became Vice President, Customer
Service in September 1998 and Vice President, Technical Support in July 1999.
Prior to joining Netro, Mr. Lotan managed a software design team at Nortel from
August 1988 to April 1995, developing wireless and ISDN communications. Mr.
Lotan received a B.Sc. degree in Electrical Engineering from the Technion,
Israel Institute of Technology and M.Sc. degree in Engineering Economic Systems
from Stanford University, California.

Stuart Feeney has served as our Director, Radio Engineering and later as
our Vice President, Radio Engineering since May 1995. Prior to joining Netro,
Mr. Feeney served as Director of System Engineering at P-Com from June 1992 to
May 1995. Mr. Feeney received a Bachelor's degree in Engineering from the
University of Salford, England, and a general business education from the
University of Manchester Institute of Science and Technology.

James Hannigan has served as our Vice President, Software Engineering
since June 1999. Prior to joining Netro, Mr. Hannigan served as Vice President,
Software at Cisco Systems from May 1998 to May 1999. From March 1982 to June
1997, he was at Tandem Computer in the position of Vice President, Software
Development for the non-stop software division. Mr. Hannigan received a B.Sc. in
Mathematics from California Polytechnic University in San Luis Obispo.

Thomas R. Baruch has been a director since November 1994. Mr. Baruch has
been a General Partner in CMEA Ventures, a venture capital firm, since 1988. Mr.
Baruch is also a Special Partner in New Enterprise Associates, a venture capital
firm. Prior to joining CMEA, Mr. Baruch was the President

40
<PAGE> 45

and Chief Executive Officer of Microwave Technology, Inc., from 1983 to 1988.
Mr. Baruch serves on the boards of directors of Physiometrix Inc., a developer
and manufacturer of non-invasive advanced medical products, and several
privately held companies.

Neal Douglas has been a director since June 1995. Since January 1993, Mr.
Douglas has been a General Partner of AT&T Ventures, a venture capital firm.
From May 1989 to January 1993, Mr. Douglas was a partner of New Enterprise
Associates, a venture capital firm. Mr. Douglas currently serves on the boards
of directors of Software.com, a provider of scalable, high performance messaging
software applications for providers of Internet communications and services,
Cellnet Data Systems, Inc., a provider of fixed network wireless information
services, FVC.COM, an Internet video applications company, TUT Systems, a
provider of products that enable high speed data transmissions over copper
wires, and several privately held companies.

Irwin Federman has been a director since June 1995. Mr. Federman has been
a general partner of U.S. Venture Partners, a venture capital firm, since 1990.
Mr. Federman serves on the boards of directors of SanDisk Corporation, a
solid-state memory system company, Western Digital Corporation, a disk drive
manufacturer, Komag Incorporated, a thin film media manufacturer, CheckPoint
Software Technologies, Inc., a network security software company, and MMC
Networks, Inc., a developer and supplier of network processors.

John L. Walecka has been a director since November 1995. Since 1984, Mr.
Walecka has been at Brentwood Venture Capital, a venture capital firm, where he
has been a general partner since 1990. Mr. Walecka serves on the boards of
directors of Rhythms NetConnections Inc., a service provider using digital
subscriber line technology, and several privately held companies.

BOARD COMPOSITION

We currently have authorized six directors. In accordance with the terms
of our Articles of Incorporation, effective upon the closing of this offering,
the terms of office of the directors will be divided into two classes:

- Class I, whose term will expire at the annual meeting of shareholders
to be held in 2000 or a special meeting held instead of that annual
meeting; and

- Class II, whose term will expire at the annual meeting of shareholders
to be held in 2001 or a special meeting held instead of that annual
meeting.

The Class I directors are Messrs. Baruch, Douglas and Federman; the Class
II directors are Messrs. Ben-Efraim, Moley and Walecka. Each director will be
elected to serve from the time of election until the second annual meeting
following election or special meeting held instead of an annual meeting. Our
Articles of Incorporation provide that the authorized number of directors may be
changed only by resolution of the board of directors. Any additional
directorships will be distributed between the two classes so that, as nearly as
possible, each class will consist of one-half of the directors. Directors of
Netro may be removed for cause by the vote of the holders of a majority of the
common stock, and without cause by the holders of two-thirds of the common
stock.

BOARD COMPENSATION

We do not currently compensate our directors, but directors are reimbursed
for out-of-pocket expenses incurred in connection with Netro business. Our
directors are eligible to participate in our 1996 stock option plan and, to the
extent that a director is an employee of Netro, to participate in our 1999
employee stock purchase plan. Our directors who are not employees also receive
periodic stock option grants under our 1997 directors' stock option plan.

41
<PAGE> 46

BOARD COMMITTEES

Compensation Committee. Upon the effectiveness of this offering, the
compensation committee will consist of Messrs. Baruch and Walecka. The
compensation committee:

- reviews and approves the compensation and benefits for our executive
officers;

- grants stock options under our stock option plans; and

- makes recommendations to the board of directors regarding such
matters.

Audit Committee. Upon the effectiveness of this offering, the audit
committee will consist of Messrs. Douglas and Federman. 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

No member of the compensation committee serves as a member of the board of
directors or the compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or compensation
committee. See "Certain Transactions" for a description of transactions between
Netro and entities affiliated with members of the compensation committee.

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<PAGE> 47

EXECUTIVE COMPENSATION

The following table provides certain summary information concerning the
compensation received for services rendered to Netro during the fiscal year
ended December 31, 1998 by:

- our Chief Executive Officer;

- each of our other four most highly compensated executive officers
serving as such as of December 31, 1998; and

- two other executive officers whose annual compensation exceeded
$100,000 in 1998, but whose employment with Netro terminated prior to
December 31, 1998.

We refer to these individuals as our Named Executive Officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Gideon Ben-Efraim.......................... $200,000 $ 50,000 -- $ --
Chief Executive Officer, President and
Director
Michael T. Everett......................... 165,077 45,000 -- --
Chief Financial Officer and Executive
Vice President
Matthew Powell............................. 100,000 120,000 400,000 --
Senior Vice President, Worldwide Sales
Cynthia M. Hillery......................... 132,956 20,000 40,000 --
Vice President, Marketing
Avram Caspi(1)............................. 138,606 25,000 120,000 13,441(1)
Vice President, Operations
Amir Makleff(2)............................ 163,863 -- -- --
Senior Vice President, Research and
Development and Engineering
Eli Pasternak(3)........................... 158,376 -- -- --
Chief Scientist
</TABLE>

- ---------------
(1) Mr. Caspi's employment with Netro terminated in June 1999. His other
compensation consisted of relocation expenses.

(2) Mr. Makleff's employment with Netro terminated in November 1998.

(3) Mr. Pasternak's employment with Netro terminated in November 1998.

43
<PAGE> 48

The following table provides summary information regarding stock options
granted to the Named Executive Officers from our 1996 stock option plan during
the fiscal year ended December 31, 1998. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by the rules of the SEC.

OPTION GRANTS IN FISCAL 1998

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------ -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim............ -- --% $ -- -- $ -- $ --
Michael T. Everett........... -- -- -- -- -- --
Matthew Powell............... 400,000 25.0 2.00 3/3/08 503,116 1,274,994
Cynthia M. Hillery........... 40,000 2.0 2.00 6/2/08 50,312 127,499
Avram Caspi.................. 120,000 7.0 2.00 3/3/08 150,935 382,498
Amir Makleff................. -- -- -- -- -- --
Eli Pasternak................ -- -- -- -- -- --
</TABLE>

During 1999, the Named Executive Officers received grants under our 1999
executive stock option plan as follows:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME UNDERLYING OPTIONS GRANTED
---- --------------------------
<S> <C>
Gideon Ben-Efraim........................... 300,000
Michael T. Everett.......................... 225,000
Matthew Powell.............................. 150,000
Cynthia M. Hillery.......................... 100,000
Avram Caspi................................. 20,000
</TABLE>

The following table provides summary information concerning the exercise
of options by the Named Executive Officers in 1998 and the shares of common
stock represented by outstanding stock options held by each of them as of
December 31, 1998. The value realized and the value of unexercised in-the-money
options uses the assumed initial public offering price of $8.00 per share as the
fair market value at December 31, 1998.

AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER UNDERLYING IN-THE-MONEY
OF SHARES UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Ben-Efraim........... -- $ -- 400,000 -- $2,400,000 $ --
Michael T. Everett.......... -- -- 183,750 236,250 1,102,500 1,417,500
Matthew Powell.............. -- -- -- 400,000 -- 2,400,000
Cynthia M. Hillery.......... 61,250 477,750 37,084 101,666 275,005 699,245
Avram Caspi................. -- -- -- 120,000 -- 720,000
Amir Makleff................ -- -- -- -- -- --
Eli Pasternak............... -- -- -- -- -- --
</TABLE>

44
<PAGE> 49

EMPLOYMENT AND CHANGE-OF-CONTROL AGREEMENTS

In March 1995, Netro entered into an employment agreement with Gideon
Ben-Efraim, Netro's Chief Executive Officer, President and Director. The initial
base salary under this agreement was $120,000 per year, with an automatic
increase to $145,000 upon the closing of Netro's Series A preferred stock
financing. Mr. Ben-Efraim's base salary has since been increased pursuant to
annual review by the board of directors. Pursuant to the agreement, Mr.
Ben-Efraim receives a cash bonus equal to 20% of his base salary, in addition to
participation in any annual executive bonus plan of Netro. In the event of
termination other than for cause, the agreement entitles Mr. Ben-Efraim to
severance benefits equal to twelve months of his then-current base salary as
well as a lapse of 25% of Netro's repurchase option on unvested shares then held
by Mr. Ben-Efraim, including those held by his family trust. If Netro enters
into certain change-of-control transactions, the vesting of Mr. Ben-Efraim's
options and shares subject to repurchase, including those held by his family
trust, will become fully vested. The agreement also provides that, in the event
Netro grants registration rights to any officers or investors, Netro will grant
no less favorable rights to Mr. Ben-Efraim.

Netro has entered into change-of-control agreements with Richard M. Moley,
Michael T. Everett, James Hannigan, Francis Ngai, Matthew Powell, John Perry and
Man Wong as follows:

- Under Mr. Moley's agreement, in the event of a change of control, all
unvested shares and options held by Mr. Moley, or his affiliates,
will vest immediately as if he had been employed by Netro for two
additional years.

- Under Mr. Everett's agreement, if Mr. Everett's employment with Netro
is terminated without cause within one year following a change of
control or if he is not offered a comparable position by the
acquiror, all unvested options will vest as if he had been employed
by Netro for two additional years.

- Under Mr. Powell's agreement, in the event that Mr. Powell is
terminated without cause following a change of control or is not
offered a comparable position by the acquiror, unvested shares and
options held by Mr. Powell will vest immediately as if he had been
employed by Netro for one additional year.

- Under the agreements with Messrs. Hannigan, Ngai, Perry and Wong, in
the event the employee is terminated without cause following a change
of control or does not receive an offer of a comparable position with
the acquiror, and the termination occurs before the employee has
completed one year of employment, unvested shares and options held by
that employee will vest immediately as if he had been employed for
one full year.

STOCK PLANS

1995 and 1996 Stock Option Plans

Our 1996 stock option plan is intended to serve as the successor equity
incentive program to our 1995 stock option plan. No option grants will be made
under the 1995 stock option plan after this offering. The 1996 stock option plan
provides for the grant of incentive stock options, as defined in Section 422 of
the Internal Revenue Code, to employees and the grant of nonstatutory stock
options to employees, non-employee directors and consultants. The purposes of
the 1996 stock option 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 option plan was adopted by our board of directors in
December 1996 and approved by our shareholders in January 1997. Unless
terminated earlier by the board of directors, the 1996 stock option plan will
terminate in December 2006. The 1996 stock option plan was amended by our board
of directors in April 1999 and June 1999 to include some of the provisions
provided below. These

45
<PAGE> 50

amendments will be submitted to our shareholders for their approval on August 6,
1999. The number of shares reserved for issuance under the 1996 stock option
plan will be subject to an automatic annual increase on the first day of 2001
through 2005 equal to the least of:

- 750,000 shares;

- 3% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or

- a number of shares determined by the administrator.

As of June 30, 1999:

- a total of 6,341,978 shares had been reserved for issuance under the
1996 stock option plan;

- options to purchase an aggregate of 4,484,667 shares of common stock
were outstanding under the 1995 stock option plan and 1996 stock
option plan at a weighted average exercise price of $2.34;

- 2,216,352 shares had been issued upon exercise of outstanding
options, net of repurchases; and

- 2,098,981 shares remained available for future grant.

As additional shares become available for grant under the 1995 stock
option plan, they will be automatically transferred to the 1996 stock option
plan.

The compensation committee currently administers the 1996 stock option
plan. The administrator of the 1996 stock option plan determines numbers of
shares subject to options, vesting schedules and exercise prices for options
granted under the 1996 stock option plan, provided, however, an individual
employee may not receive option grants for more than 1,000,000 shares in any
fiscal year.

The exercise price of incentive stock options must be at least equal to
100% of the fair market value of our common stock on the date of grant, and at
least equal to 110% of the fair market value in the case of incentive stock
options granted to an employee who holds, at the time the option is granted,
more than 10% of the total voting power of all classes of our stock or any
parent's or subsidiary's stock. Nonstatutory stock options will have an exercise
price of at least of 85% of the fair market value in the case of employees and
consultants and 100% in the case of executives.. Payment of the exercise price
may be made in cash or other form of consideration approved by the
administrator. The administrator determines the term of options, which may not
exceed ten years, or five years in the case of an incentive stock option granted
to an employee who holds, at the time the option is granted, more than 10% of
the total voting power of all classes of our stock or any parent's or
subsidiary's 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. The administrator determines when options become
exercisable. Options granted under the 1996 stock option plan generally become
exercisable at the rate of 1/4th of the total number of shares subject to the
options twelve months after the date of grant, and 1/48th of the total number of
shares subject to the options each month thereafter. To the extent an optionee
would have the right in any calendar year to exercise for the first time one or
more incentive stock options for shares having an aggregate fair market value in
excess of $100,000 as of the date the options were granted, the excess options
will be treated as nonstatutory stock options.

In the event of a change of control of Netro, outstanding options will be
assumed or substituted by the successor corporation. If the successor
corporation does not agree to this assumption or substitution, the options will
terminate upon the closing of the transaction.

The board of directors may amend, modify or terminate the 1996 stock
option plan if any amendment, modification or termination does not impair
vesting rights of plan participants. Additionally, shareholder approval is
required for an amendment to the extent required by applicable law, regulations
or rules.

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<PAGE> 51

Options outstanding under the 1995 stock option plan are subject to
substantially the same terms as options under the 1996 stock option plan,
except:

- non-employee directors were not eligible to receive options under the
1995 stock option plan;

- the 1995 stock option plan did not impose an annual limitation on the
number of shares subject to options that may be issued to any
individual employee; and

- the 1995 stock option plan provides for a minimum per share exercise
price of 85% of the fair market value of our common stock on the grant
date for all employees, including executive officers.

1999 Executive Stock Plan

Our 1999 executive stock plan was adopted by the board of directors in
April 1999 and approved by the shareholders in May 1999. As of June 30, 1999:

- a total of 1,195,000 shares of common stock has been reserved for
issuance under the 1999 executive stock plan;

- options to purchase 1,175,000 shares with a weighted average exercise
price of $3.50 were outstanding; and

- 20,000 shares remained available for future option grants.

Unless terminated earlier, the 1999 executive stock plan will terminate in
April 2009. We do not expect to grant any additional options under the 1999
executive stock plan. The 1999 executive stock plan does not impose an annual
limitation on the number of shares subject to options that may be issued to any
individual employee.

The terms of options issued under the 1999 executive stock plan are
generally the same as those that may be issued under the 1996 stock option plan.
However, options granted under the 1999 executive stock plan, may be exercised
immediately after the grant date, subject to Netro's right to repurchase at cost
any shares that remain unvested at the time of the optionee's termination of
employment. Options granted under the 1999 executive stock plan generally vest
at the rate of 1/4th of the total number of shares subject to the options twelve
months after the date of grant and 1/48th of the total number of shares subject
to the options each month thereafter.

1997 Directors' Stock Option Plan

The 1997 directors' stock option plan was adopted by the board of
directors in December 1997 and amended in June 1999. These amendments will be
submitted to our shareholders for their approval on August 6, 1999. As of June
30, 1999:

- a total of 300,000 shares of common stock had been reserved for
issuance;

- options to purchase 125,000 shares of common stock were outstanding at a
weighted average price of $2.00; and

- 175,000 shares remained available for future grants.

Under the 1997 directors' stock option plan, each individual who first
becomes a non-employee director after the effective date of the amendment will
receive an automatic initial grant of an option to purchase 10,000 shares of
common stock. Initial grants to non-employee directors will be vested and
exercisable in full as of the date of grant. The 1997 directors' stock option
plan also provides for additional grants of fully vested options to purchase
10,000 shares of common stock on the first day of each fiscal year to each
non-employee director who has served on our board of directors for at least six
months. A non-employee director who received a 20,000 share initial grant under
the original version of the 1997 directors' stock option plan, however, will be
eligible to receive an annual grant of a fully vested option to purchase 5,000
shares of common stock until the first day of our fiscal year following the date
on which

47
<PAGE> 52

the initial 20,000 share option has fully vested under the terms of that option.
After that 20,000 share option has fully vested, each director will be eligible
to receive an annual grant of a fully vested option to purchase 10,000 shares of
common stock each year. The per share exercise price of all stock options
granted under the 1997 directors' stock option plan must be equal to the fair
market value of a share of Netro's common stock on the grant date. Options
granted under the 1997 directors' stock option plan have a term of ten years.
Unvested options, however, will terminate when the optionee ceases to serve as a
director and vested options will terminate if they are not exercised within 12
months after the director's death or disability or within 90 days after the
director ceases to serve as a director for any other reason.

In the event of change of control of Netro, each non-employee director
will be entitled to have his options assumed by the successor or else his
existing options will become fully vested.

The 1997 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 other than the director or directors
who have a personal interest at stake. Although the board of directors may amend
or terminate the 1997 directors' stock option plan, it may not take any action
that might adversely affect any outstanding option. The 1997 directors' stock
option plan will have a term of ten years unless terminated earlier.

1999 Employee Stock Purchase Plan

Our 1999 employee stock purchase plan was adopted by the board of
directors in June 1999 and will be submitted for approval by the shareholders in
August 1999. If approved, the 1999 employee stock purchase plan becomes
effective on the effective date of this offering. A total of 1,000,000 shares of
common stock has been reserved for issuance under the 1999 employee stock
purchase plan. The number of shares reserved for issuance under the 1999
employee stock purchase plan will be subject to an automatic annual increase on
the first day of each of 2001 through 2005 equal to the least of:

- 250,000 shares;

- 1% of our outstanding common stock on the last day of the immediately
preceding fiscal year; or

- a number of shares determined by the administrator.

The 1999 employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, provides our employees with an
opportunity to purchase our common stock through accumulated payroll deductions.
The 1999 employee stock purchase plan will be administered by the board of
directors or by a committee appointed by the board of directors. The 1999
employee stock purchase plan permits an eligible employee to purchase common
stock through payroll deductions of up to 15% of that employee's compensation.
Employees, including officers and employee directors, of Netro, or of any
majority-owned subsidiary designated by the board of directors, are eligible to
participate in the 1999 employee stock purchase plan if they are employed by
Netro or any designated subsidiary for at least 20 hours per week and more than
five months per year. Unless the board of directors or its committee determines
otherwise, the 1999 employee stock purchase plan will be implemented by a series
of overlapping offering periods generally of 24 months' duration with new
offering periods commencing on February 1 and August 1 of each year. Each
offering period will be divided into four consecutive purchase periods of
approximately six months' duration. The first offering period is expected to
commence on the date of this offering and end on July 31, 2001; the initial
purchase period is expected to end on January 31, 2000. The price at which
common stock will be purchased under the 1999 employee stock purchase plan is
equal to 85% of the fair market value of the common stock on the first day of
the applicable offering period or the last day of the applicable purchase
period, whichever is lower. Employees may end their participation in an offering
period at any time, and participation automatically ends on termination of
employment.

Under the 1999 employee stock purchase plan, no employee may be granted an
option 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 that of our

48
<PAGE> 53

subsidiaries. In addition, no employee may be granted an option under the 1999
employee stock purchase plan if the option would permit the employee to purchase
stock under all of our employee stock purchase plans in an amount that exceeds
$25,000 of fair market value for each calendar year in which the option is
outstanding at any time, In addition, no employee may purchase more than 2,000
shares of common stock under the 1999 employee stock purchase plan in any one
purchase period. If the fair market value of the common stock on a purchase date
other than the final purchase date of an offering period is less than the fair
market value at the beginning of the offering period, each participant in the
1999 employee stock purchase plan will automatically be withdrawn from the
offering period as of the purchase date and re-enrolled in a new 24-month
offering period on the first business day following the purchase date.

The 1999 employee stock purchase plan provides that, in the event of a
change of control of Netro, each right to purchase stock under the 1999 employee
stock purchase plan will be assumed or an equivalent right substituted by the
successor corporation. However, our board of directors will shorten any ongoing
offering period so that employees' rights to purchase stock under the 1999
employee stock purchase plan are exercised prior to the transaction if the
successor corporation refuses to assume each purchase right or to substitute an
equivalent right.

The 1999 employee stock purchase plan will terminate in June 2019 unless
terminated earlier in accordance with its provisions. The board of directors has
the power to amend or terminate the 1999 employee stock purchase plan if its
action does not adversely affect any outstanding rights to purchase stock
thereunder. However, our board of directors may amend or terminate the 1999
employee stock purchase plan or an offering period even if it would adversely
affect options in order to avoid our incurring adverse accounting charges.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

We have adopted provisions in our Articles of Incorporation that limit the
liability of our directors for monetary damages arising from a breach of their
fiduciary duty as directors to the fullest extent permitted by the California
Corporations Code. This limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.

Our Bylaws provide that we will indemnify our directors and officers to
the fullest extent permitted by California law, including circumstances in which
indemnification is otherwise discretionary under California law. We have entered
into indemnification agreements with our directors and officers containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the California Corporations Code. The indemnification
agreements may require us:

- to indemnify our directors and officers against liabilities that may
arise by reason of their status or service as directors or officers,
other than liabilities arising from willful misconduct of a culpable
nature;

- to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified; and

- to obtain directors' and officers' insurance if available on
reasonable terms.

We currently have a policy for directors' and officers' insurance, which
we intend to replace with a similar policy that provides coverage for matters
relating to public offerings. At present, there is no pending litigation or
proceeding involving any director, officer, employee or agent of ours in which
indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.

49
<PAGE> 54

CERTAIN TRANSACTIONS

Since January 1, 1996, Netro has not been a party to any transaction or
series of similar transactions in which the amount involved exceeds $60,000 and
in which any director, executive officer, or holder of more than 5% of our
common stock had or will have a direct or indirect material interest other than:

- normal compensation arrangements which are described under
"Management -- Executive Compensation" above; and

- the transactions described below.

PRIVATE PLACEMENT TRANSACTIONS

Since January 1, 1996, we have issued shares of preferred stock and
warrants for the purchase of shares of preferred stock in private placement
transactions involving related parties, as follows:

- An aggregate of 6,995,111 shares of Series C preferred stock at $7.00
per share in July, October and November 1996 and January, February,
April, July and November 1997 to 34 investors; and

- An aggregate of 4,190,512 shares of Series D preferred stock at $7.78
per share in January, April, July and October 1998 and January,
February, April and June 1999 to 26 investors.

The table below summarizes the shares of preferred stock purchased by our
executive officers, directors and 5% shareholders and persons and entities
associated with them in the above private placement transactions. Shares held by
affiliated persons and entities have been aggregated. See "Principal
Shareholders" for more information.

<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------
INVESTOR SERIES C SERIES D
- -------- -------- --------
<S> <C> <C>
Venture Fund I, L.P. and Neal Douglas....................... 142,858 125,991
U.S. Venture Partners and Irwin Federman.................... 70,678 123,767
Brentwood Venture Capital and John Walecka.................. 328,572 89,698
o.tel.o. Communications GmbH................................ 230,000 --
Richard M. Moley............................................ 50,000 --
</TABLE>

TRANSACTIONS WITH DIRECTORS

We have loaned Richard M. Moley, the chairman of our board of directors,
funds according to the terms set forth in the table below. The note is secured
by shares of our common stock owned by Mr. Moley and a trust controlled by him.

<TABLE>
<CAPTION>
NOTE
ISSUE DATE DUE DATE AMOUNT INTEREST RATE
- ------------- -------------- ----------- --------------
<S> <C> <C> <C>
December 1998 April 17, 2002 $800,000 5.44% per year
</TABLE>

TRANSACTIONS WITH SHAREHOLDERS

o.tel.o Communications GmbH holds more than 5% of our common stock and
also was a significant customer, directly purchasing an aggregate of $89,000 and
$1,091,966 of AirMAN products in 1996 and 1997, and purchasing through a
reseller an aggregate of $580,000 and $2,181,104 of AirMAN products in 1996 and
1997.

EMPLOYMENT AND CHANGE-OF-CONTROL AGREEMENTS

Netro has entered into employment and change-of-control agreements with
some of its officers and directors. See "Management -- Employment and
Change-of-Control Agreements."

50
<PAGE> 55

INDEMNIFICATION AGREEMENTS

We have entered into indemnification agreements with some of our officers
and directors. See "Management -- Limitation of Liability and Indemnification
Matters."

REGISTRATION RIGHTS AGREEMENTS

Some of our shareholders are entitled have their shares registered by us
for resale. See "Description of Capital Stock -- Registration Rights of Certain
Holders."

51
<PAGE> 56

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of Netro's common stock as of June 30, 1999 and as adjusted to reflect
the sale of the common stock offered by Netro pursuant to this prospectus and
conversion of all outstanding shares of preferred stock into shares of common
stock by:

- each of our directors;

- each of our Named Executive Officers;

- all directors and executive officers as a group; and

- each person who is known by us to own beneficially more than 5% of our
common stock.

Percentage of beneficial ownership is based on 38,913,772 shares of common
stock outstanding as of June 30, 1999, together with options that are
exercisable within 60 days of June 30, 1999 for each shareholder. Beneficial
ownership is determined in accordance with the rules of the SEC. The percentages
for beneficial ownership after offering assume that the underwriters do not
exercise their over-allotment option.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Gideon Ben-Efraim(1)...................................... 4,400,000 11.2% 10.0%
Venture Fund I, L.P.(2)................................... 4,216,071 10.8 9.6
U.S. Venture Partners(3).................................. 4,141,667 10.6 9.4
Brentwood Venture Capital(4).............................. 3,001,604 7.7 6.8
o.tel.o Communications GmbH(5)............................ 2,952,222 7.6 6.7
Eli Pasternak(6).......................................... 1,714,284 4.4 3.9
Richard M. Moley(7)....................................... 423,125 1.1 1.0
Amir Makleff.............................................. 450,000 1.2 1.0
Michael T. Everett(8)..................................... 245,000 * *
Thomas R. Baruch(9)....................................... 210,000 * *
Matthew Powell(10)........................................ 141,667 * *
Cynthia M. Hillery(11).................................... 137,500 * *
Avram Caspi............................................... 40,000 * *
Neal Douglas(12).......................................... 10,000 * *
Irwin Federman(13)........................................ 10,000 * *
John L. Walecka(14)....................................... 10,000 * *
All directors and executive officers as a group (15
persons)(15)............................................ 19,337,585 48.5 44.0
</TABLE>

- ---------------
* Less than 1%.

(1) Includes 400,000 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999.

(2) Represents 4,216,071 shares held by Venture Fund I, L.P. Neal Douglas, a
director of Netro, is a general partner of the general partner of this
partnership. He shares voting and investment power with respect to the
shares held by this entity, and disclaims beneficial ownership of shares in
which he has no pecuniary interest. See note 12. The address for Venture
Fund I, L.P. is 3000 Sand Hill Road, Building 1, Suite 285, Menlo Park, CA
94025.

(3) Represents 3,582,540 shares held by U.S. Venture Partners IV, L.P., 434,878
shares held by Second Ventures II, L.P. and 124,249 shares held by USVP
Entrepreneur Partners II, L.P. Irwin Federman, a director of Netro, is a
general partner of the general partner of each of these partnerships. He
shares voting and investment power with respect to the shares held by these
entities, and disclaims

52
<PAGE> 57

beneficial ownership of shares in which he has no pecuniary interest. See
note 13. The address for U.S. Venture Partners is 2180 Sand Hill Road,
Suite 300, Menlo Park, CA 94025.

(4) Includes 2,962,302 shares held by Brentwood Associates VI, L.P. and 39,302
shares held by Brentwood Affiliates Fund, L.P. John L. Walecka, a director
of Netro, is a general partner of the general partners of each of these
partnerships. He shares voting and investment power with respect to the
shares held by these entities and disclaims beneficial ownership of shares
in which he has no pecuniary interest. See note 14. The address for
Brentwood Venture Capital is 3000 Sand Hill Road, Building 1, Suite 260,
Menlo Park, CA 94025.

(5) The address for o.tel.o Communications GmbH is Am Bonneshof 35, D-40474
Dusseldorf, Germany.

(6) Includes 100,000 shares held on behalf of a minor child.

(7) Includes 23,125 shares issuable upon exercise of options exercisable within
60 days of June 30, 1999. The vesting of 400,000 shares of common stock is
contingent upon Mr. Moley's continued service as a director of Netro.

(8) Represents 245,000 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999.

(9) Includes 10,000 shares issuable upon exercise of options exercisable within
60 days of June 30, 1999. The address for Mr. Baruch is 235 Montgomery
Street, Suite 920, San Francisco, CA 94104.

(10) Represents 141,667 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999.

(11) Includes 76,250 shares issuable upon exercise of options exercisable within
60 days of June 30, 1999.

(12) Represents 10,000 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999. Excludes 4,216,071 shares held by Venture
Fund I, L.P. See note 2.

(13) Represents 10,000 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999. Excludes 4,141,667 shares held by U.S.
Venture Partners. See note 3.

(14) Represents 10,000 shares issuable upon exercise of options exercisable
within 60 days of June 30, 1999. Excludes 3,001,604 shares held by
Brentwood Venture Capital. See note 4.

(15) Includes 11,359,342 shares held by entities affiliated with certain
directors as described in notes 2, 3 and 4 and 932,709 shares issuable upon
exercise of options exercisable within 60 days of June 30, 1999.

Except as otherwise noted, the address of each person listed in the table
is c/o Netro Corporation, 3860 N. First Street, San Jose, CA 95134, and the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable.

53
<PAGE> 58

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 and
5,000,000 shares of undesignated preferred stock.

COMMON STOCK

As of June 30, 1999, there were 38,970,800 shares of common stock
outstanding that were held of record by approximately 182 shareholders assuming:

- the conversion of all outstanding shares of our preferred stock into
common stock at a one-to-one ratio;

- the exercise of 57,028 warrants currently outstanding; and

- assuming no exercise of any other outstanding options or warrants
after June 30, 1999.

Under the same assumptions, there will be 43,970,800 shares of common
stock outstanding after the sale of the shares of common stock in this offering.
The holders of common stock are entitled to one vote per share on all matters to
be voted upon by the shareholders. Subject to preferences that may be applicable
to any outstanding preferred stock, the holders of common stock are entitled to
receive dividends as declared by the board of directors. In the event of a
liquidation, dissolution or winding up of Netro, the holders of common stock are
entitled to share in all assets remaining after payment of liabilities, subject
to the 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.

PREFERRED STOCK

Effective upon the closing of this offering, Netro will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board of directors
will have the authority, without any further vote or action by the shareholders:

- to issue the undesignated preferred stock in one or more series;

- 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 that series.

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. We have no present plan to issue shares of
preferred stock.

REGISTRATION RIGHTS

Under an agreement dated June 21, 1999, the holders of 33,708,413 shares
of common stock and shares issuable upon the exercise of warrants are entitled
to have us register these shares under the Securities Act. Subject to the
limitations in this agreement, these holders may require, on two occasions, that
Netro use its best efforts to register these securities for public resale. If we
register any of our common stock either for our own account or for the account
of other security holders, the holders of these securities may 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. Netro will bear all fees,
costs and expenses of these registrations. The holders of the securities being
registered will bear all selling expenses, including underwriting discounts,
selling commissions and stock transfer taxes.

54
<PAGE> 59

Additionally, holders of registrable securities may require, on no more
than one occasion in a twelve-month period, that we register their shares for
public resale on Form S-3 or similar short-form registration so long as the
value of the securities to be registered is at least $500,000. The holders of
the securities to be registered must bear all fees, costs and expenses of these
registrations on Form S-3 as well as all selling expenses, including
underwriting discounts, selling commissions and stock transfer taxes.

ANTI-TAKEOVER PROVISIONS

Upon completion of this offering, some provisions of our charter documents
may have the effect of delaying or preventing changes in control or management
of Netro, which could have an adverse effect on the market price of our common
stock. These include:

- authorizing the board to issue additional preferred stock;

- prohibiting cumulative voting in the election of directors;

- limiting the persons who may call special meetings of shareholders;

- establishing a classified board of directors;

- prohibiting shareholder actions by written consent; and

- establishing advance notice requirements for nominations for election
to the board of directors or for proposing matters that can be acted
on by shareholders at shareholder meetings.

Our stock option and purchase plans generally provide for assumption of
our benefit plans or substitution of equivalent options of a successor
corporation or, alternatively, at the discretion of the board of directors,
exercise of some or all of the options, including those for non-vested shares,
or acceleration of vesting of shares issued pursuant to stock grants, upon a
change of control or similar event.

WARRANTS

As of June 30, 1999, warrants were outstanding to purchase an aggregate of
57,028 shares of preferred stock at a weighted average exercise price of $7.39
per share. Warrants to purchase 28,750 shares at $7.00 per share will expire two
years from the date of this offering. Warrants to purchase 8,997 shares at $7.78
per share will expire two years from the date of this offering. Warrants to
purchase 19,281 shares at $7.78 per share will expire three years from the
closing of this offering. These warrants to purchase shares of preferred stock
outstanding following this offering will convert into warrants to purchase
shares of common stock on the closing of this offering on a one-to-one basis.
Generally, each warrant contains provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon the exercise of the
warrant under certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications, consolidations and certain dilutive
issuances of securities at prices below the then-existing warrant exercise
price. In addition, under a manufacturing and engineering services agreement
with Microelectronics Technology Inc., Netro may issue stock to Microelectronics
Technology Inc. as consideration for engineering services instead of cash.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.

LISTING

We have applied to list our common stock on the Nasdaq National Market
under the trading symbol "NTRO."

55
<PAGE> 60

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, we will have 43,913,772 shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants to
purchase common stock after June 30, 1999. Our current shareholders, holding in
the aggregate 38,913,772 shares of our common stock, have agreed that they will
not, without the prior written consent of Netro or Merrill Lynch on behalf of
the underwriters, offer, sell or otherwise dispose of any shares of common stock
or options to acquire shares of common stock during the 180-day period following
the date of this prospectus. See "Underwriting."

All of the 5,000,000 shares of common stock being sold in this offering
will be freely tradeable without restriction or further registration under the
Securities Act, except for shares held by our affiliates, as defined in Rule 144
under the Securities Act, which generally may be sold only in compliance with
the limitations of Rule 144 described below. We issued and sold the remaining
38,913,772 shares in private transactions. They are deemed restricted securities
under Rule 144. These shares may be sold in the public market only if registered
under the Securities Act or if exempt from registration under Rule 144, 144(k)
or 701 under the Securities Act, which rules are summarized below.

Assuming that this offering is effective on August 16, 1999, on the date
of the expiration of the lock-up agreements, 38,212,364 restricted shares that
will not then be subject to any repurchase option will be eligible for immediate
sale. The remaining 701,408 restricted shares will be eligible for sale under
Rule 144 after the expiration of the lock-up period. Following the completion of
this offering, warrants to purchase 57,028 shares of our common stock will be
outstanding, which if exercised would be saleable upon the expiration of various
one-year holding periods under Rule 144.

In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who has beneficially owned restricted shares for at least
one year, is 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, approximately
439,138 shares immediately after this offering; or

- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks before the date of the
sale.

Sales under Rule 144 also are subject to requirements pertaining to the
manner and notice of the sales and the availability of current public
information concerning Netro.

Under Rule 144(k), a person who is not deemed to have been an affiliate of
Netro at any time during the 90 days before a sale and who has beneficially
owned the shares proposed to be sold for at least two years would be entitled to
sell these shares without regard to the requirements described above. To the
extent that shares were acquired from an affiliate of Netro, the transferee's
holding period for the purpose of effecting a sale under Rule 144(k) commences
on the date of transfer from the affiliate.

Rule 701 provides that, beginning 90 days after the date of this
prospectus, persons other than affiliates may sell shares of common stock
acquired from us in connection with written compensatory benefit plans,
including our stock option plans, subject only to the manner of sale provisions
of Rule 144. Beginning 90 days after the date of this prospectus, affiliates may
sell these shares of common stock subject to all provisions of Rule 144 except
the one-year minimum holding period.

Shortly after the closing of this offering, we intend to file a
registration statement on Form S-8 under the Securities Act to register all
shares of common stock issuable under the 1995 Stock Option Plan, the 1996 Stock
Option Plan, the 1997 Directors' Stock Option Plan, the 1999 Executive Stock
Plan and the 1999 Employee Stock Purchase Plan. See "Management--Stock Plans."
This Form S-8

56
<PAGE> 61

registration statement is expected to become effective immediately upon filing,
and shares covered by that registration statement will then be eligible for sale
in the public markets, subject to:

- the Rule 144 limitations applicable to affiliates;

- the expiration of the lock-up period; and

- vesting restrictions imposed by us.

After the closing of this offering, the holders of 33,708,413 shares of
our common stock, including shares issuable upon the exercise of warrants to
purchase shares of our preferred stock will be entitled to have their shares
registered by us for resale. For a discussion of these rights, see "Description
of Capital Stock--Registration Rights."

57
<PAGE> 62

UNDERWRITING

GENERAL

Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson
Stephens Inc., and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, are acting as representatives of each of the underwriters named
below. Subject to the terms and conditions set forth in a purchase agreement, we
have agreed to sell to each of the underwriters, and each of the underwriters,
severally and not jointly, has agreed to purchase from us, the number of shares
of our common stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
BancBoston Robertson Stephens Inc...........................
Dain Rauscher Wessels.......................................
---------
Total.......................................... 5,000,000
=========
</TABLE>

Subject to the terms and conditions set forth in the purchase agreement,
each of the underwriters is committed to purchase all of the shares of our
common stock being sold pursuant to the purchase agreement if any shares of our
common stock are purchased. Under certain circumstances, under the terms of the
purchase agreement, the commitments of the non-defaulting underwriters may be
increased or the purchase agreement may be terminated. We have agreed to
indemnify the underwriters against some liabilities, including some liabilities
under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us that they propose initially to offer
the shares of our common stock to the public at the public offering price set
forth on the cover page of this prospectus, and to certain dealers at such price
less a concession not in excess of $ per share of common stock. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of common stock on sales to certain other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed.

The following table shows the per share and total public offering price,
the underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.

<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................. $ $ $
Underwriting discount.................. $ $ $
Proceeds, before expenses, to Netro.... $ $ $
</TABLE>

The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ million and are payable by us.

58
<PAGE> 63

OVER-ALLOTMENT OPTION

We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of 750,000
additional shares of common stock at the public offering price set forth on the
cover of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of our common stock offered hereby. To the extent that the underwriters exercise
this option, each underwriter will be obligated, subject to certain conditions,
to purchase a number of additional shares of our common stock proportionate to
such underwriter's initial amount reflected in the foregoing table.

RESERVED SHARES

At our request, the underwriters have reserved approximately 350,000
shares of our common stock for sale at the public offering price to our
directors, consultants and certain other persons with relationships to Netro.
The number of shares of our common stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares which are not so orally confirmed for purchase within one
day of the pricing of the offering will be offered by the underwriters to the
general public on the same basis as the other shares offered by this prospectus.

NO SALES OF SIMILAR SECURITIES

We, our executive officers and directors, and most of our existing
shareholders have agreed, with certain exceptions, not to directly or
indirectly:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer
any shares of our common stock or any securities convertible into or
exchangeable or exercisable for our common stock, whether now owned
or later acquired by the person executing the agreement or with
respect to which the person executing the agreement later acquires
the power of disposition, or file any registration statement under
the Securities Act relating to any shares of our common stock for a
period of 180 days after the date of this prospectus; or

- enter into any swap or other agreement that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership
of our common stock, whether any such swap or transaction is to be
settled by delivery of our common stock or other securities, in cash
or otherwise,

without the prior written consent of Merrill Lynch on behalf of the underwriters
for a period of 180 days after the date of this prospectus. See "Shares Eligible
for Future Sale."

NASDAQ NATIONAL MARKET LISTING

Before this offering, there has been no public market for our common
stock. The public offering price will be determined through negotiations among
us and the representatives. Among the factors to be considered by us and the
representatives in determining the public offering price of our common stock, in
addition to prevailing market conditions, will be the trading multiples of
publicly traded companies that the representatives believe to be comparable to
us, certain of our financial information, the history of, and the prospects for,
our company and the industry in which we compete, and an assessment of our
management, our past and present operations, the prospects for, and timing of,
our future revenue, the present state of our development, the percentage
interest of Netro being sold as compared to the valuation for the entire company
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours. There can be
no assurance that an active trading market will develop for our common stock or
that our common stock will trade in the public market subsequent to the offering
at or above the public offering price.

We have applied for a listing of our common stock on the Nasdaq National
Market under the symbol "NTRO."

59
<PAGE> 64

The underwriters have advised us that they do not expect sales to accounts
over which the underwriters exercise discretionary authority to exceed 5% of the
total number of shares of our common stock offered by them.

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the representatives are permitted to engage in certain
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.

If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing common stock in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

The representatives may also impose a penalty bid on certain underwriters
and selling group members. This means that, if the representatives purchase
shares of our common stock in the open market to reduce the underwriters' short
position or to stabilize the price of our common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members
that sold those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

OTHER RELATIONSHIPS

ML IBK Positions, an affiliate of Merrill Lynch, holds 642,674 shares of
our common stock. DRW Investors LLC, an affiliate of Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, holds 64,267 shares of our common stock.
BancBoston Robertson Stephens Inc. holds 28,572 shares of our common stock.

60
<PAGE> 65

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
Netro by Venture Law Group, A Professional Corporation, Menlo Park, California.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Fenwick & West LLP, Palo Alto, California. Tae Hea Nahm, a
director of Venture Law Group, is the Secretary of Netro, and Sanjay Khare, an
attorney at Venture Law Group, is Assistant Secretary. Tae Hea Nahm and other
attorneys of Venture Law Group, together with an entity affiliated with Venture
Law Group, hold an aggregate of 153,963 shares of our common stock and options
to purchase 25,000 shares of our common stock.

EXPERTS

The audited consolidated financial statements and schedule included in
this prospectus and elsewhere in the registration statement to the extent and
for the periods indicated in their reports have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act. This prospectus, which is a part
of the registration statement, does not contain all of the information set forth
in the registration statement, including items contained in the exhibits to the
registration statement. For further information with respect to Netro and the
common stock being offered, you should see the registration statement and the
exhibits, financial statements and notes filed with the registration statement.
Statements made in this prospectus concerning other documents are not
necessarily complete. With respect to the exhibits to the registration
statement. The registration statement, including exhibits, financial statements
and notes, 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 may be obtained
from the Commission upon payment of fees prescribed by the Commission.
Information on the operation of the public reference room may be obtained by
calling the Commission at 1-800-SEC-0330. These reports and other information
may also be inspected without charge at a Web site maintained by the Commission
at http://www.sec.gov.

61
<PAGE> 66

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations and Comprehensive
Loss................................................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 67

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of Netro Corporation:

We have audited the accompanying consolidated balance sheets of Netro
Corporation (a California corporation) and subsidiaries as of December 31, 1997
and 1998, and June 30, 1999, and the related consolidated statements of
operations and comprehensive loss, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1998, and for the six months
ended June 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the financial position of Netro Corporation and
subsidiaries as of December 31, 1997 and 1998, and June 30, 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, and for the six months ended June 30, 1999,
in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

San Jose, California

July 19, 1999

F-2
<PAGE> 68

NETRO CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY
-------------------- JUNE 30, AT JUNE 30,
1997 1998 1999 1999 (NOTE 9)
-------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 15,668 $ 6,094 $ 2,997
Short-term investments................................ 10,038 9,034 16,890
Trade accounts receivable, net of allowance of $47,
$509 and $100, respectively........................ 2,157 1,150 2,533
Inventory............................................. 3,927 4,315 4,651
Prepaid expenses and other............................ 361 243 603
-------- -------- --------
Total current assets.......................... 32,151 20,836 27,674
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net............... 5,516 5,634 4,996
OTHER ASSETS............................................ 41 318 240
-------- -------- --------
Total assets.................................. $ 37,708 $ 26,788 $ 32,910
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital
leases............................................. $ 1,487 $ 3,872 $ 5,557
Trade accounts payable................................ 2,870 1,327 2,129
Accrued liabilities................................... 2,137 3,114 3,553
-------- -------- --------
Total current liabilities..................... 6,494 8,313 11,239
LONG-TERM DEBT AND CAPITAL LEASES, net of current
portion............................................... 4,209 4,547 4,282
DEFERRED FACILITIES RENT................................ -- 35 48
-------- -------- --------
Total liabilities............................. 10,703 12,895 15,569
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 7) SHAREHOLDERS'
EQUITY:
Convertible Preferred Stock, no par value:
Authorized -- 32,692,517 shares
Outstanding -- 25,711,771 shares, 27,732,235 shares
and 29,902,283 shares at December 31, 1997,
December 31, 1998 and June 30, 1999,
respectively; none outstanding pro forma at June
30, 1999 (unaudited); aggregate liquidation
preference at June 30, 1999 of $98,128........... 65,437 81,073 97,908 $ --
Common Stock, no par value:
Authorized -- 60,000,000 shares
Outstanding -- 8,078,957 shares, 8,530,238 shares
and 9,011,489 shares at December 31, 1997,
December 31, 1998 and June 30, 1999,
respectively; 38,913,772 shares outstanding pro
forma at June 30, 1999 (unaudited)............... 344 1,224 6,451 104,359
Note receivable from shareholder...................... -- (800) (800) (800)
Deferred stock compensation........................... -- -- (4,325) (4,325)
Accumulated deficit................................... (38,776) (67,604) (81,893) (81,893)
-------- -------- -------- --------
Total shareholders' equity.................... 27,005 13,893 17,341 $ 17,341
-------- -------- -------- ========
Total liabilities and shareholders' equity.... $ 37,708 $ 26,788 $ 32,910
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 69

NETRO CORPORATION

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES............................... $ 731 $ 5,601 $ 5,438 $ 3,273 $ 5,338
COST OF REVENUES....................... 619 8,273 9,640 4,273 4,171
-------- -------- -------- -------- --------
GROSS PROFIT (LOSS).................... 112 (2,672) (4,202) (1,000) 1,167
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Research and development............. 10,446 15,289 16,143 8,769 9,183
Sales and marketing.................. 1,293 3,776 4,819 2,330 2,563
General and administrative........... 1,189 3,500 3,968 1,900 3,103
Amortization of deferred stock
compensation...................... -- -- -- -- 509
-------- -------- -------- -------- --------
Total operating expenses..... 12,928 22,565 24,930 12,999 15,358
-------- -------- -------- -------- --------
LOSS FROM OPERATIONS................... (12,816) (25,237) (29,132) (13,999) (14,191)
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE), net:
Interest income...................... 669 1,001 1,260 736 454
Interest expense..................... (26) (298) (956) (418) (552)
-------- -------- -------- -------- --------
Total other income (expense),
net........................ 643 703 304 318 (98)
-------- -------- -------- -------- --------
NET LOSS AND COMPREHENSIVE LOSS........ $(12,173) $(24,534) $(28,828) $(13,681) $(14,289)
======== ======== ======== ======== ========
Basic and diluted net loss per share... $ (4.66) $ (5.11) $ (4.07) $ (2.11) $ (1.72)
======== ======== ======== ======== ========
Shares used to compute basic and
diluted net loss per share........... 2,610 4,798 7,087 6,475 8,315
======== ======== ======== ======== ========
Pro forma basic and diluted net loss
per share (unaudited)................ $ (0.84) $ (0.38)
======== ========
Shares used to compute pro forma basic
and diluted net loss per share
(unaudited).......................... 34,391 37,628
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 70

NETRO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
CONVERTIBLE NOTE
PREFERRED STOCK COMMON STOCK RECEIVABLE DEFERRED TOTAL
-------------------- ------------------ FROM STOCK ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHAREHOLDER COMPENSATION DEFICIT EQUITY
---------- ------- --------- ------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1995.................... 18,716,660 $16,541 7,851,284 $ 69 $ (3) $ -- $ (2,069) $ 14,538
Exercise of stock options
for cash................ -- -- 170,000 34 -- -- -- 34
Repurchase of Common Stock
for cash................ -- -- (207,878) (9) -- -- -- (9)
Issuance of Series C
Convertible Preferred
Stock for cash, net of
issuance costs of $36... 1,967,106 13,734 -- -- -- -- -- 13,734
Repayment of notes
receivable from
shareholders............ -- -- -- -- 3 -- -- 3
Net loss.................. -- -- -- -- -- -- (12,173) (12,173)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1996.................... 20,683,766 30,275 7,813,406 94 -- -- (14,242) 16,127
Exercise of stock options
for cash................ -- -- 111,301 15 -- -- -- 15
Issuance of Common Stock
for cash................ -- -- 158,000 235 -- -- -- 235
Repurchase of Common Stock
for cash................ -- -- (3,750) -- -- -- -- --
Issuance of Series C
Convertible Preferred
Stock for cash, net of
issuance costs of $36... 5,028,005 35,162 -- -- -- -- -- 35,162
Net loss.................. -- -- -- -- -- -- (24,534) (24,534)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1997.................... 25,711,771 65,437 8,078,957 344 -- -- (38,776) 27,005
Exercise of stock options
for cash................ -- -- 389,677 226 -- -- -- 226
Issuance of Common Stock
for cash................ -- -- 5,396 11 -- -- -- 11
Repurchase of Common Stock
for cash................ -- -- (343,792) (157) -- -- -- (157)
Issuance of Common Stock
for notes receivable.... -- -- 400,000 800 (800) -- -- --
Issuance of Series D
Convertible Preferred
Stock for cash, net of
issuance costs of $84... 2,020,464 15,636 -- -- -- -- -- 15,636
Net loss.................. -- -- -- -- -- -- (28,828) (28,828)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, DECEMBER 31,
1998.................... 27,732,235 81,073 8,530,238 1,224 (800) -- (67,604) 13,893
Exercise of stock options
for cash................ -- -- 502,917 397 -- -- -- 397
Deferred stock
compensation............ -- -- -- 4,834 -- (4,834) -- --
Repurchase of Common Stock
for cash................ -- -- (21,666) (4) -- -- -- (4)
Issuance of Series D
Convertible Preferred
Stock for cash, net of
issuance costs of $48... 2,149,254 16,673 -- -- -- -- -- 16,673
Issuance of Series D
Convertible Preferred
Stock for services
rendered................ 20,794 162 -- -- -- -- -- 162
Amortization of deferred
stock compensation...... -- -- -- -- -- 509 -- 509
Net loss.................. -- -- -- -- -- -- (14,289) (14,289)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE, JUNE 30, 1999.... 29,902,283 $97,908 9,011,489 $6,451 $(800) $(4,325) $(81,893) $ 17,341
========== ======= ========= ====== ===== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 71

NETRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $(12,173) $(24,534) $(28,828) $(13,681) $(14,289)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization......... 761 1,968 3,065 1,478 1,635
Provision for doubtful accounts....... -- 47 462 25 28
Loss on disposal of fixed assets...... 194 258 -- -- --
Amortization of deferred stock
compensation........................ -- -- -- -- 509
Non-cash issuance of Preferred
Stock............................... -- -- -- -- 162
Changes in operating assets and
liabilities:
Trade accounts receivable........... (543) (1,717) 545 326 (1,411)
Inventory........................... (1,257) (2,670) (388) (1,495) (336)
Prepaid expenses and other.......... (108) (191) (159) (141) (282)
Trade accounts payable and accrued
liabilities...................... 2,277 2,282 (566) (205) 1,254
-------- -------- -------- -------- --------
Net cash used in operating
activities..................... (10,849) (24,557) (25,869) (13,693) (12,730)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold
improvements.......................... (3,104) (2,530) (3,183) (2,133) (997)
Purchases of short-term investments...... (17,944) (18,796) (34,085) (17,552) (25,955)
Maturities of short-term investments..... 8,208 18,494 35,089 10,175 18,099
-------- -------- -------- -------- --------
Net cash used in investing
activities..................... (12,840) (2,832) (2,179) (9,510) (8,853)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
and sale-leaseback transactions....... -- 4,577 4,553 2,766 3,256
Payments on notes payable and capital
leases................................ (246) (1,109) (1,795) (822) (1,836)
Proceeds from issuance of Preferred
Stock, net of issuance costs.......... 13,734 35,162 15,636 10,259 16,673
Proceeds from issuance of Common Stock... 34 250 237 125 397
Repurchases of Common Stock.............. (9) -- (157) (9) (4)
Repayment of note receivable from
shareholder........................... 3 -- -- -- --
-------- -------- -------- -------- --------
Net cash provided by financing
activities..................... 13,516 38,880 18,474 12,319 18,486
-------- -------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.............................. (10,173) 11,491 (9,574) (10,884) (3,097)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................... 14,350 4,177 15,668 15,668 6,094
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD... $ 4,177 $ 15,668 $ 6,094 $ 4,784 $ 2,997
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest................... $ 21 $ 360 $ 802 $ 344 $ 513
Non-cash transactions:
Notes receivable from the issuance of
common stock........................ $ -- $ -- $ 800 $ -- $ --
Equipment acquired under capital
leases.............................. $ 891 $ 1,083 $ -- $ -- $ --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 72

NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF JUNE 30 1998 IS UNAUDITED)

1. ORGANIZATION AND OPERATIONS OF THE COMPANY:

Netro Corporation (the "Company") was incorporated in California on
November 14, 1994 to develop, manufacture and sell broadband wireless access
systems.

During 1997, the Company commenced volume shipments of its products and
emerged from the development stage. Although no longer in the development stage,
the Company continues to be subject to a number of risks similar to other
companies in a comparable stage of development, including reliance on key
personnel, the challenges of successfully marketing its products in an emerging
market, competition from substitute products and other companies, the challenges
of successfully developing new products and the inability to secure adequate
financing to support future growth.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

UNAUDITED INTERIM FINANCIAL DATA

The unaudited interim consolidated financial statements for the six months
ended June 30, 1998, were prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial information set forth therein, in accordance with generally
accepted accounting principles.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiary in Germany and a wholly-owned, dormant subsidiary in
Israel.

FOREIGN CURRENCY TRANSLATION

The functional currency of the Company's subsidiaries is the local
currency. Gains and losses resulting from the translation of the financial
statements have not been material to date.

Foreign exchange gains and losses resulting from foreign currency
transactions were not material in any of the periods presented.

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of short-term, highly liquid investments
with original maturities of less than three months.

SHORT-TERM INVESTMENTS

The Company classifies its investments in debt securities as
"held-to-maturity." Accordingly, these investments, which mature at various
dates through September 1999, are valued using the amortized cost

F-7
<PAGE> 73
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

method. The fair value of the investments approximates amortized cost and, as
such, the gross unrealized holding gains and losses at December 31, 1997 and
1998 and June 30, 1999, were not material.

The carrying value of the Company's investments by major security type
consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
DESCRIPTION 1997 1998 1999
----------- ------- ------- --------
<S> <C> <C> <C>
United States Treasury Bills.......................... $10,042 $ 1,996 $ 4,988
Other federal agency securities....................... 12,046 6,945 6,933
Commercial paper...................................... -- 5,064 4,969
------- ------- -------
$22,088 $14,005 $16,890
======= ======= =======
</TABLE>

Approximately $12,050,000 and $4,971,000 of the total investments in debt
securities as of December 31, 1997 and 1998, respectively, were included in cash
and cash equivalents. The remaining balances were classified as short-term
investments. There were no investments included in cash and cash equivalents as
of June 30, 1999.

INVENTORY

Inventory includes materials and labor, is stated at the lower of cost
(first-in, first-out) or market and consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Raw materials.............................................. $1,188 $3,204 $2,110
Work-in-process............................................ 1,657 474 1,241
Finished goods............................................. 1,082 637 1,300
------ ------ ------
$3,927 $4,315 $4,651
====== ====== ======
</TABLE>

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment is recorded at cost and depreciated using the straight-line
method based upon the estimated useful lives of the assets, which range from
three to five years. Leasehold improvements are recorded at cost and are
amortized over the estimated lives of the improvements or the term of the lease,
whichever is shorter. Maintenance and repairs that do not improve or extend the
life of assets are expensed as incurred.

SOFTWARE DEVELOPMENT COSTS

Under the criteria set forth in Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," capitalization of software development costs
begins upon the establishment of technological feasibility of the product. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. Amounts that could have been capitalized under this
statement after consideration of the above factors were immaterial and,
therefore, no software development costs have been capitalized by the Company to
date.

F-8
<PAGE> 74
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Revenues from product sales are generally recognized when all of the
following conditions are met: the product has shipped, the Company has the right
to invoice the customer, collection of the receivable is probable and the
Company has fulfilled all of its contractual obligations to the customer.
Provisions are made at the time of revenue recognition for estimated warranty
costs.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred and consist
primarily of payroll costs, other direct expenses and overhead. The Company
received third-party research and development funding of $900,000 and $450,000
in 1998 and the six months ended June 30, 1999. The Company offset research and
development expenses with the funding when agreed-upon milestones were met.

COMPUTATION OF HISTORICAL NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE

Historical net loss per share was calculated under SFAS No. 128, "Earnings
per Share." Basic and diluted net loss per share on a historical basis is
computed using the weighted average number of shares of common stock
outstanding. Potential common shares from conversion of convertible preferred
stock and exercise of stock options and warrants are excluded from diluted net
loss per share because they would be antidilutive. The total number of shares
excluded from diluted net loss per share relating to these securities was
22,260,942 shares, 29,777,846 shares, and 32,453,093 shares for 1996, 1997 and
1998, respectively, and 31,624,038 shares and 35,743,978 shares for the six
months ended June 30, 1998 and 1999, respectively.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 98, convertible preferred stock and common stock issued or granted for
nominal consideration prior to the anticipated effective date of an initial
public offering must be included in the calculation of basic and diluted net
loss per share as if they had been outstanding for all periods presented. To
date, the Company has not had any issuances or grants for nominal consideration.

Pro forma basic and diluted net loss per share is calculated assuming the
conversion of convertible preferred stock into an equivalent number of shares of
common stock, as if the shares had converted on the dates of their issuance.

F-9
<PAGE> 75
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents the calculation of historical and pro forma
net loss per share (in thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -----------------------
1996 1997 1998 1998 1999
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss........................... $(12,173) $(24,534) $(28,828) $(13,681) $(14,289)
======== ======== ======== ======== ========
HISTORICAL:
Weighted average shares of common
stock outstanding................ 7,880 8,021 8,227 8,232 8,604
Less: Weighted average shares of
common stock subject to
repurchase....................... (5,270) (3,223) (1,140) (1,757) (289)
-------- -------- -------- -------- --------
Weighted average shares used to
compute basic and diluted net
loss per share................... 2,610 4,798 7,087 6,475 8,315
======== ======== ======== ======== ========
Basic and diluted net loss per
share............................ $ (4.66) $ (5.11) $ (4.07) $ (2.11) $ (1.72)
======== ======== ======== ======== ========
PRO FORMA:
Net loss........................... $(28,828) $(14,289)
======== ========
Shares used above.................. 7,087 8,315
Pro forma adjustment to reflect
weighted average effect of
assumed conversion of convertible
preferred stock (unaudited)...... 27,304 29,313
-------- --------
Weighted average shares used to
compute pro forma basic and
diluted net loss per share
(unaudited)...................... 34,391 37,628
======== ========
Pro forma basic and diluted net
loss per share (unaudited)....... $ (0.84) $ (0.38)
======== ========
</TABLE>

COMPREHENSIVE LOSS

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which the Company adopted beginning on January
1, 1998. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income (loss) and its components in a full set of general purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with shareholders.
Comprehensive income (loss) is the total of net income (loss) and all other
non-owner changes in equity. For each of the periods presented, the Company had
no such transactions, therefore the comprehensive loss was equal to net loss.

STOCK-BASED COMPENSATION PLANS

Effective January 1, 1996, the Company adopted the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." In accordance with the
provisions of SFAS No. 123, the Company applies Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for stock options.

F-10
<PAGE> 76
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to value derivative financial instruments, including those used for
hedging foreign currency exposures, at current market value with the impact of
any change in market value being charged against earnings in each period. SFAS
No. 133 will be effective for and adopted by the Company in the first quarter of
the fiscal year ending December 31, 2000. To date, the Company has not entered
into any derivative financial instrument contracts. Thus, the Company
anticipates that SFAS No. 133 will not have a material impact on its
consolidated financial statements.

3. CONCENTRATIONS OF CREDIT RISK:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables, cash
equivalents and short-term investments. As of December 31, 1998 and June 30,
1999, approximately 71% and 62%, respectively, of the Company's trade accounts
receivable balance was represented by two customers and one customer,
respectively. The Company does not require collateral on accounts receivable, as
the majority of the Company's customers are large, well-established companies.
The Company provides reserves for credit losses and such losses have been
insignificant in all periods presented in the accompanying consolidated
financial statements. With respect to cash equivalents and short-term
investments, the Company has cash investment policies that limit the amount of
credit exposure to any one issuer and restrict placement of these investments to
issuers evaluated as creditworthy.

4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

Equipment and leasehold improvements consisted of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Engineering and test equipment................ $ 5,975 $ 7,997 $ 8,651
Office and computer equipment................. 1,931 2,743 2,953
Furniture and fixtures........................ 202 345 457
Leasehold improvements........................ -- 206 227
------- ------- -------
8,108 11,291 12,288
Less: Accumulated depreciation and
amortization................................ (2,592) (5,657) (7,292)
------- ------- -------
Equipment and leasehold improvements, net..... $ 5,516 $ 5,634 $ 4,996
======= ======= =======
</TABLE>

5. ACCRUED LIABILITIES:

Accrued liabilities consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Accrued payroll and related benefits........... $ 584 $ 935 $ 938
Accrued moving expenses........................ 387 -- --
Warranty reserve............................... 171 1,250 905
Customer deposits.............................. -- 315 264
Other.......................................... 995 614 1,446
------- ------- ------
Total................................ $ 2,137 $ 3,114 $3,553
======= ======= ======
</TABLE>

F-11
<PAGE> 77
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEBT AND CAPITAL LEASES:

The following table summarizes obligations under long-term debt and capital
leases (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Borrowings under bank line of credit............ $ -- $ 1,839 $ 3,266
Secured note payable to lender, due in monthly
installments of $90,942 with interest at
12.5%......................................... 3,447 2,746 2,295
Capital leases, due through 2002................ 2,249 3,834 4,278
------- ------- -------
5,696 8,419 9,839
Less: current portion........................... (1,487) (3,872) (5,557)
------- ------- -------
$ 4,209 $ 4,547 $ 4,282
======= ======= =======
</TABLE>

In January 1998, the Company entered into a new bank line of credit under
which up to $6,000,000 is available for borrowings and letters of credit. This
arrangement was renewed in January 1999 and expires in January 2000. Borrowings
are limited to an aggregate amount equaling approximately 80% and 90% of
domestic and foreign eligible trade accounts receivables, respectively, and 50%
of eligible foreign inventories. The line of credit is secured by the Company's
outstanding trade accounts receivable and inventory. The borrowings under the
line are due in January 2000 and accrue interest at the 30-day LIBOR rate plus
2.25% or the bank's prime rate, at the Company's option. Under the agreement,
the Company must comply with certain financial and other covenants. As of June
30, 1999, borrowings outstanding under this agreement were $3,266,000 and
amounts utilized for outstanding letters of credit were $400,000.

In 1997, the Company borrowed $3,750,000 from a lender to finance purchases
of fixed assets. The loan accrues interest at 12.5% per annum from the date of
borrowing, and is secured by a purchase money lien on the equipment financed.
Principal payments due under the loan at June 30, 1999, are as follows (in
thousands):

<TABLE>
<S> <C>
1999................................................ $ 342
2000................................................ 898
2001................................................ 1,055
------
Total..................................... $2,295
======
</TABLE>

A significant portion of the Company's machinery and equipment is leased
under agreements accounted for as capital leases. The cost of equipment under
capital leases included in property and equipment at December 31, 1997 and 1998
and June 30, 1999 was approximately $3,122,000, $5,754,000 and $6,792,000
respectively.

F-12
<PAGE> 78
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments under all noncancelable capital lease
agreements as of June 30, 1999, are summarized as follows (in thousands):

<TABLE>
<S> <C>
1999................................................ $ 863
2000................................................ 1,721
2001................................................ 1,559
2002................................................ 1,026
------
Total minimum lease payments........................ 5,169
Less: amount representing interest at 10.0% to
13.4%......................................... (891)
------
Present value of lease payments..................... $4,278
======
</TABLE>

In March 1999, the Company entered into a new equipment lease agreement,
under which the Company can finance equipment purchases of up to $3,000,000. As
of June 30, 1999, the Company had borrowed approximately $1,298,000 against this
agreement. See Note 9 for information regarding warrants issued as part of this
agreement.

7. COMMITMENTS AND CONTINGENCIES:

COMMITMENTS

The Company leases its facilities and certain equipment under noncancelable
operating lease agreements expiring at various dates through September 2001.
Future minimum lease payments under all noncancelable operating lease agreements
as of June 30, 1999, are summarized as follows (in thousands):

Rent expense for the operating leases was approximately $224,000, $538,000,
$922,000 and $681,000 in 1996, 1997, 1998 and in the six months ended June 30,
1999, respectively.

The Company issued a standby letter of credit of $400,000 to secure certain
of the Company's warranty obligations to one customer related to possible
damages resulting from downtime due to product performance issues. The letter of
credit is secured by a certificate of deposit for $125,000. The letter of credit
is subject to draw if the Company fails to meet its obligation for liquidated
damages to the customer.

CONTINGENCIES

In March 1999, one of the Company's former contract manufacturers filed for
binding arbitration in Santa Clara County, California with respect to a dispute
with the Company. The arbitration involves claims for approximately $950,000 for
amounts allegedly owed by the Company for inventory purchased by the plaintiff
in anticipation of the Company's projected demand. In June 1999, the Company
filed an answer and counterclaim alleging damages of approximately $275,000 for
product failures. The Company believes it has meritorious defenses to the
plaintiff's claim, and intends to defend this arbitration vigorously.

8. EMPLOYEE BENEFIT PLAN:

The Company maintains an employee savings plan for all of its full-time
employees. This plan qualifies under Section 401(k) of the Internal Revenue Code
(the "Code"). The plan allows employees to

F-13
<PAGE> 79
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

make pre-tax contributions in specified percentages up to the maximum dollar
limitations prescribed by the Code. The Company has the option to contribute to
the plan, but has not made contributions to date.

9. CAPITAL STOCK:

STOCK SPLIT

In December 1996, the Company's Board of Directors effected a two-for-one
stock split payable in the form of a dividend of one additional share of the
Company's capital stock for every share owned by shareholders. All share data
have been adjusted to retroactively reflect the stock split.

CAPITAL STOCK

The Company's capital stock is divided into two classes: Common Stock and
Convertible Preferred Stock. Convertible Preferred Stock consists of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock.

At June 30, 1999, 38,037,959 shares of Common Stock were reserved,
including 8,078,648 shares for issuance under the Company's stock option plans,
29,902,283 shares for conversion of the outstanding Convertible Preferred Stock
and 57,028 for Convertible Preferred Stock warrants.

During 1998, the Company issued 400,000 shares of Common Stock in exchange
for a full recourse note in the amount of $800,000. The note bears interest at
5.44% per annum and is due in April 2002.

STOCK OPTION PLANS

1999 Executive Stock Plan

Our 1999 Executive Stock Plan was adopted by the board of directors in
April 1999 and approved by the shareholders in May 1999. A total of 1,195,000
shares of common stock has been reserved for issuance under the 1999 Executive
Stock Plan. As of June 30, 1999, options to purchase 1,175,000 shares of common
stock with a weighted average exercise price of $3.50 had been issued, and
20,000 shares remained available for future option grants. Unless terminated
earlier, the 1999 Executive Stock Plan will terminate in April 2009. The 1999
Executive Stock Plan does not impose an annual limitation on the number of
shares subject to options that may be issued to any individual employee.

The terms of options issued under the 1999 Executive Stock Plan are
generally the same as those that may be issued under the 1996 Stock Option Plan,
except with respect to the following features. All options granted under the
1999 Executive Stock Plan may be exercised immediately after the grant date, but
to the extent the shares subject to the options are not vested as of the date of
exercise, Netro retains a right to repurchase any shares that remain unvested at
the time of the optionee's termination of employment by paying an amount equal
to the exercise price times the number of unvested shares. Options granted under
the 1999 Executive Stock Plan generally vest at the rate of 1/4th of the total
number of shares subject to the options twelve months after the date of grant
and 1/48th of the total number of shares subject to the options each month
thereafter.

1997 Directors' Stock Option Plan

The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by the Board of Directors in December 1997 and amended in June 1999. A total of
300,000 shares of common stock has been reserved for issuance under the
Directors' Plan, of which options to purchase 125,000 shares of common stock had
been granted. Under the Directors' Plan, as amended, each individual who first
becomes a non-employee director after the effective date of the amendment will
receive an automatic initial grant of an option to purchase 10,000 shares of
common stock upon appointment or election. Initial

F-14
<PAGE> 80
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

grants to non-employee directors will be vested and exercisable in full as of
the date of grant. The Directors' Plan also provides for annual grants of
options to purchase 10,000 shares of common stock on the first day of each
fiscal year to each non-employee director who has served on the Board of
Directors for at least six months, provided that a non-employee director who
received a 20,000 share initial grant under the original version of the
Directors' Plan will be eligible to receive an annual grant of an option to
purchase 5,000 shares of common stock until the first day of the fiscal year
following the date on which the initial option has fully vested under the terms
of that option, after which date each director will be eligible to receive an
annual grant of an option to purchase 10,000 shares of common stock. The annual
grants to non-employee directors will be vested and exercisable in full as of
the date of grant. The per share exercise price of all stock options granted
under the Directors' Plan must be equal to the fair market value of a share of
the Company's common stock on the date of grant of the option. Options granted
under the Directors' Plan have a term of ten years. However, unvested options
will terminate when the optionee ceases to serve as a director and vested
options will terminate if they are not exercised within 12 months after the
director's death or disability or within 90 days after the director ceases to
serve as a director for any other reason.

1995 and 1996 Stock Option Plans

During 1996, the Company established the 1996 Stock Option Plan (the "1996
Plan"). All shares previously available for issuance under the Company's 1995
Stock Option Plan are reserved for issuance under the 1996 Plan. As of June 30,
1999, 8,800,000 shares of Common Stock had been authorized for issuance under
the 1995 and 1996 Plan, of which 2,098,981 shares remained available for future
option grants. Under the 1996 Plan, the Company may grant incentive stock
options or nonstatutory stock options to employees, officers, directors and
consultants at an exercise price of not less than 100% of the fair market value
of the Common Stock on the date of grant, except that nonstatutory stock options
may be granted at 85% of such fair market value. Options granted generally
become exercisable at a rate of one-fourth of the shares subject to the option
at the end of the first year and 1/48 of the shares subject to the option at the
end of each calendar month thereafter. However, at the discretion of management,
the optionee may have the immediate right to exercise the option subject to a
restricted stock agreement that gives the Company the right to repurchase
unvested shares at the original issuance price in the event of termination of
employment. The maximum term of a stock option under the plans is ten years, but
if the optionee at the time of grant has voting power of more than 10% of the
Company's outstanding capital stock, the maximum term is five years.

F-15
<PAGE> 81
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes option activity under all option plans:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE SHARES EXERCISE PRICE
---------- --------- --------------
<S> <C> <C> <C>
Balance at December 31, 1995................... 2,104,716 41,000 $0.045
Authorized................................... 1,500,000 -- --
Granted...................................... (2,288,800) 2,288,800 0.470
Exercised.................................... -- (170,000) 0.200
Terminated................................... 63,800 (63,800) 0.270
Unvested shares repurchased.................. 197,460 -- 0.045
---------- ---------
Balance at December 31, 1996................... 1,577,176 2,096,000 0.490
Authorized................................... 1,320,000 -- --
Granted...................................... (2,557,550) 2,557,550 1.980
Exercised.................................... -- (111,301) 0.213
Terminated................................... 504,924 (504,924) 1.022
Unvested shares repurchased.................. 3,750 -- 0.045
---------- ---------
Balance at December 31, 1997................... 848,300 4,037,325 1.360
Authorized................................... 500,000 -- --
Granted...................................... (1,605,800) 1,605,800 2.000
Exercised.................................... -- (389,677) 0.579
Terminated................................... 570,337 (570,337) 1.555
Unvested shares repurchased.................. 248,667 -- 0.064
---------- ---------
Balance at December 31, 1998................... 561,504 4,683,111 1.621
Authorized................................... 3,315,284 -- --
Granted...................................... (2,402,600) 2,402,600 3.740
Exercised.................................... -- (502,917) 0.790
Terminated................................... 798,127 (798,127) 1.743
Unvested shares repurchased.................. 21,666 -- 0.194
---------- ---------
Balance at June 30, 1999....................... 2,293,981 5,784,667 2.556
========== =========
</TABLE>

As of June 30, 1999, 10,833 shares purchased under the plans were subject
to repurchase.

F-16
<PAGE> 82
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at June 30, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ---------------------------------- NUMBER
EXERCISE CONTRACTUAL VESTED AND
PRICES NUMBER LIFE EXERCISABLE
- -------- --------- ----------- -----------
<S> <C> <C> <C>
$0.045 21,000 6.13 years 21,000
$0.200 360,171 6.99 years 243,113
$1.000 19,652 7.13 years 14,090
$1.500 234,469 7.45 years 151,499
$2.000 3,426,525 8.73 years 901,902
$3.500 1,316,000 9.77 years --
$7.000 194,000 9.89 years --
$7.500 212,850 10.00 years --
--------- ---------
5,784,667 1,331,604
========= =========
</TABLE>

In January 1996, the Company adopted the provisions of SFAS No. 123, which
calls for companies to measure employee stock compensation expense based on the
fair value method of accounting. As allowed by SFAS No. 123, the Company elected
the continued use of APB Opinion No. 25, with pro forma disclosure of net loss
determined as if the fair value method had been applied in measuring
compensation cost. Had compensation cost been determined under the fair value
method consistent with SFAS No. 123, the Company's net loss would have resulted
in the following pro forma amounts:

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED
------------------------------ JUNE 30,
1996 1997 1998 1999
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net loss (in thousands):
As reported................................ $(12,173) $(24,534) $(28,828) $(14,289)
Pro forma.................................. (12,197) (24,670) (29,079) (14,539)
Pro forma basic and diluted net loss per
share................................... (4.67) (5.14) (4.10) (1.75)
</TABLE>

The weighted average fair values of options granted during 1996, 1997, 1998
and June 30, 1999 were $0.58, $2.47, $2.48 and $4.66 per share, respectively.
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option valuation model with the following assumptions:

<TABLE>
<S> <C>
Risk-free interest rate..................... 5.03% - 6.70%
Average expected life of option............. 5 years
Dividend yield.............................. 0%
Volatility of Common Stock.................. 0.01%
</TABLE>

1999 EMPLOYEE STOCK PURCHASE PLAN

In June 1999, the Board of Directors adopted the 1999 Employee Stock
Purchase Plan (the "Purchase Plan"), subject to shareholder approval. The
Purchase Plan is intended to qualify under Section 423 of the Internal Revenue
Code. A total of 1,000,000 shares of common stock have been reserved for
issuance under the Purchase Plan. The number of shares reserved for issuance
under the Purchase Plan will be subject to an automatic annual increase on the
first day of each of 2001 through 2005 equal to the least of: (1) 250,000
shares, (2) 1% of the outstanding common stock on the last day of the
immediately preceding fiscal year, or (3) a number of shares determined by the
administrator. The price of shares purchased under the plan will be equal to 85%
of the fair market value of the Common Stock on the first or last day of the
offering period, whichever is lower.

F-17
<PAGE> 83
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED STOCK COMPENSATION

In connection with the grant of stock options to purchase 2,338,550 shares
of common stock with a weighted average exercise price of $2.84 per share to
employees during 1998 and the six months ended June 30, 1999, the Company
recorded deferred compensation of $4,834,000, representing the difference
between the estimated fair value of the common stock and the aggregate option
exercise price of such options at the date of grant. This amount is presented as
a reduction of shareholders' equity and amortized ratably over the vesting
period of the applicable options (generally four years). Amortization expense
related to fiscal 1998 was immaterial. Amortization expense of $509,000 was
recorded during the six months ended June 30, 1999. Compensation expense is
decreased in the period of forfeiture for any accrued but unvested compensation
arising from the early termination of an option holder's services.

CONVERTIBLE PREFERRED STOCK

The Company has authorized shares of each series of Convertible Preferred
Stock as follows:

<TABLE>
<CAPTION>
OUTSTANDING
--------------------------------------
DECEMBER 31,
------------------------ JUNE 30,
AUTHORIZED 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Series A.......................... 13,466,660 13,466,660 13,466,660 13,466,660
Series B.......................... 5,250,000 5,250,000 5,250,000 5,250,000
Series C.......................... 8,475,857 6,995,111 6,995,111 6,995,111
Series D.......................... 5,500,000 -- 2,020,464 4,190,512
</TABLE>

The rights and preferences of the Series A, B, C and D Preferred Stock are
as follows:

- The holders of Series A, B, C and D Preferred Stock are entitled to
dividends of $0.036, $0.16, $0.56 and $0.62 per share, respectively,
payable annually, as and if declared by the Board of Directors. Dividends
declared are prior and in preference to payment of dividends on Common
Stock. No dividends had been declared as of June 30, 1999.

- In the event of a liquidation or winding up of the Company, the holders
of Series A, B, C and D Preferred Stock are entitled to receive, in
preference to holders of Common Stock, an amount that is equal to $0.45,
$2.00, $7.00 and $7.78 per share, respectively, plus any declared but
unpaid dividends on such shares. If amounts are not available to satisfy
the full preferential amounts, the entire assets of the Company will be
distributed to the preferred shareholders in proportion to the aggregate
liquidation preferences of the shares of Preferred Stock held.

- Each share of Preferred Stock is convertible, at the option of the holder
at any time after the date of issuance of such shares, into Common Stock
at the initial conversion rate of one fully paid and non-assessable share
of Common Stock. The conversion rate is subject to adjustments upon the
occurrence of certain events.

- Each share of Preferred Stock will convert into shares of Common Stock
immediately upon the consummation of an underwritten public offering
pursuant to an effective registration statement under the Securities Act
of 1933.

- Each holder of Preferred Stock has the right to one vote for each share
of Common Stock into which the Preferred Stock could then be converted.
Holders of Preferred Stock vote with holders of Common Stock except (i)
on matters required by law or otherwise to be voted upon by class and
(ii) for the election of members of the Board of Directors. Holders of
Preferred Stock as a group are entitled to elect three members of the
Board of Directors.

F-18
<PAGE> 84
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- Holders of at least a majority of the Preferred Stock are required to
consent to any action that: (i) alters or changes the rights, preferences
or privileges of that class of Preferred Stock; (ii) increases the
authorized number of shares of Preferred Stock; (iii) creates any class
of stock with preferences or priorities superior to or on a parity with
the preferences and priority of the Preferred Stock; or (iv) affects the
sale of all or substantially all of the assets of the Company, or any
consolidation or merger, or any sale of more than 50% of the Company's
capital stock.

In January 1999, the Company entered into an agreement with one of its
vendors to issue up to approximately 100,000 shares of Preferred Stock for
engineering work performed. The number of shares to be issued was determined by
dividing the dollar amount specified for the achievement of agreed-upon
milestones by the price per share of such series of Preferred Stock most
recently issued. In June 1999, the Company issued 20,794 shares of Series D
Convertible Preferred Stock valued at $7.78 per share pursuant to the terms of
this agreement. In the six months ended June 30, 1999, approximately $162,000
related to the issuance of these shares is included in research and development
expense in the accompanying consolidated statements of operations and
comprehensive loss.

WARRANTS

In connection with one of the Company's capital lease financing
arrangements, the Company issued warrants to its lessor as follows:

<TABLE>
<CAPTION>
YEAR SHARE EXERCISE
CLASS OF STOCK GRANTED AMOUNT PRICE
- -------------- ------- ------ --------
<S> <C> <C> <C>
Series C Preferred Stock............................... 1997 28,750 $7.00
Series D Preferred Stock............................... 1998 8,997 $7.78
Series D Preferred Stock............................... 1999 19,281 $7.78
</TABLE>

The warrants to purchase 28,750 shares at $7.00 per share and 8,997 shares
at $7.78 per share are exercisable immediately upon issuance and expire two
years from the closing of an initial public offering or five years from the date
the warrants were granted, whichever is later. Warrants to purchase 19,281
shares at an exercise price of $7.78 per share are exercisable immediately upon
issuance and expire three years from the closing of an initial public offering
or seven years from the date the warrants were granted, whichever is later. The
fair value of the warrants was estimated at the date of grant using the Black-
Scholes model and the value was determined to be immaterial.

PRO FORMA SHAREHOLDERS' EQUITY (UNAUDITED)

In May 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of the
Company's Common Stock in connection with a proposed initial public offering
("IPO"). If the offering is consummated under the terms presently anticipated,
all of the currently outstanding Convertible Preferred Stock will convert to
29,902,283 shares of common stock upon the closing of the IPO. The effect of
this conversion has been reflected as unaudited pro forma shareholders' equity
in the accompanying consolidated balance sheet as of June 30, 1999.

10. INCOME TAXES:

The Company provides for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires an asset and liability
based approach in accounting for income taxes. Deferred income tax assets and
liabilities are recorded to reflect the tax consequences on future years of
temporary differences of revenue and expense items for financial statement and
income tax purposes. Valuation allowances are provided against assets that are
not likely to be realized.

F-19
<PAGE> 85
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income tax rate of 35% to loss before
income taxes as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- JUNE 30,
1996 1997 1998 1999
------ ------ ------ ----------
<S> <C> <C> <C> <C>
Federal statutory rate............................ (35)% (35)% (35)% (35)%
State taxes, net of federal benefit............... (6) (6) (6) (6)
Change in valuation allowance..................... 41 41 41 41
---- ---- ---- ----
--% --% --% --%
==== ==== ==== ====
</TABLE>

The major components of the net deferred tax asset were as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net operating losses:
Federal.................................. $ 11,017 $ 20,363 $ 24,832
State.................................... 750 1,176 1,362
Tax credit carryforwards................... 1,535 2,842 3,586
Cumulative temporary differences:
Reserves................................. 1,376 1,774 1,354
Research and development costs........... 848 1,653 2,070
Start-up costs........................... 847 621 508
Other.................................... 295 457 1,078
-------- -------- --------
Total deferred tax asset......... 16,668 28,886 34,790
Valuation allowance........................ (16,668) (28,886) (34,790)
-------- -------- --------
Net deferred tax asset........... $ -- $ -- $ --
======== ======== ========
</TABLE>

The Company has established a valuation allowance for the total deferred
tax asset because, given the Company's limited operating history and accumulated
deficit, it is uncertain that the deferred tax asset will be realized.

As of June 30, 1999, the Company had Federal and State net operating loss
carryforwards of approximately $73,035,000 and $23,348,000, respectively. The
Company's net operating loss carryforwards expire at various dates through 2019.
Under current tax law, the net operating loss and tax credit carryforwards
available for use in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interest.

11. SEGMENT REPORTING:

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." The
Company adopted SFAS No. 131 in fiscal 1998. SFAS No. 131 establishes standards
for disclosures about operating segments, products and services, geographic
areas and significant customers. The Company is organized and operates as one
operating segment: the design, development, manufacturing, marketing and selling
of broadband wireless point-to-multipoint access systems.

F-20
<PAGE> 86
NETRO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company markets its products in the United States and in other foreign
countries through worldwide system integrators, its direct sales force and local
resellers. Revenue by country was as follows:

<TABLE>
<CAPTION>
SIXTH
YEARS ENDED MONTHS
DECEMBER 31, ENDED
------------------ JUNE 30,
1996 1997 1998 1999
---- ---- ---- ----------
<S> <C> <C> <C> <C>
United States.......................................... 8% 1% 24% 64%
Germany................................................ 92% 61% 2% 5%
Austria................................................ -- 13% 27% 3%
United Kingdom......................................... -- -- 16% 1%
Italy.................................................. -- -- 15% 20%
Israel................................................. -- 21% 10% --
Other.................................................. -- 4% 6% 7%
</TABLE>

The following customers accounted for 10% or more of revenues in the periods
indicated:

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
------------------ JUNE 30,
1996 1997 1998 1999
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Customer A............................................. 79% 39% * *
Customer B............................................. 13% 20% * *
Customer C............................................. -- 21% 10% *
Customer D............................................. -- 12% 27% *
Customer E............................................. -- -- 16% 60%
Customer F............................................. -- -- 15% 20%
</TABLE>

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

* Customer below 10% in 1998 or 1999

F-21
<PAGE> 87

[INSIDE FRONT COVER PAGE]

PHOTOGRAPHS, DESCRIPTIONS AND CAPTIONS

1. Top: Color photo of three AirStar base radio units and a base station
shelf with base sector controllers with a base modem unit.

Caption: AirStar, Base Station Equipment -- base station, base radio unit.
AirStar's base station equipment aggregates traffic from subscribers for
transmission to and from the service provider's central office.

2. Center: Color photo of the AirStar subscriber access unit and subscriber
radio unit.

Caption: AirStar Customer Premises Equipment, Subscriber Radio Unit,
Subscriber Access System.

AirStar's customer premises equipment connects the subscriber and
translates voice and data traffic for air transmission.

3. Bottom: Color photo of a computer monitor with a picture of an AirView
LE screen on its screen.

Caption: AirView LE Network Management Software.

All components of the AirStar network are managed remotely by the network
management software, using industry standard protocols.

[INTERIOR FOLD-OUT OF FRONT COVER PAGE]

IMAGES, DIAGRAM, DIAGRAM DESCRIPTIONS AND CAPTIONS

1. Top Caption: AirStar Network Deployment.

2. Center: Diagram of a communications network of a metropolitan broadband
wireless point-to-multipoint deployment with our AirStar with a central office
of a Telecom Carrier/Service Provider, connecting through the public switched
telephone network to the various services and protocols as well as the use of
the Airview LE Network Management Software (one of the Company's products) in
that location.

The Central Office is connected through fiber to a building which houses
the AirStar base station. On the roof of that building are AirStar base radio
units covering a small business (with a subscriber radio unit and a subscriber
access system), a mid-sized business (with the same subscriber equipment) and a
multiple tenant building (with the same subscriber equipment). The base station
and base radio units transmit and receive packets to and from the three
subscribers, described above, with transmission depicted by arrows.

3. Top Left Corner: Three drawings of buildings with AirStar equipment
covering a cell, with sector coverage depicted as a pyramid consisting of five
cones.

6. Bottom: our Logo

[INSIDE BACK COVER PAGE]

IMAGES, A MAP AND CAPTIONS

1. Top: AirStar.

2. Map with flags depicting the location of AirStar trials at end user and
distributor locations.

<PAGE> 88

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

Through and including , 1999 (the 25(th) day after the date
of this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

5,000,000 SHARES

[NETRO LOGO]

COMMON STOCK

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

PROSPECTUS
----------------------

MERRILL LYNCH & CO.

BANCBOSTON ROBERTSON STEPHENS

DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED

, 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 89

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 15,985
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 250,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 250,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous fees and expenses............................. 72,765
Total............................................. $1,000,000
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 317 of the California General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
Article VI of the Registrant's Amended and Restated Articles of Incorporation,
to be filed and effective upon completion of this offering (Exhibit 3.3 hereto),
provides for indemnification of its directors and officers to the maximum extent
permitted by the California General Corporation Law, and Section 6.1 of the
Registrant's Bylaws, to be effective upon completion of this offering (Exhibit
3.4 hereto), provides for indemnification of its directors, officers, employees
and other agents to the maximum extent permitted by the California General
Corporation Law. In addition, the Registrant has entered into Indemnification
Agreements (Exhibit 10.1 hereto) with its directors and officers containing
provisions that are in some respects broader than the specific indemnification
provisions contained in the California General Corporation Law. The
indemnification agreements may require the Registrant, among other things, to
indemnify its directors and officers against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms. Reference is also made to Section 6(b) of the
Underwriting Agreement contained in Exhibit 1.1 hereto, which indemnifies
officers and directors of the Registrant against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since inception through June 30, 1999, the Registrant has issued and
sold (without payment of any selling commission to any person) the following
unregistered securities:

- an aggregate of 13,466,660 shares of Series A preferred stock at $0.45
per share in June 1995 to 14 investors;

- an aggregate of 5,250,000 shares of Series B preferred stock at $2.00
per share in November and December 1995 to 10 investors;

II-1
<PAGE> 90

- an aggregate of 4,125,678 shares of Series C preferred stock at $7.00
per share in July, October and November 1996, and January, February
and April 1997 to 27 investors;

- warrants to purchase an aggregate of 28,750 shares of Series C
preferred stock in June and September 1997 to an equipment lessor;

- an aggregate of 2,869,433 shares of Series C preferred stock at $7.00
per share in July and November 1997 to 15 investors;

- an aggregate of 1,285,347 shares of Series D preferred stock at $7.78
per share in January 1998 to one investor;

- warrants to purchase an aggregate of 8,997 shares of Series D
preferred stock in February 1998 to an equipment lessor;

- an aggregate of 2,253,757 shares of Series D preferred stock at $7.78
per share in April, July and October 1998 and January and February
1999 to 20 investors;

- warrants to purchase an aggregate of 19,281 shares of Series D
preferred stock in March 1999 to an equipment lessor;

- an aggregate of 630,614 shares of Series D preferred stock at $7.78
per share in April and June 1999 to 4 investors;

- an aggregate of 20,794 shares of Series D preferred stock for
engineering services upon the achievement by Microelectronics
Technology Inc. of certain milestones in June 1999;

- an aggregate of 9,011,489 shares of common stock had been issued upon
exercise of options or pursuant to restricted stock purchase
agreements, net of repurchases, to consultants, employees and
directors; and

- options and stock purchase rights to purchase an aggregate of
10,413,750 shares of common stock have been issued to a number of
employees, directors and consultants with exercise prices ranging from
$0.045 to $7.50. Of the total, options and stock purchase rights to
purchase an aggregate of 1,941,188 shares of common stock have been
returned to Registrants's stock plans.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

The issuances described in Item 15(a) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering and in the case of
some issuances of our common stock, were deemed to be exempt from registration
under the Securities Act in reliance upon Rule 701 promulgated under the
Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in such transactions.
All recipients had adequate access, through their relationships with the
Registrant, to information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement.
3.1* Amended and Restated Articles of Incorporation of the
Registrant.
3.2* Bylaws of the Registrant, and amendments.
3.3* Form of Amended and Restated Articles of Incorporation of
the Registrant, to be filed and effective upon completion of
this offering.
</TABLE>

II-2
<PAGE> 91

<TABLE>
<C> <S>
3.4* Form of Amended and Restated Bylaws of the Registrant, to be
effective upon completion of this offering.
4.1** Form of the Registrant's common stock certificate.
5.1 Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2 1996 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
10.3* 1999 Executive Stock Plan and form of subscription
agreement.
10.4* 1999 Employee Stock Purchase Plan and form of subscription
agreement.
10.5 1997 Directors' Stock Option Plan, as amended, and form of
stock option agreement.
10.6* Lease between Sobrato Interests II et al. and Pyramid
Technology Corporation dated August 29, 1979, and first
amendment.
10.6.1* Sublease between Registrant and Siemens Pyramid Information
Systems, Inc. dated December 15, 1997 and amendment.
10.6.2* Landlord's consent to sublease.
10.7(+)* Global OEM Purchase Agreement between Registrant and Lucent
Technologies Inc.
10.8(+)* Frame Agreement between Registrant and Italtel s.p.a.
10.8.1(+)* Non-Exclusive OEM Supplemental Agreement between Registrant
and Italtel s.p.a.
10.8.2(+)* Joint Development Agreement between Registrant and Italtel
s.p.a.
10.8.3 Special Rights Agreement between Registrant and Italtel
s.p.a.
10.9(+)* Manufacturing Agreement between Registrant and Solectron
California Corporation, dated May 31, 1998.
10.10(+)* Manufacturing and Engineering Services Agreement between
Registrant and Microelectronics Technology Inc., dated
January 11, 1999 and first amendment.
10.11(+)* OEM Agreement between Registrant and Cisco Systems, Inc.,
dated as of December 7, 1998.
10.11.1(+)* Technology Agreement between Registrant and Cisco Systems,
Inc., dated as of December 7, 1998.
10.12* Employment Agreement between Registrant and Gideon
Ben-Efraim, and amendment.
10.13* Form of Change-of-Control Agreement.
10.14 Amended and Restated Rights Agreement by and among
Registrant and certain of its shareholders, dated June 21,
1999.
10.15 1995 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>

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

* Previously filed.

** To be supplied by amendment.

+ Confidential treatment requested as to certain portions of this Exhibit.

(b) FINANCIAL STATEMENT SCHEDULES

Schedule II -- Valuation and Qualifying Accounts and Reserves (see page
S-2).

II-3
<PAGE> 92

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

II-4
<PAGE> 93

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on July 27, 1999.

NETRO CORPORATION

By: /s/ MICHAEL T. EVERETT

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

Michael T. Everett, Executive Vice
President and Chief Financial
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

* Chairman of the Board of Directors July 27, 1999
- ---------------------------------------------------
(Richard Moley)

* President, Chief Executive Officer July 27, 1999
- --------------------------------------------------- and Director (Principal Executive
(Gideon Ben-Efraim) Officer)

/s/ MICHAEL T. EVERETT Executive Vice President and Chief July 27, 1999
- --------------------------------------------------- Financial Officer (Principal
(Michael T. Everett) Financial and Accounting Officer)

* Director July 27, 1999
- ---------------------------------------------------
(Thomas Baruch)

* Director July 27, 1999
- ---------------------------------------------------
(Neal Douglas)

* Director July 27, 1999
- ---------------------------------------------------
(Irwin Federman)

* Director July 27, 1999
- ---------------------------------------------------
(John Walecka)

* Power of Attorney

By: /s/ MICHAEL T. EVERETT
- ---------------------------------------------------
(Michael T. Everett)
</TABLE>

II-5
<PAGE> 94

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To the Board of Directors and Shareholders of
Netro Corporation:

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Netro Corporation (a California
corporation) and subsidiaries included in this registration statement and have
issued our report thereon dated July 19, 1999. Our audits were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in Item 16(b) above is the responsibility of the
Company's management, is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP
--------------------------------------

San Jose, California

July 19, 1999

S-1
<PAGE> 95

NETRO CORPORATION

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
THE BEGINNING CHARGED TO END OF THE
OF THE YEAR EXPENSES DEDUCTIONS YEAR
------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:

Year ended December 31, 1996............ $ -- $ 11 $ 8 $ 3
Year ended December 31, 1997............ 3 219 175 47
Year ended December 31, 1998............ 47 462 -- 509
Six months ended June 30, 1999.......... $ 509 $ 28 $437 $ 100
Reserve for Warranty:
Year ended December 31, 1996............ $ -- $ 133 $ 58 $ 75
Year ended December 31, 1997............ 75 320 224 171
Year ended December 31, 1998............ 171 1,833 754 1,250
Six months ended June 30, 1999.......... $1,250 $ 57 $402 $ 905
</TABLE>

S-2
<PAGE> 96

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------ ------------------------------------------------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1* Amended and Restated Articles of Incorporation of the
Registrant.
3.2* Bylaws of the Registrant, and amendments.
3.3* Form of Amended and Restated Articles of Incorporation of
the Registrant, to be filed and effective upon completion of
this offering.
3.4* Form of Amended and Restated Bylaws of the Registrant, to be
effective upon completion of this offering.
4.1** Form of the Registrant's common stock certificate.
5.1 Opinion of Venture Law Group, A Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2 1996 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
10.3* 1999 Executive Stock Plan and form of subscription
agreement.
10.4* 1999 Employee Stock Purchase Plan and form of subscription
agreement.
10.5 1997 Directors' Stock Option Plan, as amended, and form of
stock option agreement.
10.6* Lease between Sobrato Interests II et al. and Pyramid
Technology Corporation dated August 29, 1979, and first
amendment.
10.6.1* Sublease between Registrant and Siemens Pyramid Information
Systems, Inc. dated December 15, 1997 and amendment.
10.6.2* Landlord's consent to sublease.
10.7(+)* Global OEM Purchase Agreement between Registrant and Lucent
Technologies Inc.
10.8(+)* Frame Agreement between Registrant and Italtel s.p.a.
10.8.1(+)* Non-Exclusive OEM Supplemental Agreement between Registrant
and Italtel s.p.a.
10.8.2(+)* Joint Development Agreement between Registrant and Italtel
s.p.a.
10.8.3 Special Rights Agreement between Registrant and Italtel
s.p.a.
10.9(+)* Manufacturing Agreement between Registrant and Solectron
California Corporation, dated May 31, 1998
10.10(+)* Manufacturing and Engineering Services Agreement between
Registrant and Microelectronics Technology Inc., dated
January 11, 1999 and first amendment.
10.11(+)* OEM Agreement between Registrant and Cisco Systems, Inc.,
dated as of December 7, 1998.
10.11.1(+)* Technology Agreement between Registrant and Cisco Systems,
Inc., dated as of December 7, 1998.
10.12* Employment Agreement between Registrant and Gideon
Ben-Efraim, and amendment.
10.13* Form of Change-of-Control Agreement.
10.14 Amended and Restated Rights Agreement by and among
Registrant and certain of its shareholders, dated June 21,
1999.
10.15 1995 Stock Option Plan, as amended, and form of stock option
agreement and restricted stock purchase agreement.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
</TABLE>

<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------ ------------------------------------------------------------
<C> <S>
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1 Financial Data Schedule.
</TABLE>

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

* Previously filed.

** To be supplied by amendment.

+ Confidential treatment requested as to certain portions of this Exhibit.

<PAGE> 1
[VENTURE LAW GROUP LETTERHEAD]

EXHIBIT 5.1

June 23, 1999

Netro Corporation
3860 N. First Street
San Jose, CA 95134

REGISTRATION STATEMENT ON FORM S-1
(FILE NO. 333-81325)

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 (File No.
333-81325) filed by you, Netro Corporation, with the Securities and Exchange
Commission (the "Registration Statement") on June 22, 1999 in connection with
the registration under the Securities Act of 1933, as amended, of shares of your
Common Stock (the "Shares"). As your counsel in connection with this
transaction, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the sale and issuance
of the Shares.

It is our opinion that, assuming effectiveness of the Registration
Statement, the Shares when issued and sold in the manner described in the
Registration Statement will be legally and validly issued, fully paid and
nonassessable.

We are admitted to practice law only in the State of California and
accordingly, we express no opinion as to any matter relating to the laws of any
jurisdiction other than the laws of the State of California and the federal
securities laws of the United States. We consent to the use of this opinion as
an exhibit to the Registration Statement and further consent to the use of our
name wherever appearing in the Registration Statement, including the Prospectus
constituting a part thereof, and in any amendment thereto.

Sincerely,

VENTURE LAW GROUP
A Professional Corporation

/s/ Venture Law Group
--------------------------

THN

<PAGE> 1
EXHIBIT 10.2

NETRO CORPORATION

1996 STOCK OPTION PLAN

(AS AMENDED THROUGH JUNE 21, 1999)

1. PURPOSES OF THE PLAN. The purposes of this 1996 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "AFFILIATE" means an entity other than a Subsidiary in which
the Company owns an equity interest or which, together with the Company, is
under common control of a third person or entity.

(c) "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock option, restricted stock purchase and stock bonus
plans under applicable U.S. state corporate laws, U.S. federal and applicable
state securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options are granted
under the Plan, as such laws, rules, regulations and requirements shall be in
place from time to time.

(d) "BOARD" means the Board of Directors of the Company.

(e) "CODE" means the Internal Revenue Code of 1986, as amended.

(f) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.

(g) "COMMON STOCK" means the Common Stock of the Company.

(h) "COMPANY" means Netro Corporation, a California corporation.

(i) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.

<PAGE> 2
(j) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.

(k) "DIRECTOR" means a member of the Board.

(l) "EMPLOYEE" means any person, (including if appropriate any
Named Executive, Officer or Director), employed by the Company or any Parent,
Subsidiary or Affiliate of the Company, with the status of employment determined
based upon such minimum number of hours or periods worked as shall be determined
by the Administrator in its discretion, subject to any requirements of the Code.
The payment of a director's fee to a Director shall not be sufficient to
constitute "employment" of such Director by the Company.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(n) "FAIR MARKET VALUE" means, as of any date, the fair market
value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or

(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.

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<PAGE> 3
(p) "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.

(q) "NAMED EXECUTIVE" means any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four most highly compensated officers
of the Company (other than the chief executive officer). Such officer status
shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.

(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.

(s) "OPTION" means a stock option granted pursuant to the Plan.

(t) "OPTIONED STOCK" means the Common Stock subject to an Option.

(u) "OPTIONEE" means an Employee or Consultant who receives an
Option.

(v) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.

(w) "PLAN" means this 1996 Stock Option Plan.

(x) "REPORTING PERSON" means an officer, director, or greater
than ten percent shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.

(y) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.

(z) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

(aa) "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.

(bb) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.

(cc) "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 5,140,284

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<PAGE> 4
shares of Common Stock, plus any shares that should become available for grant
under the Company's 1995 Stock Option Plan which shall be transferred to this
Plan, plus an automatic annual increase on the first day of each of the
Company's fiscal years beginning in 2001, 2002, 2003, 2004, 2005 and 2006 equal
to the lesser of: (i) 750,000 Shares; (ii) three percent (3%) of the Shares
outstanding on the last day of the immediately preceding fiscal year, or (iii)
such lesser number of Shares as is determined by the Board. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan. Shares
repurchased by the Company pursuant to any repurchase right which the Company
may have shall be available for future grant as nonstatutory stock options under
the Plan.

4. ADMINISTRATION OF THE PLAN.

(a) GENERAL. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options to Employees and Consultants.

(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
respect to Options granted to Reporting Persons and Named Executives, the Plan
may (but need not) be administered so as to permit such Options to qualify for
the exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.

(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:

(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(n) of the Plan;

(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options or
any combination thereof are granted hereunder;

(iv) to determine the number of shares of Common Stock to
be covered by each such option granted hereunder;

(v) to approve forms of agreement for use under the Plan;

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<PAGE> 5

(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any option granted hereunder;

(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;

(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;

(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan; and

(x) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.

(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.

5. ELIGIBILITY.

(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees, provided however that Employees of Affiliates shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.

(b) TYPE OF OPTION. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.

(c) EMPLOYMENT RELATIONSHIP. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.

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<PAGE> 6

7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, is a Ten
Percent Holder, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.

8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
in Section 12 below, the maximum number of Shares which may be subject to
Options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 1,000,000 Shares.

9. OPTION EXERCISE PRICE AND CONSIDERATION.

(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:

(i) In the case of an Incentive Stock Option that is:

(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, is a Ten Percent Holder, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.

(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

(ii) In the case of a Nonstatutory Stock Option that is:

(A) granted to a person who, at the time of the
grant of such Option is a Ten Percent Holder, prior to the date, if any, on
which the Common Stock becomes a Listed Security, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of the
grant.

(B) granted to a Named Executive, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant if such Option is intended to qualify as performance-based
compensation under Section 162(m) of the Code.

(C) granted to any person, other than a Named
Executive or a Ten Percent Holder, the per Share exercise price shall be no less
than 85% of the Fair Market Value per Share on the date of grant if required by
the Applicable Laws and, if not so required, shall be such price as is
determined by the Administration.

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<PAGE> 7
Shares as to which such Option shall be exercised, (5) authorization for the
Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable income or employment taxes, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

10. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan; provided that if required by the Applicable Laws, any option
granted prior to the date, if any, upon which the Common Stock becomes a Listed
Security, shall become exercisable at the rate of at least twenty percent (20%)
per year over five (5) years from the date the Option is granted. In the event
that any of the Shares issued upon exercise of an Option (which exercise occurs
prior to the date, if any, upon which the Common Stock becomes a Listed
Security) should be subject to a right of repurchase in the Company's favor,
such repurchase right shall, if required by the Applicable Laws, lapse at the
rate of at least twenty percent (20%) per year over five (5) years from the date
the Option is granted. Notwithstanding the above, in the case of an Option
granted to an officer, Director or Consultant of the Company or any Parent,
Subsidiary or Affiliate of the Company, the Option may become fully exercisable,
or a repurchase right, if any, in favor of the Company shall lapse, at any time
or during any period established by the Administrator. The Administrator shall
have the discretion to determine whether and to what extent the vesting of
Options shall be tolled during any unpaid leave of absence; provided however
that in the absence of such determination, vesting of Options shall be tolled
during any such leave.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for

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<PAGE> 8

which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.

(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Subject
to Section 10(c), in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant with the Company, such Optionee may, but only
within three (3) months (or such other period of time not less than thirty (30)
days as is determined by the Administrator, with such determination in the case
of an Incentive Stock Option being made at the time of grant of the Option and
not exceeding three (3) months) after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 10(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.

(i) Notwithstanding Section 10(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.

(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.

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<PAGE> 9

(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.

(e) RULE 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.

(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

11. TAXES.

(a) As a condition of the exercise of an Option granted under the
Plan, the Participant (or in the case of the Participant's death, the person
exercising or receiving the Option) shall make such arrangements as the
Administrator may require for the satisfaction of any applicable federal, state,
local or foreign withholding tax obligations that may arise in connection with
the exercise of an Option and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.

(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.

(c) This Section 11(c) shall apply only after the date, if any,
upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with respect
to any remaining tax obligations), in the absence of any other arrangement and
to the extent permitted under the Applicable Laws, the Participant shall be
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option that number of Shares having a Fair Market Value
determined as of the applicable Tax Date (as defined below) equal to the amount
required to be withheld. For purposes of this Section 11, the Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined under the Applicable Laws (the "Tax
Date").

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<PAGE> 10

(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Participant for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value determined as of the applicable Tax Date equal to the amount required to
be withheld.

(e) Any election or deemed election by a Participant to have
Shares withheld to satisfy tax withholding obligations under Section 11(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 11(d) above must be
made on or prior to the applicable Tax Date.

(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option is exercised but such
Participant shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the applicable Tax Date.

12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.

(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale of
all or substantially all of the Company's assets or a merger of the Company with
or into another corporation where the successor corporation issues its
securities to the Company's shareholders,

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<PAGE> 11
each outstanding Option shall be assumed or an equivalent option or right shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the successor corporation does not agree to assume
the Option or to substitute an equivalent option, in which case such Option
shall terminate upon the consummation of the merger or sale of assets.

(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.

13. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution, provided that, after the date,
if any, upon which the Common Stock becomes a Listed Security, the Administrator
may in its discretion grant transferable Nonstatutory Stock Options pursuant to
Option Agreements specifying (i) the manner in which such Nonstatutory Stock
Options are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. Option may be exercised or purchased during the lifetime
of the Optionee, only by the Optionee.

14. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.

15. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such a degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.

16. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without

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<PAGE> 12
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any Stock
Exchange.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.

17. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

18. AGREEMENTS. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.

19. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under the Applicable Laws. All Options issued
under the Plan shall become void in the event such approval is not obtained.

20. INFORMATION AND DOCUMENTS TO OPTIONEES. Prior to the date, if any,
upon which the Common Stock becomes a Listed Security, the Company shall provide
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information. In
addition, at the time of issuance of any securities under the Plan, the Company
shall provide to the Optionee a copy of the Plan and a copy of any agreement(s)
pursuant to which securities under the Plan are issued.

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<PAGE> 13
NETRO CORPORATION

INCENTIVE STOCK OPTION AGREEMENT

Netro Corporation, a California corporation (the "Company"),
hereby grants to <<OPTIONEE>> (the "Optionee") effectivE <<BOARDGRANTDATE>>, an
option to purchase a total of <<SHARESGRANTED>> shares of Common Stock, at the
price determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the 1996 Stock Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.

1. Nature of the Option. This option is intended to qualify as an
Incentive Stock Option as defined in Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code").

2. Option Price. The Option Price is <<OptionPrice>> for each share of
Common Stock, which price is not less than the fair market value per share of
Common Stock on the date of grant (110% of fair market value in the event
Optionee owns, immediately before this option is granted, stock representing
more than 10% of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations, as those terms are defined
in Section 425 of the Code), as determined by the Board or its Committee.

3. Exercise of Option. This option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(a) Subject to subsection 3(i)(b), below, this option
shall be exercisable cumulatively, as follows:

1/4th of the shares subject to this option (i.e., <<ONEFOURTHOFSHARES>>
shares) shall become exercisable one (1) year after the vesting
commencement date of <<VESTINGCOMMENCEDATE>>, with an additional 1/48th
of the shares (i.e., <<ONEFORTYEIGHTHOFSHARES>> shares) becoming
exercisable at the end of each one month period thereafter.

(b) This option may not be exercised for a fraction of a
share.

(c) In the event of Optionee's death, disability or other
termination of employment, consulting relationship or directorship, the
exercisability of the Option is governed by Sections 7, 8 and 9 below.

(ii) Method of Exercise. This option shall be exercisable by
written notice which shall state the election to exercise the option, the number
of Shares in respect of which the option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the President of the
Company. The written notice shall be

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<PAGE> 14
accompanied by payment of the purchase price. This Option shall be deemed
exercised upon receipt by the Company of such written notice accompanied by the
exercise price.

No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

4. Optionee's Representations. By receipt of this option, by its
execution, and by its exercise in whole or in part, Optionee represents to the
Company that he or she understands that:

(i) both this option, and any Shares purchased upon its exercise,
are securities the issuance by the Company of which requires compliance with
federal and state securities laws;

(ii) these securities are made available to Optionee only on the
condition that Optionee makes the representation contained in this Section 4 to
the Company; and

(iii) Optionee has made a reasonable investigation of the affairs of
the Company sufficient to be well informed as to the rights and the value of
these securities.

5. Method of Payment. Payment of the exercise price shall be by (i)
check payable to the Company, (ii) same-day sale of all or part of the
underlying Shares, whereby the Company is first paid the appropriate exercise
price for the Shares and thereafter the Optionee is paid the balance of the
sales price of the Shares, or (iii) surrender of other Shares of Common Stock of
the Company which, if acquired from the Company, have been held for six (6)
months or more and which are of a value equal to the exercise price of the
Shares as to which the Option is being exercised.

6. Restrictions on Exercise. This option may not be exercised if the
issuance of such shares upon such exercise would constitute a violation of any
applicable Federal or State Securities or other law or regulation, including any
rule under Regulation G as promulgated by the Federal Reserve Board. As a
condition to the exercise of this option, the Company may require the Optionee
to make any representation and warranty to the Company as may be required by any
applicable law or regulation.

7. Termination of Status as an Employee. If Optionee ceases to serve as
an Employee, Consultant or director of the Company, Optionee may, but only
within the earlier of three (3) months after the date Optionee ceases to be an
Employee, Consultant or director of the Company or the date the Option expires
by its terms, exercise his or her option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the option at the date of such
termination, or if he or she does not exercise the option within the time
specified herein, the option shall terminate.

8. Disability of Optionee. Notwithstanding the provisions of Section 7
above, if Optionee is unable to continue his or her employment, consulting
relationship or directorship with the Company as a result of his or her total
and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within the earlier of six (6) months (or such other period of time

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<PAGE> 15
not exceeding twelve (12) months as is determined by the Board) from the date of
termination of employment, consulting relationship, directorship or the date the
Option expires by its terms, exercise his or her option to the extent Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.

9. Death of Optionee. In the event of the death of Optionee:

(i) during the option period while an Employee, Consultant or
director of the Company and having been in Continuous Status as such since the
date of grant of the option, the option may be exercised, at any time within the
earlier of six (6) months following the date of death or the date the Option
expires by its terms, by the Optionee's estate or by a person who acquired the
right to exercise the option by bequest or inheritance, but only to the extent
of the right to exercise that would have accrued up to the date of death; or

(ii) within one (1) month after the termination of the Optionee's
Continuous Status as an Employee, Consultant or director of the Company, the
option may be exercised, at any time within the earlier of six (6) months
following the date of death or the date the Option expires by its terms, by the
Optionee's estate or by a person who acquired the right to exercise the option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.

10. Non-Transferability of Option. This option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by him. The terms of
this option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

11. Term of Option. This Option may not be exercised more than ten years
from the date of grant of this option, and may be exercised during such term
only in accordance with the Plan and the terms of this option.

12. Market Standoff Agreement. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any securities of the Company under the
Securities Act of 1933 (the "1933 Act"), Optionee shall not sell or otherwise
transfer any Shares or other securities of the Company during the 180-day period
following the effective date of a registration statement of the Company filed
under the 1933 Act (or such other shorter period as is determined by the Company
or the representative of the underwriters); provided, however, that such
restriction shall only apply to the first registration statement of the Company
to become effective under the 1933 Act which includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under the
1933 Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.

13. Early Disposition of Stock. Optionee understands that if he or she
disposes of any Shares received under this option within 2 years after the date
of this Agreement or within 1 year

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<PAGE> 16
after such Shares were delivered to him or her, Optionee will be treated for
federal income tax purposes as having received ordinary income at the time of
such disposition in an amount generally measured by the difference between the
exercise price and the lower of the fair market value of the Shares at the date
of the exercise or the fair market value of the Shares at the date of
disposition. The amount of such ordinary income may be measured differently if
Optionee is an officer, director or 10% shareholder of the Company, or if the
Shares were subject to a substantial risk of forfeiture at the time they were
transferred to Optionee. Optionee hereby agrees to notify the Company in writing
within 30 days after the date of any such disposition. Optionee understands that
if he or she disposes of such shares at any time after the expiration of such
2-year and 1-year holding periods, any gain on such sale will be taxed at
capital gain rates.

NETRO CORPORATION

a California corporation

By: _________________________
Gideon Ben-Efraim, President

Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board or of the Committee upon
any questions arising under the Plan.

Dated: _________________ _________________________________________
Optionee

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<PAGE> 17
NETRO CORPORATION

EXERCISE NOTICE AND RESTRICTED STOCK AGREEMENT

1996 STOCK OPTION PLAN

This Exercise Notice and Restricted Stock Agreement ("Agreement") is
made as of _________________, 199__ by and between Netro Corporation, a
California corporation (the "Company"), and _______________________ (the
"Purchaser").

1. Exercise of Option.

Pursuant to the exercise of a stock option granted to the
Purchaser under the Company's 1996 Stock Option Plan (the "Plan"), and pursuant
to the Stock Option Agreement dated ________________________ (the "Option
Agreement") between the Company and the Purchaser, the Purchaser has elected to
purchase ______________ of those shares which have become vested under the
vesting schedule set forth in Section 3(i)(a) of the Option Agreement (the
"Shares"). The purchase price for the Shares shall be __________________ per
Share for a total purchase price of ___________________________. The term
"Shares" refers to the purchased Shares and all securities received in
replacement of the Shares, or as stock dividends or as a result of any stock
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.

2. Payment of Purchase Price.

The purchase price for the Shares shall be paid to the Company at
the time of execution of this agreement in cash or by check made payable to the
Company. The form of such payment shall be at the discretion of the Company.

3. Limitations on Transfer.

Purchaser shall not assign, encumber or dispose of any interest
in such Shares except in compliance with Sections 3(a) and 3(b) below and
applicable securities laws:

(a) Right of First Refusal. In the event, at any time after the
date of this Agreement, the Purchaser or his or her transferee desires to sell
or transfer the Shares in any manner, the Purchaser shall first offer such
Shares for sale to the Company at the same price, and upon the same terms (or
terms as similar as reasonably possible) upon which he is proposing or is to
dispose of such Shares. Said right of first refusal shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the Purchaser of the terms and conditions of said proposed
sale or transfer and the name, address and phone number of each proposed buyer
or transferee. If the Company desires to exercise such right of first refusal,
it shall notify Purchaser in writing within such thirty (30) day period. In the
event the Shares are not

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<PAGE> 18

disposed of on such terms within thirty (30) days following lapse of the period
of the right of first refusal provided to the Company, or if the Purchaser
proposes to change the price or other terms to make such terms more favorable to
the buyer, the Shares shall once again be subject to the right of first refusal
herein provided.

(b) Involuntary Transfer. In the event, at any time after the
date of this Agreement, of any transfer by operation of law or other involuntary
transfer (including death, except as to transfers to spouses, immediate
ancestors or descendants, or divorce) of all or a portion of the Shares by the
record holder thereof, the Company shall have an option to purchase all of the
Shares transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company of such transfer. The right to
purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.

(c) Price for Involuntary Transfer. With respect to any stock to
be transferred pursuant to Section 3(b), the purchase price per Share shall be
that price set by the Board of Directors of the Company, in its discretion,
exercised in good faith. Such purchase price shall reflect the current value of
the stock in terms of present earnings and future prospects of the Company. The
Company shall notify Purchaser or his or her executor of the price so determined
within thirty (30) days after receipt by the Company of written notice of the
transfer or proposed transfer of Shares. The decision of the Board of Directors
as to the purchase price shall be final.

(d) Assignment. The right of Company to purchase any part of the
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.

(e) Restrictions Binding on Transferees. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are met.

(f) Termination of Refusal Right. The rights of first refusal
granted the Company by Sections 3(a) and 3(b) above shall terminate at such time
as a public market exists for the Company's capital stock (or any other stock
issued to Purchaser in exchange for the Shares purchased under this Agreement).
For the purpose of this Agreement, a "Public Market" shall be deemed to exist if
(i) such stock is listed on a national securities exchange (as that term is used
in the Securities Exchange Act of 1934) or (ii) such stock is traded on the
over-the-counter market and prices are published daily on business days in a
recognized financial journal. Notwithstanding the foregoing, Purchaser and
Purchaser's transferees will not, without the prior written consent of the
Company, offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of any of the Shares for a period of one hundred eighty (180)
days following the effectiveness of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), in connection with
the Company's initial public offering of securities.

(g) Exempt Transfers. The restrictions on transfer of this
Section 3 shall not apply to a transfer to Purchaser's ancestors or descendants
or spouse or to a trustee for their bene-

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<PAGE> 19
fit, provided that such transferee shall agree in writing to take such Shares
subject to all the terms of this Agreement, including restrictions on further
transfer.

4. Investment Representations.

In connection with the purchase of the Shares, Purchaser
represents to the Company the following:

(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.

(b) Purchaser either has a preexisting business or personal
relationship with the Company or any of its officers, directors or controlling
persons or by reason of Purchaser's business or financial experience or the
business or financial experience of Purchaser's professional advisors who are
unaffiliated with and who are not compensated by the Company, directly or
indirectly, could be reasonably assumed to have the capacity to evaluate the
merits and risks of an investment in the Company and to protect Purchaser's own
interests in connection with this transaction.

(d) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed in this Agreement. Purchaser
acknowledges that the sale of the Shares involves a high degree of risk, and the
Purchaser is able, without impairing his or her financial condition, to hold the
Shares for an indefinite period of time and to suffer a complete loss of its
value.

(e) Purchaser further acknowledges and understands that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser further acknowledges and understands that the Company is under no
obligation to register the securities. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.

(f) Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" (acquired, directly or indirectly, from the issuer
thereof or from an affiliate of such issuer, in a non-public offering) subject
to the satisfaction of certain conditions, including, among other things: (i)
the availability, in certain cases, of certain public information about the
Company; (ii) the resale occurring (unless Rule 701 promulgated under the Act is
available) not less than one year after the party has purchased and paid for the
securities to be sold; and (iii) in the case of an affiliate, or a

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<PAGE> 20
non-affiliate who has held the restricted securities for less than two years,
the sale being made through a broker in an unsolicited "broker's transaction" or
in transactions directly with a market maker (as such term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three-month period not exceeding the specified limitations stated therein.

(g) Purchaser further understands that, at the time Purchaser
wishes to sell the securities, there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 even if the one-year minimum holding period had been satisfied.

(h) Purchaser further understands that in the event that all of
the requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales and that such persons and their respective brokers who
participate in such transactions do so at their own risk.

(i) Purchaser further understands that the resale provisions of
Rule 701, if available, will not apply until 90 days after the Company becomes
subject to the reporting obligations under the Securities Act and that there can
be no assurance that the requirements of Rule 701 will be met.

5. Legends; California Securities Law.

The certificate or certificates representing the Shares shall
bear the following legends (as well as any legends required by applicable
corporate and securities laws):

(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.

(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

6. No Employment Rights. This Agreement shall not confer upon Purchaser
any right with respect to continuation of his or her position as an employee or
consultant of the Company or its subsidiaries, nor shall it interfere in any way
with the right of Purchaser or the Company, or any

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<PAGE> 21
of its subsidiaries, to terminate Purchaser's position as an employee or
consultant of the Company at any time.

7. Miscellaneous.

(a) This Agreement may be amended only by written Agreement
between the Company and Purchaser.

(b) Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed, if to the Company, at its principal place of business,
attention the President, and if to Purchaser, at his or her address as shown on
the stock records of the Company.

(c) The rights and benefits of this Agreement shall inure to the
benefit of, and be enforceable by the Company's successors and assigns. The
rights and obligations of Purchaser under this Agreement may be assigned only
with the prior written consent of the Company.

(d) Both parties agree to execute any additional documents
necessary to carry out the purposes of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.

NETRO CORPORATION PURCHASER

By:_____________________________ _____________________________

Gideon Ben-Efraim, CEO Address:_____________________
3200 Coronado Drive _____________________
Santa Clara, CA 95054

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<PAGE> 22
ATTACHMENT A

CONSENT OF SPOUSE

I, _______________________, spouse of have read and approved the
foregoing Agreement. In consideration of the Company's granting my spouse the
right to purchase the Shares as set forth in the Agreement, I hereby agree to be
irrevocably bound by the Agreement and further agree that any community property
or other such interest shall be similarly bound by the Agreement. I hereby
appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.

Dated: _________________ _______________________________
Spouse of Purchaser

<PAGE> 1
EXHIBIT 10.5

NETRO CORPORATION

1997 DIRECTORS' STOCK OPTION PLAN

(AS AMENDED THROUGH JUNE 21, 1999)

1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.

All options granted hereunder shall be nonstatutory stock options.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

(d) "Company" shall mean Netro Corporation, a California
corporation.

(e) "Continuous Status as a Director" shall mean the absence of
any interruption or termination of service as a Director.

(f) "Director" shall mean a member of the Board.

(g) "Employee" shall mean any person, including any officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

(i) "Option" shall mean a stock option granted pursuant to the
Plan. All options shall be nonstatutory stock options (i.e., options that are
not intended to qualify as incentive stock options under Section 422 of the
Code).

(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.

(k) "Optionee" shall mean an Outside Director who receives an
Option.

(l) "Outside Director" shall mean a Director who is not an
Employee.

(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

<PAGE> 2

(n) "Plan" shall mean this 1997 Directors' Stock Option Plan.

(o) "Share" shall mean a share of the Common Stock, as adjusted
in accordance with Section 11 of the Plan.

(p) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 300,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.

4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.

(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.

(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:

(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.

(ii) Each Outside Director shall be automatically granted
an Option to purchase 10,000 Shares (a "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board of Directors to fill a
vacancy.

(iii) Each Outside Director shall be automatically granted
an Option on the first day of each fiscal year (beginning with 1999) immediately
following which such Outside Director is serving on the Board, provided that, on
such date, he or she shall have served on the Board for at least six (6) months
prior to such date (a "Subsequent Option"). With respect to grants to an Outside
Director who was granted an option under the Plan in December 1997 ("Current
Directors"), a Subsequent Option granted prior to the first day of the Company's
fiscal year in 2002 shall be an option to purchase 5,000 Shares. With respect to
grants (A) to all other Outside Directors and (B) to Current Directors on and
after the first day of the Company's fiscal year in 2002, a Subsequent Option
shall be an option to purchase 10,000 Shares.

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<PAGE> 3

(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each such automatic grant
shall be for that number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of Outside Directors
receiving an Option on such date on the automatic grant date. Any further grants
shall then be deferred until such time, if any, as additional Shares become
available for grant under the Plan through action of the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.

(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 17 hereof.

(vi) The terms of each First Option granted hereunder
shall be as follows:

(1) the First Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof;

(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the First Option,
determined in accordance with Section 8 hereof; and

(3) the First Option shall be fully vested and
exercisable in its entirety immediately upon grant.

(vii) The terms of each Subsequent Option granted
hereunder shall be as
follows:

(1) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof;

(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof; and

(3) the Subsequent Option shall be fully vested and
exercisable in its entirety immediately upon grant.

(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person

-3-
<PAGE> 4

to execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the Plan.

(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his
or her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.

5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.

6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on
December 9, 1997. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 13 of the Plan.

7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
the date of grant thereof.

8. EXERCISE PRICE AND CONSIDERATION.

(a) EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.

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<PAGE> 5

(b) FAIR MARKET VALUE. The fair market value shall be determined
in good faith by the Board; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the mean
of the bid and asked prices of the Common Stock in the over-the-counter market
on the date of grant, as reported in The Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("Nasdaq") System) or, in the event the Common Stock
is traded on the Nasdaq National Market or listed on a stock exchange, the fair
market value per Share shall be the closing price on such system or exchange on
the date of grant of the Option (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as reported in
The Wall Street Journal.

(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.

9. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable prior to
shareholder approval of the Plan in accordance with Section 17 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.

Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

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<PAGE> 6

(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such Outside Director was not entitled to exercise an Option at the date of
such termination, or does not exercise such Option (which he or she was entitled
to exercise) within the time specified herein, the Option shall terminate.

(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above,
in the event a Director is unable to continue his or her service as a Director
with the Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within six (6)
months (or such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of such termination, exercise his or her
Option to the extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent that
he or she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.

(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:

(i) During the term of the Option who is, at the time of
his or her death, a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for six (6) months (or such lesser
period of time as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired; or

(ii) Within three (3) months after the termination of
Continuous Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.

10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.

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<PAGE> 7

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.

(a) ADJUSTMENT. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, and the number of shares of Common Stock authorized for issuance
under the automatic grant provisions of Sections 4(b)(ii) and (iii) hereof, as
well as the price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Eligible Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.

13. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other

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<PAGE> 8

applicable law or regulation), the Company shall obtain approval of the
shareholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.

14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
If such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such shareholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the outstanding
shares of the Company. Options may be granted, but not exercised, before such
shareholder approval.

-8-

<PAGE> 1
Exhibit 10.8.3

SPECIAL RIGHTS AGREEMENT

This Special Rights Agreement (the "Agreement") is made as of December
19, 1997, by and among Netro Corporation (the "Company") and Italtel, SpA
("Italtel") and shall be effective for all purposes as of the date of the
Initial Closing under the Series D Preferred Stock Purchase Agreement of even
date herewith (the "Effective Date").

The parties hereto agree as follows:

1. Definitions. As used herein, the following terms shall have the
following meanings:

(a) "Change of Control" means the purchase by a single Competitor
of Italtel of more than fifty percent (50%) of the Voting Stock of the Company.

(b) "Competitor of Italtel" means the companies listed on Exhibit
A hereto as well as any other company whom the Company and Italtel, after
consultation, good faith negotiation and mutual agreement, agree may be deemed a
competitor of Italtel.

(c) "Fair Market Value" means, the highest price per
Share-equivalent of the Voting Stock paid by a Competitor of Italtel in
connection with a Change of Control.

(d) "Shares" means the Series D Preferred Stock of the Company
purchased by Italtel pursuant to the Series D Preferred Stock Purchase Agreement
of even date herewith and any Common Stock of the Company issued or issuable in
respect of such Series D Preferred Stock or other securities issued or issuable
with respect to such Series D Preferred Stock upon any stock split, stock
dividend, recapitalization.

(e) "Voting Stock" means any share of the capital stock of the
Company generally entitled to vote on matters put before the shareholders of the
Company at any regular or special meeting of shareholders.

2. Repurchase of Shares. If, during the Term of this Agreement, the
Company enters into an agreement that results in a Change of Control, as soon as
practicable after entering into such agreement, the Company shall provide
Italtel with a notice identifying the date of such transaction and the
Competitor of Italtel involved. Upon notice from Italtel of its decision to
exercise its rights under this Section 2, the Company (or a third-party
designated by the Company) will, as soon as practicable after receipt of such
notice, purchase from Italtel and Italtel will sell to the Company, any Shares
then held by Italtel at the Fair Market Value of the Shares as of the date that
the Company entered into the agreement that resulted in such Change of Control.

3. Closing of Repurchase.

(a) The closing of the purchase and sale of the Shares hereunder
(the "Closing") shall be held at the principal office of the Company as soon as
practicable after the

<PAGE> 2

receipt of notice by the Company of the election by Italtel to exercise its
rights under Section 2 (the "Closing Date").

(b) At the Closing, which shall take place at the offices of
Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, Italtel will
deliver to the Company (or its designee) a certificate or certificates
representing the Shares to be purchased by the Company against payment of the
Fair Market Value therefor.

(c) Upon payment of the Purchase Price for such Shares, the
Company (or its designee) shall become the legal and beneficial owner of the
Shares being repurchased and all rights and interest therein or related thereto,
and the Company (or its designee) shall have the right to transfer to its own
name the number of Shares being repurchased without further action by Italtel.

4. Board Visitation Rights. During the Term of this Agreement, and so
long as Italtel owns more than three percent (3%) of the Voting Stock of the
Company, one (1) member of the senior management of Italtel (or such other
adequate designee of Italtel), will be entitled to attend full meetings of the
Company's Board of Directors. The Company may exclude such representative from
time to time from all or portions of these meetings, or omit to provide Italtel
with information related to such meetings, if: (a) such action is necessary to
preserve the attorney-client privilege, (b) such action is necessary to fulfill
the Company's obligations with respect to confidential or proprietary
information of third parties, (c) such meeting or information involves matters
concerning the Company's relationship or prospective relationship with Italtel
or competitors to Italtel, (d) such meeting or information involves matters
which represent a conflict of interest for Netro or Italtel, or (e) such meeting
or information represents a situation where a director would customarily not
participate in the meeting or be provided such information. Any information
communicated during, or related to, such a meeting shall be deemed to be the
Confidential Information of the Company and subject to the terms of the
Non-Disclosure Agreement between the parties dated __________________.

5. Termination. This Agreement, and all rights hereunder, shall
terminate upon the consummation of the sale of the Company's securities pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, in connection with the firm commitment underwritten offering
of its securities to the general public.

6. Miscellaneous.

(a) Notices. Any notice, demand or request required or permitted
to be given under this Agreement shall be in writing and shall be deemed
sufficient when delivered personally by a recognized international courier
(e.g., Federal Express or DHL) or sent by confirmed facsimile, and addressed, if
to the Company, at its principal place of business, attention the President, and
if to Italtel, at their address as shown on the stock records of the Company.
Such notice shall be effective upon receipt by the organization being notified.

(b) Successors and Assigns. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's and
Italtel's successors and assigns.

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<PAGE> 3

(c) California Law. This Agreement shall be subject to and
governed by the laws of the State of California, as it applies to contracts
entered into and to be performed by California residents, whether or not any
party may become a resident of a different state.

(d) Severability. The provisions of this Agreement are divisible
and severable, and if any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances as to which it is held invalid, shall be
valid as if the void or unenforceable provision were not included in this
Agreement.

(e) Amendment. This Agreement is subject to amendment only with
the unanimous written consent of all parties hereto.

(f) Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof, and
supersedes all prior negotiations and agreements, whether written or oral, with
respect to the subject matter of this Agreement.

[The rest of this page is left blank intentionally]

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<PAGE> 4

The parties hereto have executed this Agreement as of December 19, 1997
and it shall be effective for all purposes as of the Effective Date.

NETRO CORPORATION

By:_____________________________________
Gideon Ben-Efraim, President & CEO

ITALTEL SPA

By:_____________________________________

Title:__________________________________

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<PAGE> 5

EXHIBIT A

COMPETITORS OF ITALTEL

Alcatel
Bosch
Nokia
Ericsson
Motorola
Nera
NEC
Fujitsu
Lucent
Nortel
DMC
P-Com
SIAE
SAT
California Microwave
Harris
Cisco Systems, Inc.
Newbridge Networks
Pirelli
TEC Marconi

<PAGE> 1

EXHIBIT 10.14

NETRO CORPORATION

AMENDED AND RESTATED RIGHTS AGREEMENT

This Amended and Restated Rights Agreement (the "Agreement") is entered
into as of the 21st day of June, 1999, by and among Netro Corporation, a
California corporation (the "Company"), the Series A Purchasers, Series B
Purchasers, Series C Purchasers, the Series D Purchasers and the Ben-Efraims,
all as identified on Exhibit A hereto and shall be effective for all purposes
upon the consummation of the Initial Closing under the Series D Preferred Stock
Purchase Agreement of even date herewith (the "Effective Date"). The Series A
Purchasers, Series B Purchasers, Series C Purchasers and Series D Purchasers
shall be referred to collectively herein as the "Purchasers." The Purchasers and
the Ben-Efraims shall be referred to collectively herein as the "Investors."

RECITALS

A. Pursuant to a Rights Agreement dated June 2, 1995 (the "June 1995
Rights Agreement"), the Company, the Series A Purchasers and the Ben-Efraims
acquired certain registration rights as to securities purchased pursuant to the
Series A Preferred Stock Purchase Agreement dated June 2, 1995 and the Common
Stock Purchase Agreement dated January 13, 1995, respectively.

B. Pursuant to a Rights Agreement dated November 22, 1995 (the "November
1995 Rights Agreement"), the Company, the Series A Purchasers and the
Ben-Efraims agreed to amend and restate the registration rights acquired
pursuant to the June 1995 Rights Agreement in their entirety as set forth in the
November 1995 Rights Agreement, and to include the Series B Purchasers as
parties thereto such that the June 1995 Rights Agreement was of no further force
or effect.

C. Pursuant to a Rights Agreement dated July 31, 1996 (the "July 1996
Rights Agreement"), the Company, the Series A Purchasers, the Series B
Purchasers and the Ben-Efraims agreed to amend and restate the registration
rights acquired pursuant to the November 1995 Rights Agreement in their entirety
as set forth in the July 1996 Rights Agreement, and to include the Initial
Series C Purchasers as parties thereto such that the November 1995 Rights
Agreement was of no further force or effect.

D. Pursuant to an Amended and Restated Rights Agreement dated July 24,
1997 (the "1997 Rights Agreement"), the Company, the Series A Purchasers, the
Series B Purchasers, certain of the Series C Purchasers, and the Ben-Efraims,
agreed to amend and restate the registration rights acquired pursuant to the
July 1996 Rights Agreement in their entirety as set forth in the July 1997
Rights Agreement, and to include certain additional Series C Purchasers as
parties thereto such that the July 1996 Rights Agreement was of no further force
or effect.

E. Pursuant to an Amended and Restated Rights Agreement dated November
1997 (the "November 1997 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, certain of the Series C Purchasers, and the
Ben-Efraims, agreed to amend and restate

<PAGE> 2

the registration rights acquired pursuant to the 1997 Rights Agreement in their
entirety as set forth in the November 1997 Rights Agreement, and to include
certain additional Series C Purchasers as parties thereto such that the 1997
Rights Agreement was of no further force or effect.

F. Pursuant to an Amended and Restated Rights Agreement dated December
19, 1997 (the "December 1997 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, the Series C Purchasers and the
Ben-Efraims, agreed to amend and restate the registration rights acquired
pursuant to the November 1997 Rights Agreement in their entirety as set forth in
the December 1997 Rights Agreement, and to include certain of the Series D
Purchasers as parties thereto such that the November 1997 Rights Agreement was
of no further force or effect.

G. Pursuant to an Amended and Restated Rights Agreement dated July 13,
1998 (the "July 1998 Rights Agreement"), the Company, the Series A Purchasers,
the Series B Purchasers, the Series C Purchasers, certain of the Series D
Purchasers and the Ben-Efraims, agreed to amend and restate the registration
rights acquired pursuant to the December 1997 Rights Agreement in their entirety
as set forth in the July 1998 Rights Agreement, and to include certain of the
Series D Purchasers as parties thereto such that the December 1997 Rights
Agreement was of no further force or effect.

H. Pursuant to an Amended and Restated Rights Agreement dated January 9,
1999 (the "January 1999 Rights Agreement"), the Company, the Series A
Purchasers, the Series B Purchasers, the Series C Purchasers, certain of the
Series D Purchasers and the Ben-Efraims, agreed to amend and restate the
registration rights acquired pursuant to the July 1998 Rights Agreement in their
entirety as set forth in the January 1999 Rights Agreement, and to include
certain of the Series D Purchasers as parties thereto such that the July 1998
Rights Agreement was of no further force or effect.

I. In connection with the closing of a certain Series D Preferred Stock
financing between the Company and certain additional Series D Purchasers and
with the approval of the majority of Common Stock of the Company issued or
issuable upon conversion of the outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the
Company, the Series A Purchasers, the Series B Purchasers, the Series C
Purchasers, the Series D Purchasers, and the Ben-Efraims, intend to amend and
restate the January 1999 Rights Agreement, as allowed in Sections 3.7 and 3.8
thereof to read as set forth herein so that all rights of the Investors to
participation and registration under Securities Act of 1933 as amended, shall
upon the effectiveness of this agreement, be consolidated and restated herein
and the provisions of the January 1999 Rights Agreement shall be of no further
force or effect.

NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:

SECTION 1

Restrictions on Transferability;

<PAGE> 3

Registration Rights

1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:

"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.

"Common Shares" shall mean the shares of Common Stock
outstanding and issuable upon the exercise of options listed on Exhibit A
hereto.

"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Preferred ----------------- Shares.

"Holder" shall mean any Investor holding Registrable Securities,
and any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.

"Initiating Holders" shall mean Holders in the aggregate of not
less than fifty percent (50%) of the Registrable Securities; provided, however,
that the Gideon Ben-Efraim and Bina Ben-Efraim Family Trust dated July 29, 1994
(the "Trust") shall be counted as a Holder for purposes of calculating the
foregoing fifty percent (50%) of the Registrable Securities only if Mr. Gideon
Ben-Efraim, Trustee of the Trust, shall not then be employed by the Company.

"Preferred Shares" shall mean the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock listed on Exhibit A hereto together with the shares of Series C Preferred
Stock and Series D Preferred Stock issuable upon exercise of the warrants listed
on Exhibit A hereto.

The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

"Registrable Securities" means (i) the Common Shares; (ii) the
Conversion Shares; and (iii) any Common Stock of the Company issued or issuable
in respect of the Common Shares, Preferred Shares or Conversion Shares or other
securities issued or issuable with respect to the Preferred Shares, Conversion
Shares or Common Shares upon any stock split, stock dividend, recapitalization,
or similar event, or any Common Stock otherwise issued or issuable with respect
to the Common Shares, Conversion Shares or Preferred Shares; provided, however,
that shares of Common Stock or other securities shall only be treated as
Registrable Securities if and so long as they have not been (x) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (y) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.

"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all

<PAGE> 4

registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).

"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.

"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.

"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (except as provided by Section 1.9).

1.2 Restrictions. The Preferred Shares, the Conversion Shares and the
Common Shares shall not be sold, assigned, transferred or pledged except upon
the conditions specified in this Agreement, which conditions are intended to
ensure compliance with the provisions of the Securities Act. The Investors will
cause any proposed purchaser, assignee, transferee or pledgee of the Preferred
Shares, the Conversion Shares or the Common Shares to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Agreement.

1.3 Restrictive Legend. Each certificate representing (i) the Preferred
Shares, (ii) the Conversion Shares, (iii) the Common Shares and (iv) any other
securities issued in respect of the securities referenced in clauses (i), (ii)
and (iii) upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with legends
in the following form (in addition to any legend required under applicable state
securities laws):

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO
IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."

"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."

Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.

<PAGE> 5

1.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "no action" letter
(a) in any transaction in compliance with Rule 144, (b) in any transaction in
which an Investor which is a corporation distributes Restricted Securities after
six (6) months after the purchase thereof solely to its majority-owned
subsidiaries or affiliates for no consideration, or (c) in any transaction in
which an Investor which is a partnership distributes Restricted Securities after
six (6) months after the purchase thereof solely to partners thereof for no
consideration, provided that each transferee agrees in writing to be subject to
the terms of this Section 1.4. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.

1.5 Request for Registration.

(a) In case the Company shall receive from the Initiating
Holders a written request that the Company effect any registration,
qualification or compliance with respect to the Registrable Securities, the
Company will:

(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and

(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to take
any action to effect

<PAGE> 6

any such registration, qualification or compliance pursuant to this Section 1.5:

(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;

(2) Prior to the earlier of (i) two (2) years
from the date of this Agreement or (ii) six months following the Company's
initial public offering;

(3) During the period ending on the date three
(3) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan);

(4) After the Company has effected two (2) such
registration pursuant to this subparagraph 1.5(a), such registration has been
declared or ordered effective and the securities offered pursuant to such
registration have been sold; or

(5) If the Company shall furnish to such Holders
a certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.

Subject to the foregoing clauses (1) through (5), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.

(b) Underwriting. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.

The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.5, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such Holders at the
time of filing the

<PAGE> 7

registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.

If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.

1.6 Company Registration.

(a) Notice of Registration. If at any time or from time to time,
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:

(i) promptly give to each Holder written notice thereof;
and

(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within twenty (20) days after receipt of such
written notice from the Company by any Holder, but only to the extent that such
inclusion will not diminish the number of securities included by the Company or
by holders of the Company's securities who have demanded such registration.

(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration to a minimum of 25% of the total shares to be
included in such underwriting or exclude them entirely in the case of the
Company's initial public offering. The Company shall so advise all Holders and
the other holders distributing their securities through such underwriting
pursuant to piggyback registration rights similar to this Section 1.6, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders and other holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by

<PAGE> 8

such Holders and other securities held by other holders at the time of filing
the registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.

(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.

1.7 Registration on Form S-3.

(a) If any Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered for
the offering on such form; provided, however, that the Company shall not be
required to effect more than one registration pursuant to this Section 1.7 in
any twelve (12) month period. The Company will (i) promptly give written notice
of the proposed registration to all other Holders, and (ii) as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of such written notice from the Company. The substantive provisions of Section
1.5(b) shall be applicable to each registration initiated under this Section
1.7.

(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), or (iii) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, it would be seriously

<PAGE> 9

detrimental to the Company or its shareholders for registration statements to be
filed in the near future, then the Company's obligation to use its best efforts
to file a registration statement shall be deferred for a single period not to
exceed one hundred twenty (120) days from the receipt of the request to file
such registration by such Holder or Holders.

1.8 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such shares or securities are
entitled to be included in registrations only to the extent that the inclusion
of such securities will not diminish the amount of Registrable Securities that
are included.

1.9 Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5 and 1.6 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the holders
of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered unless the Holders holding a majority of the Registrable Securities,
as appropriate, agree to forfeit their right to one demand registration pursuant
to Section 1.5. Notwithstanding the foregoing, however, if at the time of the
withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to such Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses or to forfeit the right to one demand registration. Unless
otherwise stated, all other Selling Expenses relating to securities registered
on behalf of the Holders and all Registration Expenses incurred in connection
with any registration pursuant to Section 1.7 shall be borne by the Holders of
the registered securities included in such registration pro rata on the basis of
the number of shares so registered.

1.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:

(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed; and

(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.

1.11 Indemnification.

<PAGE> 10

(a) The Company will indemnify each Holder, each of its
trustees, officers and directors and partners, and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or compliance, and the Company will
reimburse each such Holder, each of its officers and directors, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein.

(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder and
stated to be specifically for use therein; provided, however, that the liability
of a Holder for indemnification under this Section 1.11(b) shall not exceed the
gross proceeds from the offering received by such Holder.

<PAGE> 11

"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.

1.12 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.

1.13 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:

(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act");

(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and

(c) So long as an Investor owns any Restricted Securities, to
furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as an Investor may reasonably request in
availing itself of any rule or regulation of the Commission allowing an Investor
to sell any such securities without registration.

1.14 Transfer of Registration Rights. The rights to cause the Company to
register

<PAGE> 12

securities granted Investors under Sections 1.5, 1.6 and 1.7 may be assigned to
a transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities by an Investor (together
with any affiliate); provided, that (a) such transfer may otherwise be effected
in accordance with applicable securities laws, (b) notice of such assignment is
given to the Company, and (c) such transferee or assignee (i) is a wholly-owned
subsidiary or constituent partner (including limited partners) of such Investor,
or (ii) acquires from such Investor the lesser of (a) 100,000 or more shares of
Restricted Securities (as appropriately adjusted for stock splits and the like)
or (b) all of the Restricted Securities then owned by such Investor.

1.15 Standoff Agreement. Each Investor, and any transferee of shares
held by an Investor, agrees in connection with the initial registration of the
Company's securities that, upon request of the Company or the underwriters
managing any underwritten initial public offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; provided that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.

1.16 Termination of Rights. The rights of any particular Holder to cause
the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate with respect to such Holder following a bona fide firm underwritten
public offering of shares of the Company's Common Stock registered under the
Securities Act (provided the aggregate offering price, net of underwriting
discounts and commissions, exceeds ten million dollars ($10,000,000)) at such
time as such Holder is able to dispose of all its Registrable Securities in one
three-month period pursuant to the provisions of Rule 144; provided, that such
Holder holds Registrable Securities constituting less than 1% of the outstanding
voting stock of the Company.

SECTION 2

Right of Participation

2.1 Purchasers' Right of Participation.

(a) Right of Participation. Subject to the terms and conditions
contained in this Section 2.1, the Company hereby grants to each Purchaser the
right of participation to purchase its Pro Rata Portion of any New Securities
(as defined in subsection 2.1(b)) which the Company may, from time to time,
propose to sell and issue. A Purchaser's "Pro Rata Portion" for purposes of this
Section 2.1 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then held by such Purchaser and the total number of
shares of the Company's Common Stock issuable upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock then held by such Purchaser bears to (y) the sum of the total
number of shares of the Company's Common Stock then outstanding and the total
number of shares of the Company's Common Stock issuable upon conversion of the
then outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock

<PAGE> 13

and Series D Preferred Stock.

(b) Definition of New Securities. Except as set forth below,
"New Securities" shall mean any shares of capital stock of the Company,
including Common Stock and Preferred Stock, whether authorized or not, and
rights, options or warrants to purchase said shares of Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Common Shares, the
Preferred Shares or the Conversion Shares, (ii) securities offered to the public
generally pursuant to a registration statement under the Securities Act, (iii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all of the assets or shares or
other reorganization whereby the Company or its shareholders own not less than a
majority of the voting power of the surviving or successor corporation, (iv)
shares of the Company's Common Stock or related options or warrants convertible
into or exercisable for such Common Stock issued to employees, officers and
directors of, and consultants to, the Company, pursuant to any arrangement
approved by the Board of Directors of the Company, (v) shares of the Company's
Common Stock or related options or warrants convertible into or exercisable for
such Common Stock issued to customers and vendors of the Company pursuant to any
arrangement unanimously approved by the Board of Directors of the Company; (vi)
shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to banks, commercial lenders, lessors
and other financial institutions in connection with the borrowing of money or
the leasing of equipment by the Company, (vii) stock issued pursuant to any
rights or agreements, including, without limitation, convertible securities,
options and warrants, provided that the Company shall have complied with the
rights of participation established by this Section 2.1 with respect to the
initial sale or grant by the Company of such rights or agreements, or (viii)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.

(c) Notice of Right. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities and the price and
terms upon which the Company proposes to issue the same. Each Purchaser shall
have twenty (20) days from the date of receipt of any such notice to agree to
purchase shares of such New Securities (up to the amount referred to in
subsection 2.1(a)), for the price and upon the terms specified in the notice, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.

(d) Exercise of Right. If any Purchaser exercises its right of
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days after the Purchaser gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of such right of participation,
the Company and the Purchaser shall be legally obligated to consummate the
purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.

(e) Lapse and Reinstatement of Right. In the event a Purchaser
fails to exercise the right of participation provided in this Section 2.1 within
said twenty (20) day period, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to

<PAGE> 14

which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by such Purchaser at the price and upon
the terms no more favorable to the purchasers of such securities than specified
in the Company's notice. In the event the Company has not sold the New
Securities or entered into an agreement to sell the New Securities within said
ninety (90) day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities without first offering
such securities to the Purchasers in the manner provided above.

(f) Assignment. The right of the Purchasers to purchase any part
of the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of a Purchaser, or other persons or
organizations who acquire the lesser of (i) 100,000 or more shares of Restricted
Securities (as adjusted for stock splits and the like) or (ii) all of the
Restricted Securities then owned by such Purchaser.

2.2 Termination of Participation Right. The rights of participation
granted under Section 2.1 of this Agreement shall terminate on and be of no
further force or effect upon the earlier of (i) the consummation of the
Company's sale of its Common Stock in an underwritten public offering pursuant
to an effective registration statement filed under the Securities Act
immediately subsequent to which the Company shall be obligated to file annual
and quarterly reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or (ii) the registration by the Company of a class of its equity
securities under Section 12(b) or 12(g) of the Exchange Act.

2.3 Waiver of Prior Right. Pursuant to the terms of the June 1995 Rights
Agreement, the November 1995 Rights Agreement, the July 1996 Rights Agreement,
the 1997 Rights Agreement, the November 1997 Rights Agreement, the December 1997
Rights Agreement and the July 1998 Rights Agreement, the Purchasers hereby waive
any right of pro rata participation which may have accrued to them in the past
with respect to any prior issuance of securities by the Company, including the
issuance of shares of Series D Preferred Stock to certain Series D Purchasers in
connection herewith.

SECTION 3

Miscellaneous

3.1 Assignment. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.

3.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

3.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California in the United States of America
without giving effect to the conflicts of laws principles thereof.

<PAGE> 15

3.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

3.5 Notices. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally by a recognized international courier (e.g., Federal
Express or DHL) or sent by confirmed facsimile, and addressed, if to the
Company, at its principal place of business, attention the President, and if to
a Purchaser, at their address as shown on the stock records of the Company. Such
notice shall be effective upon receipt by the organization being notified.

3.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.

3.7 Amendment and Waiver. Any provision of this Agreement may be amended
or waived with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities, so long as the
effect is to treat all Holders equally. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event that
an underwriting agreement is entered into between the Company and any Holder,
and such underwriting agreement contains terms differing from this Agreement, as
to any such Holder the terms of such underwriting agreement shall govern.

3.8 Effect of Amendment or Waiver. The Investors and their successors
and assigns acknowledge that by the operation of Section 3.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.

3.9 Rights of Holders. Each holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.

3.10 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver,

<PAGE> 16

permit, consent or approval of any kind or character on the part of any party of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement, must be made in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.

3.11 Additional Parties. The Investors agree that any additional persons
who become "Purchasers" under the Purchase Agreement at any "Subsequent Closing"
as such term is described in the Purchase Agreement shall become "Purchasers"
under this Agreement without further action by any other Investor.

<PAGE> 17

The parties hereto have executed this Amended and Restated Rights
Agreement as of the day of _____, ______, and it shall be effective for all
purposes as of the Effective Date.

COMPANY: INVESTORS:

NETRO CORPORATION,
a California corporation (Print Name of Investor)

By: By:
Gideon Ben-Efraim,
President & CEO Title:

Address: 3680 N. First Street Address:
San Jose, CA 95134

(Print Name of Investor)

By:

Title:

Address:

<PAGE> 18

EXHIBIT A

The Ben-Efraims (Common Stock)

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Gideon and Bina Ben-Efraim, Trustees of the Gideon
Ben-Efraim and Bina Ben-Efraim Family Trust dated July
29, 1994 2,800,000

Amir Ben-Efraim 400,000

Nadav Ben-Efraim 400,000

Nadav Ben-Efraim, Custodian for Yair Jacob Ben-Efraim 400,000

Gideon Ben-Efraim (options) 400,000

TOTAL: 4,400,000
</TABLE>

<PAGE> 19

The Series A Purchasers (Series A Preferred Stock)

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
AT&T Venture Company, L.P. 3,222,222

Venture Law Group Retirement Savings Plan U/A DTD 2/1/93
FBO Elias J. Blawie 11,110

Brentwood Associates VI, L.P. 1,333,334

Jerusalem Pacific Ventures, L.P. 1,481,480

Craig W. Johnson 27,776

Beams Technology Investments Ltd. (formerly Due Diligence
Ltd.) 22,222

Mofet Israel Technology Fund Ltd. 740,742

Venture Law Group Retirement Savings Plan U/A DTD 2/1/93
FBO Tae Hea Nahm 5,554

U.S. Venture Partners IV 2,787,222

Second Ventures II, L.P. 338,334

U.S.V.P. Entrepreneur Partners II, L.P. 96,666

Vebacom GmbH 2,222,222

VLG Investments 1994 33,334

VLG Investments 1995 33,332

StrataCom, Inc. 1,111,110

TOTAL: 13,466,660
</TABLE>

<PAGE> 20

The Series B Purchasers (Series B Preferred Stock)

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
AT&T Venture Company, L.P. 725,000

Brentwood Associates VI, L.P. 1,250,000

Jerusalem Pacific Ventures, L.P. 150,000

Norwest Equity Partners V, L.P. 1,250,000

U.S.V.P. Entrepreneur Partners II, L.P. 21,750

StrataCom, Inc. 250,000

Second Ventures II, L.P. 76,126

U.S. Venture Partners IV, L.P. 627,124

Fitzwilson, Robert C. Trustee of the Robert C
Fitzwilson Trust U/A Dated 6/24/1987 56,500

Vebacom GmbH 500,000

Mofet Israel Technology Fund Ltd. 150,000

TOTAL: 5,056,500
</TABLE>

<PAGE> 21

The Series C Purchasers (Series C Preferred Stock)

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Pan Dacom GmbH 285,714

AT&T Venture Company, L.P. 142,858

Brentwood Associates VI, L.P. 292,858

U.S. Venture Partners IV, L.P. 61,136

Second Ventures II, L.P. 7,422

U.S.V.P. Entrepreneur Partners II, L.P. 2,120

Norwest Equity Partners V, L.P. 71,428

Cisco Systems, Inc. 82,142

Korea Technology Banking Corporation 160,679

Robert C. Fitzwilson, Trustee of the Robert C
Fitzwilson Trust U/A Dated 6/24/1987 234,071

John Bush and Rita Lynn Simpson, TTEES, The Simpson
Family Trust UTD 1/12/199 35,714

Susan Jackson, Trustee of the Susan Jackson Trust U/A
DTD 9/15/89 241,071

Robertson, Stephens & Company 28,572

Robert W. Wilmot & Mary J. Wilmot, trustees of the
Wilmot Living Trust u/d/t April 18th, 1995 142,858

Citicorp 1,428,572

German American Capital Corporation 160,681

21st Century Communications T-E Partners, L.P. 164,780
</TABLE>

<PAGE> 22

Series C Purchasers (Series C Preferred Stock) - continued

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
21st Century Communications Partners, L.P. 484,306

21st Century Communications Foreign Partners, L.P. 65,200

Brentwood Affiliates Fund, L.P. 35,714

GS Capital Partners II, L.P. 268,899

GS Capital Partners II Offshore, L.P. 106,898

Goldman, Sachs & Co. Verwaltungs GmbH 9,918

Xylan Corporation 285,714

Van Wagoner Capital Management 714,285

Stone Street Fund 1997, L.P. 28,849

Bridge Street Fund 1997, L.P. 14,008

Vebacom GmbH 230,000

Comdisco, Inc. 35,715

Comdisco, Inc. (warrants) 28,750

Hasso Plattner 714,286

Richard M. Moley 50,000

Josef Berger 24,000

Wireless ATM Investors 379,786

Tae Hea Nahm 2,857

TOTAL: 7,021,861
</TABLE>

<PAGE> 23

The Series D Purchasers (Series D Preferred Stock)

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Italtel SpA 1,285,347

Comdisco, Inc. (warrants) 8,997

Al Shams Holdings Ltd. 642,674

Jerold and Marjorie Principato, JTWROS 25,707

Deborah E. Lindsey, M.D 12,854

J. Douglas Principato 12,853

Garry Pammer 6,425

ML IBK Positions 642,674

DRW Investors LLC 64,267

Venture Fund I, LP 125,991

Brentwood Associates VI, L.P. 86,110

Brentwood Affiliates Fund, L.P. 3,588

U.S. Venture Partners IV, L.P. 107,058

Second Ventures II, L.P. 12,996

USVP Entrepreneur Partners II, L.P. 3,713

Norwest Equity Partners V, A Minnesota Limited Liability 40,705
Partnership

Citicorp 44,006

Hasso Plattner 128,535

Dynamic Securities & Holdings Inc. 64,267

Sasson International Holdings Inc. 192,802

Comdisco, Inc. 1,928
</TABLE>

<PAGE> 24

The Series D Purchasers (Series D Preferred Stock) - continued

<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Van Wagoner Capital Management 283,572

Lesk Investments Ltd. 154,241

MiniCap Investment Technology AG 183,161

Anat Bar Gera 9,640

TOTAL: 4,144,111
</TABLE>

<PAGE> 1
EXHIBIT 10.15

NETRO CORPORATION

1995 STOCK OPTION PLAN, AS AMENDED

1. Purposes of the Plan. The purposes of this 1995 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.

(e) "Common Stock" means the Common Stock of the Company.

(f) "Company" means Netro Corporation, a California corporation.

(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

(h) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or

<PAGE> 2

from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.

(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(k) "Fair Market Value" means, as of any date, the fair market
value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or

(iii) In the absence of an established market for the
Common Stock, the Fair
Market value thereof shall be determined in good faith by the Administrator.

(1) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

(n) "Option" means a stock option granted pursuant to the Plan.

(o) "Optioned Stock" means the Common Stock subject to an Option.

(p) "Optionee" means an Employee or Consultant who receives an
Option.

(q) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.

-2-
<PAGE> 3

(r) "Plan" means this 1995 Stock Option Plan.

(s) "Reporting Person" means an officer, director or greater than
ten percent shareholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under
the Exchange Act.

(t) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.

(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

(v) "Stock Exchange" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.

(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.

3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 3,659,716 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.

(ii) Administration With Respect to Reporting Persons.
With respect to grants of Options to Employees who are Reporting Persons, the
Plan shall be administered by (A) the Board if the Board may administer the Plan
in compliance with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted in such a manner as
to permit the Plan to comply with Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan. Once appointed, such committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and

-3-
<PAGE> 4

remove all members of the committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended
to qualify thereunder as a discretionary plan. No person serving as a member of
an Administrator that has authority with respect to grants to Reporting Persons
shall be eligible to receive any grant under the Plan which would cause such
member to cease to be "disinterested" within the meaning of Rule 16b-3.

(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws").
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:

(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;

(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options or
any combination thereof are granted hereunder;

(iv) to determine the number of shares of Common Stock to
be covered by each such option granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any option granted hereunder;

(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;

(viii) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed

-4-
<PAGE> 5

outside of the United States in order to recognize differences in local law, tax
policies or customs.

(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.

5. Eligibility.

(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted additional Options.

(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

(c) For purposes of Section 5(b), Incentive Stock Options shall
be taken into account in the order in which they were granted, and the Fair
Market Value of the Shares subject to an Incentive Stock Option shall be
determined as of the date of the grant of such Option.

(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term often (10) years unless sooner terminated under
Section 14 of the Plan.

7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.

8. Option Exercise Price and Consideration.

-5-
<PAGE> 6

(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:

(i) In the case of an Incentive Stock Option that is:

(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

(ii) In the case of a Nonstatutory Stock Option that is:

(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.

(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.

(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

-6-
<PAGE> 7

9. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan; provided that such Option shall become exercisable at the rate of
at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Termination of Employment or Consulting Relationship. Subject
to Section 9(c), in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant with the Company, such Optionee may, but only
within three (3) months (or such other period of time not less than thirty (30)
days as is determined by the Administrator, with such determination in the case
of an Incentive Stock Option being made at the time of grant of the Option and
not exceeding three (3) months) after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.

(i) Notwithstanding the provisions of Section 9(b) above,
in the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his

-7-
<PAGE> 8

or her total and permanent disability (within the meaning of Section 22(e)(3) of
the Code), Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant, or within
thirty (30) days following the termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.

(e) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.

(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject

-8-
<PAGE> 9

to tax withholding under applicable tax laws, and the Optionee is obligated to
pay the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some combination
of the following methods: (a) by cash payment, (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").

Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of an Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

(a) the election must be made on or prior to the applicable Tax
Date;

(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;

(d) if the Optionee is a Reporting Person, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.

11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.

-9-
<PAGE> 10

(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.

(c) Merger or Sale of Assets. In the event of a proposed sale of
all or substantially all of the Company's assets or a merger of the Company with
or into another corporation where the successor corporation issues its
securities to the Company's shareholders, each outstanding Option shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.

(d) Certain Distributions. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.

12. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee, only by the Optionee.

13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each

-10-
<PAGE> 11

Employee or Consultant to whom an Option is so granted within a reasonable time
after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

(b) Effect of Amendment or Termination. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.

15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.

16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.

18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange. All Options issued under the Plan shall become void
in the event such approval is not obtained.

-11-
<PAGE> 12

19. Information to Optionees. The Company shall provide financial
statements at least annually to each Optionee during the period such Optionee
has one or more Options outstanding, and in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.

-12-

<PAGE> 1
EXHIBIT 21.1

Netro Corporation has the following subsidiaries:

Netro Ltd.

Netro GmbH

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.

/s/ ARTHUR ANDERSEN LLP

San Jose, California

July 27, 1999

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 6,094 2,997
<SECURITIES> 9,034 16,890
<RECEIVABLES> 1,659 2,633
<ALLOWANCES> 509 100
<INVENTORY> 4,315 4,651
<CURRENT-ASSETS> 20,836 27,674
<PP&E> 11,291 12,288
<DEPRECIATION> 5,657 7,292
<TOTAL-ASSETS> 26,788 32,910
<CURRENT-LIABILITIES> 8,313 11,239
<BONDS> 4,582 4,330
0 0
81,073 97,983
<COMMON> 1,224 6,451
<OTHER-SE> (68,404) (87,018)
<TOTAL-LIABILITY-AND-EQUITY> 26,788 32,910
<SALES> 4,322 5,271
<TOTAL-REVENUES> 5,438 5,338
<CGS> 9,640 4,171
<TOTAL-COSTS> 9,640 4,171
<OTHER-EXPENSES> 24,468 15,330
<LOSS-PROVISION> 462 28
<INTEREST-EXPENSE> (304) 98
<INCOME-PRETAX> (28,828) (14,289)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (28,828) (14,289)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (28,828) (14,289)
<EPS-BASIC> (4.07) (1.72)
<EPS-DILUTED> (4.07) (1.72)

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