PROXIM INC /DE/, S-3, 1996-06-06

PROXIM INC /DE/
S-3, 1996-06-06
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1996

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

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

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

PROXIM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 77-0059429
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 960-1630
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

DAVID C. KING
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROXIM, INC.
295 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 960-1630
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:

<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. EDWARD M. LEONARD, ESQ.
RICHARD C. DEGOLIA, ESQ. SCOTT D. LESTER, ESQ.
ROBERT G. DAY, ESQ. BROBECK, PHLEGER & HARRISON LLP
WILSON SONSINI GOODRICH & ROSATI TWO EMBARCADERO PLACE
PROFESSIONAL CORPORATION 2200 GENG ROAD
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94303
PALO ALTO, CALIFORNIA 94304-1050 (415) 424-0160
(415) 493-9300
</TABLE>

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

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Common Stock, 0.001 par value............... 2,875,000 shares $41.125 $118,234,375 $40,771
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</TABLE>

(1) Includes 375,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low prices for the Common Stock as
reported on the Nasdaq National Market on June 3, 1996, in accordance with
Rule 457(c) promulgated under the Securities Act of 1933.

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 THE 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

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and Canada the ("U.S.
Prospectus") and the other to be used in connection with a concurrent
international offering (the "International Prospectus"). The two prospectuses
are identical except for the outside front cover page. The form of U.S.
Prospectus outside front cover page is included behind this explanatory note and
is followed by the differing outside front cover page to be used in the
International Prospectus.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 6, 1996

2,500,000 SHARES

LOGO
COMMON STOCK

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

Of the 2,500,000 shares of Common Stock offered hereby, 1,875,000 shares
are being offered initially in the United States and Canada by the U.S.
Underwriters and 625,000 shares are being offered initially outside of the
United States and Canada by the International Underwriters. See "Underwriting."
All of the 2,500,000 shares of Common Stock offered hereby are being sold by
Proxim, Inc. ("Proxim" or the "Company"). The Company's Common Stock is traded
on the Nasdaq National Market under the symbol "PROX." On June 3, 1996, the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
was $40.25 per share. See "Price Range of Common Stock."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<TABLE>
<S> <C> <C> <C> <C>
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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
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Per Share................... $ $ $ $
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Total(3).................... $ $ $ $
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</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses of the offering payable by the Company, estimated
at $675,000.

(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 375,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public will be $ , the Underwriting Discounts and
Commissions will be $ and the Proceeds to the Company will be
$ . See "Underwriting."

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

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the shares will be made in New York, New York on or about
, 1996.

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

UBS SECURITIES
MONTGOMERY SECURITIES

UNTERBERG HARRIS

VOLPE, WELTY & COMPANY

, 1996
<PAGE> 4

PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 6, 1996

2,500,000 SHARES

LOGO
COMMON STOCK

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

Of the 2,500,000 shares of Common Stock offered hereby, 625,000 shares
are being offered initially outside of the United States and Canada by the
International Underwriters and 1,875,000 shares are being offered initially in
the United States and Canada by the U.S. Underwriters. See "Underwriting." All
of the 2,500,000 shares of Common Stock offered hereby are being sold by Proxim,
Inc. ("Proxim" or the "Company"). The Company's Common Stock is traded on the
Nasdaq National Market under the symbol "PROX." On June 3, 1996, the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
was $40.25 per share. See "Price Range of Common Stock."

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

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses of the offering payable by the Company, estimated
at $675,000.

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

UBS LIMITED
MONTGOMERY SECURITIES

UNTERBERG HARRIS

VOLPE, WELTY & COMPANY

, 1996
<PAGE> 5

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

This Prospectus includes trademarks of the Company and other companies.

2
<PAGE> 6

PROSPECTUS SUMMARY

This Prospectus contains certain statements of a forward-looking nature
relating to future events or future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, a prospective investor should specifically consider the various
factors identified in or incorporated by reference into this Prospectus,
including the matters set forth under the caption "Risk Factors," which could
cause actual results to differ materially from those indicated in such
forward-looking statements. The following summary is qualified in its entirety
by the more detailed information, including "Risk Factors" and Financial
Statements and Notes thereto, appearing elsewhere in, or incorporated by
reference into, this Prospectus. Unless otherwise indicated, the information
contained in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.

THE COMPANY

Proxim designs, manufactures and markets high performance wireless local
area data networking products. Based on spread spectrum radio frequency
technology, Proxim's highly integrated wireless client adapters and network
infrastructure systems seamlessly extend existing enterprise LANs to enable
mobility-driven applications in a wide variety of in-building and campus area
environments. Proxim's RangeLAN2TM 2.4 GHz wireless LAN technology has been
adopted by a number of mobile computer and handheld data terminal system
manufacturers, as well as many leading wireless solution providers, for
real-time data collection applications in manufacturing, warehousing,
transportation and retailing and for point-of-service network applications in
healthcare, hospitality and financial services.

Significant technological advances and changes in the regulatory
environment have facilitated the development and proliferation of wireless
networking solutions which extend the reach of existing wired networks. Advances
in wireless data communications technology have enabled the development of a new
generation of 2.4 GHz wireless LAN products that operate at significantly higher
data rates and utilize standard network interfaces and protocols to seamlessly
extend existing enterprise data networks into a wide variety of vertical markets
and applications. As a result of recent regulatory changes, the 2.4 GHz
frequency band has been allocated for unlicensed wireless networks in virtually
every developed country around the world. The universal availability of this
unlicensed spectrum has encouraged wireless LAN suppliers to design standard
products and solutions which can be used globally. The Company believes that the
convergence of worldwide spectrum availability, emerging standards and new high
performance products will lead to more widespread deployment of wireless LAN
products to achieve improved productivity and enhanced customer service in both
traditional industrial data collection applications as well as emerging
point-of-service network applications.

In 1994, Proxim pioneered 2.4 GHz frequency hopping wireless LAN technology
by being first to market with its RangeLAN2 product family. Proxim designs high
performance open systems wireless communications products that transparently
extend the reach of existing enterprise LANs using standard network interfaces
and protocols. RangeLAN2's unique frequency hopping systems architecture and
wireless LAN protocols create a robust RF network environment that
cost-effectively expands to accommodate an increasing number of mobile users and
applications. The RangeLAN2 family incorporates a number of technological
innovations to achieve superior product performance and functionality. The
widespread availability of RangeLAN2-based mobile computer and peripheral
systems allows end users to select from numerous interoperable products in
meeting their application requirements.

Proxim's objective is to maintain its leadership position in the high
performance wireless LAN market. The Company's key strategies include enhancing
the performance and functionality of its existing products and developing new
wireless communications technologies and products, focusing on key marketing
opportunities by working closely with its OEM customers to expand into new
retail markets and applications, and strengthening its international marketing
and distribution capabilities.

The Company sells its products directly to OEM customers, and indirectly to
value added resellers, system integrators and end users through regional,
national and international distributors. Since 1994, Proxim

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<PAGE> 7

has captured a substantial number of key design wins with major 2.4 GHz OEM
customers. Currently, the Company has relationships with over 50 OEM customers
and application solutions providers for its RangeLAN2 products. Representative
OEM customers include AMP Incorporated, Data General, Digital Equipment
Corporation, Fujitsu Personal Systems, Inc., Intermec Corporation, LXE, Inc.,
Norand Corporation, NTT Intelligent Technology Co., Ltd., SpaceLabs Medical and
Zenith Data Systems Corporation.

The Company was incorporated in California in December 1984 and was
reincorporated in Delaware in December 1993. Its principal executive offices are
located at 295 North Bernardo Avenue, Mountain View, California 94043 and the
Company's telephone number is (415) 960-1630.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered............................. 2,500,000 shares
Common Stock to be outstanding after the
offering....................................... 9,956,000 shares(1)
Use of Proceeds.................................. For working capital, capital expenditures
and other general corporate purposes
Nasdaq National Market Symbol.................... PROX
Risk Factors..................................... The Common Stock offered hereby involves a
high degree of risk. See "Risk Factors."
</TABLE>

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 2,672 $ 4,114 $ 8,078 $11,297 $22,083 $3,363 $8,901
Gross profit.................. 558 1,696 4,171 6,076 11,240 1,744 4,362
Research and development...... 1,673 1,199 1,474 1,783 3,288 652 1,070
Selling, general and
administrative............. 1,368 2,383 2,821 3,982 6,694 1,235 2,127
Income (loss) from
operations................. (2,483) (1,886) (124) 311 1,258 (143) 1,165
Net income (loss)............. (2,494) (1,902) (99) 745 2,846 18 912
Net income (loss) per
share(2)................... -- (.36) (.02) .10 .35 .00 .11
Weighted average common shares
and equivalents(2)......... -- 5,326 5,665 7,738 8,172 7,733 8,268
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 5,590 $100,609
Working capital...................................................... 17,256 112,275
Total assets......................................................... 23,875 118,894
Stockholders' equity................................................. 19,525 114,544
</TABLE>

- ---------------
(1) Based upon shares outstanding as of March 31, 1996. Excludes as of March 31,
1996 (i) 1,377,250 shares reserved for issuance upon exercise of outstanding
stock options, (ii) 1,140,000 additional shares reserved for future issuance
pursuant to the Company's 1995 Long-Term Incentive Plan, (iii) 231,913
additional shares reserved for future issuance under the Company's 1993
Employee Stock Purchase Plan and (iv) 53,542 additional shares reserved for
future issuance under the Company's 1994 Director Option Plan.
(2) Net loss per share for 1992 is a pro forma calculation based on the weighted
average number of outstanding shares of Common Stock plus common stock
equivalents. Common stock equivalents include stock options and warrants
granted between October 1, 1992 and December 22, 1993 (using the treasury
stock method and the initial public offering price) and Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock
on their respective original dates of issuance, even though anti-dilutive
for all periods through the effectiveness of the Company's initial public
offering. Net loss per share for 1991 has not been presented as such
information is not meaningful. See Note 2 of Notes to Financial Statements.
(3) Adjusted to give effect to the issuance and sale by the Company of 2,500,000
shares of Common Stock offered hereby at an assumed public offering price of
$40.25 per share after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company and the application of
the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."

4
<PAGE> 8

RISK FACTORS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in, or
incorporated by reference into, this Prospectus. In addition to the other
information in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company's business before purchasing shares of the
Company's Common Stock offered hereby.

POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS

The Company has experienced, and may in the future continue to experience,
significant annual and quarterly fluctuations in revenue, gross margins and
operating results due to numerous factors, some of which are outside the
Company's control. These factors include fluctuating market demand for, and
declines in the average selling prices of, the Company's products, the timing of
and delays or cancellations of significant orders from OEM customers, the cost,
the availability and quality of components from the Company's suppliers,
availability, quality and cost of assemblies from subcontractors, the lengthy
sales and design-in cycles for OEM products, delays in the introduction of the
Company's new products, competitive product introductions, market adoption of
new technologies and standards, the mix of products sold, the effectiveness of
the Company's distribution channels, the failure to anticipate changing customer
product requirements, seasonality, manufacturing capacity and efficiency,
changes in the regulatory environment and general economic conditions.
Historically, the Company has not operated with a significant order backlog and
a substantial portion of the Company's revenue in any quarter has been derived
from orders booked and shipped in that quarter. Accordingly, the Company's
revenue expectations are based almost entirely on its internal estimates of
future demand and not on firm customer orders. Planned expense levels are
relatively fixed in the short term and are based in large part on these
estimates, and if orders and revenue do not meet expectations, the Company's
operating results could be materially adversely affected. In this regard, in the
third quarter of 1994, the Company experienced a decrease in revenue and an
operating loss as a result of lower than expected orders in connection with the
transition of several OEM customers from 900 MHz products to 2.4 GHz RangeLAN2
products. There can be no assurance that the Company will not experience future
quarter-to-quarter decreases in revenue and gross margins or quarterly operating
losses. In addition, due to the timing of orders from OEM customers, the Company
has often recognized a substantial portion of its revenue in the last month of a
quarter. As a result, minor fluctuations in the timing of orders and the
shipment of products have caused, and may in the future cause, operating results
to vary significantly from quarter to quarter. It is possible that due to such
fluctuations or other factors, the Company's future operating results could be
below the expectations of securities analysts and investors. In such an event,
or in the event that adverse market conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."

DEPENDENCE ON A LIMITED NUMBER OF OEM CUSTOMERS

Historically, a substantial portion of the Company's revenue has been
derived from a limited number of customers, most of which are OEM customers.
Approximately 76%, 79%, 56%, and 83% of the Company's total revenue during the
first quarter of 1996 and during 1995, 1994 and 1993, respectively, were to OEM
customers. Sales to two OEM customers represented approximately 27% and 14%, of
the Company's total revenue during 1995. Sales to three OEM customers
represented approximately 27%, 17% and 11% of the Company's total revenue during
the first quarter of 1996. The Company expects that sales to a limited number of
OEM customers will continue to account for a substantial portion of its revenue
during any period for the foreseeable future. The Company also has experienced
quarter to quarter variability in sales to each of

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<PAGE> 9

its major OEM customers and expects this pattern to continue in the future. The
loss of one or more of the Company's major OEM customers could have a material
adverse effect on the Company's results of operations.

Sales of many of the Company's wireless networking products depend in
significant part upon the decision of a prospective OEM customer to develop and
market wireless solutions which incorporate the Company's wireless technology.
OEM customers' orders are affected by a variety of factors such as new product
introductions, regulatory approvals, end user demand for OEM customers'
products, product life cycles, inventory levels, manufacturing strategy,
contract awards, competitive conditions and general economic conditions. Sales
of the Company's products generally involve a significant commitment of capital
and other resources by its customers, with the attendant delays associated with
such customers' internal procedures to approve such commitment. For these and
other reasons, the design-in cycle associated with the purchase of the Company's
wireless products by OEM customers is quite lengthy, generally ranging from six
months to two years, and is subject to a number of significant risks, including
customers' budgeting constraints and internal acceptance reviews, that are
beyond the Company's control. Because of the lengthy sales cycle, the Company
typically plans its production and inventory levels based on internal forecasts
of OEM customer demand, which is highly unpredictable and can fluctuate
substantially. In addition, the Company's agreements with OEM customers
typically do not require minimum purchase quantities and a significant
reduction, delay or cancellation of orders from any of these customers could
have a material adverse effect on the Company's results of operations. If
revenue forecasted from a specific customer for a particular quarter is not
realized in that quarter, the Company's operating results for that quarter could
be materially adversely affected. In addition, there can be no assurance that
the Company will become a qualified supplier for new OEM customers or that the
Company will remain a qualified supplier for existing OEM customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Customers" and "-- Sales and Marketing."

SOLE OR LIMITED SOURCES OF SUPPLY

Certain parts and components used in the Company's products, including the
Company's proprietary application specific integrated circuits ("ASICs"),
monolithic memory integrated circuits ("MMICs") and assembled circuit boards,
are only available from single sources, and certain other parts and components
are only available from a limited number of sources. The Company's reliance on
these sole source or limited source suppliers involves certain risks and
uncertainties, including the possibility of a shortage or discontinuation of
certain key components and reduced control over delivery schedules,
manufacturing capability, quality and costs. Any reduced availability of such
parts or components when required could materially impair the Company's ability
to manufacture and deliver its products on a timely basis and result in the
cancellation of orders, which could have a material adverse effect on the
Company's operating results. In addition, the purchase of certain key components
involves long lead times and, in the event of unanticipated increases in demand
for the Company's products, the Company has in the past been, and may in the
future be, unable to manufacture certain products in a quantity sufficient to
meet its customers' demand in any particular period. The Company has no
guaranteed supply arrangements with its sole or limited source suppliers, does
not maintain an extensive inventory of parts or components, and customarily
purchases sole or limited source parts and components pursuant to purchase
orders placed from time to time in the ordinary course of business. Business
disruptions, production shortfalls or financial difficulties of a sole or
limited source supplier could materially and adversely impact the Company by
increasing product costs, or reducing or eliminating the availability of such
parts or components. In such event, the inability of the Company to develop
alternative sources of supply quickly and on a cost-effective basis could
materially impair the Company's ability to manufacture and deliver its products
on a timely basis and could have a material adverse effect on its operating
results. See "Business -- Manufacturing."

6
<PAGE> 10

MANUFACTURING RISKS

The Company currently has limited manufacturing capability and has no
experience in large scale manufacturing. If the Company's customers were to
place orders for unexpectedly large quantities of the Company's products, the
Company's present manufacturing capacity could be inadequate to meet such
demand. There can be no assurance that the Company will be able to develop or
contract for additional manufacturing capacity on acceptable terms on a timely
basis. In addition, in order to continue to compete successfully, the Company
will need to achieve significant product cost reductions. Although the Company
intends to achieve cost reductions through engineering improvements and
production economies, there can be no assurance that the Company will be able to
do so. In order to remain competitive, the Company must continue to introduce
new products and processes into its manufacturing environment. The Company
currently conducts its manufacturing operations for all of its products in a
single facility in Mountain View, California. In addition, the Company relies on
certain outside contract manufacturers for circuit board assemblies which
subjects the Company to a number of risks, including a potential inability to
obtain an adequate supply of assembled circuit boards as well as reduced control
over the price, timely delivery and quality of such assembled circuit boards. If
the Company's Mountain View facility or the facilities of the outside contract
manufacturers were incapable of operating, even temporarily, or were unable to
operate at or near current or full capacity for any extended period, the
Company's business and operating results could be materially adversely affected.
Changes to the manufacturing process to incorporate new products and processes
could cause disruptions, which, in turn, could adversely affect customer
relationships, cause a loss of market opportunities and have a material adverse
effect on the Company's business and operating results.

During the second and third quarters of 1995, the Company experienced
higher than expected demand for its products. This resulted in delays in the
delivery of certain products due to temporary shortages of certain components,
particularly components with long lead times, and insufficient manufacturing
capacity. Although the Company has taken certain steps to minimize such delays
in the future by increasing its manufacturing capacity and stocking certain
critical and long lead time components, due to the complex nature of the
Company's products and manufacturing processes, the worldwide demand for certain
wireless technology components and other factors, there can be no assurance that
delays in the delivery of products will not occur in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results of Operations," and "Business -- Manufacturing."

RAPID TECHNOLOGICAL CHANGE; ONGOING NEW PRODUCT DEVELOPMENT REQUIREMENTS;
EVOLVING INDUSTRY STANDARDS

The wireless communications industry is characterized by very rapid
technological change, short product life cycles and evolving industry standards.
To remain competitive, the Company must develop or gain access to new
technologies in order to increase product performance and functionality, reduce
product size and maintain cost-effectiveness. The Company has committed and
expects that it will continue to devote substantial research and development
resources to enhance its RangeLAN2 architecture and develop new RangeLAN2-based
products. The Company also expects to substantially increase its research and
development expenses to develop new technologies and products in the future.
Given the emerging nature of the wireless LAN market, there can be no assurance
that the RangeLAN2 products and technology, or the Company's other products or
technology, will not be rendered obsolete by alternative technologies.

7
<PAGE> 11

effect on the Company's operating results. If the Company is unable to develop
or obtain access to advanced wireless networking technologies as they become
available, or is unable to design, develop and introduce competitive new
products on a timely basis, or is unable to hire qualified engineers to develop
such technologies and products, its future operating results would be materially
and adversely affected. In particular, the Company intends to expend substantial
resources in developing products that are designed to conform to the potential
IEEE 802.11 specifications. There can be no assurance that these specifications
will be ultimately adopted or that such standards will have a meaningful
commercial impact. To the extent these standards or other standards are adopted,
the Company could be at a disadvantage if its competitors are able to develop
and introduce competitive products which conform to such standards more rapidly
than the Company. See "Business -- Research and Development" and
"-- Competition."

COMPETITION

The wireless local area networking market is intensely competitive. The
principal competitive factors in this market include effective RF coverage area,
data throughput, wireless networking protocol sophistication, network
scalability, roaming capability, power consumption, product miniaturization,
product reliability, product time to market, product certifications, price,
effective distribution channels, ability to support new industry standards and
company reputation. Although the Company believes that it currently competes
favorably on the basis of these factors, the Company could be at a disadvantage
to companies that have broader distribution channels and offer more diversified
product lines.

Proxim has several current competitors which offer 2.4 GHz products,
including IBM, Lucent Technologies, Symbol Technologies and Telxon. In addition,
certain other companies, such as 3Com Corporation, have announced their
intention to offer competitive 2.4 GHz products. Some of these competitors have
announced their intention to develop IEEE 802.11 standards-based products or
other higher performance systems in the future. In addition to competition from
companies that offer or have announced their intention to develop wireless LAN
products, the Company could face future competition from companies that offer
products which replace network adapters or offer alternative wireless
communications solutions, or from large computer and network equipment
companies. There can be no assurance that the Company will be able to compete
successfully against these competitors or that competitive pressures faced by
the Company will not adversely affect its business or operating results.

Many of the Company's present and potential competitors have substantially
greater financial, marketing, technical and other resources than the Company
with which to pursue engineering, manufacturing, marketing, and distribution of
their products and may succeed in establishing technology standards or strategic
alliances in the wireless LAN market, obtain more rapid market acceptance for
their products, or otherwise gain a competitive advantage. There can be no
assurance that the Company will succeed in developing products or technologies
that are more effective than those developed by its competitors. Furthermore,
the Company competes with companies with high volume manufacturing and extensive
marketing and distribution capabilities, areas in which the Company has limited
experience. Increased competition, direct and indirect, could adversely affect
the Company's revenue and profitability through pricing pressure and loss of
market share. There can be no assurance that the Company will be able to compete
successfully against existing and new competitors as the market evolves and the
level of competition increases.

INTERNATIONAL SALES

Revenue from shipments by the Company to customers outside the United
States, principally to a limited number of distributors and OEM customers,
represented 36%, 24%, 6% and 4% of total revenue during the first quarter of
1996 and during 1995, 1994 and 1993, respectively. The Company expects that
revenue from shipments to international customers will continue to represent a
substantial portion of total revenue for the foreseeable future. Sales to
international customers or to U.S. OEM customers who ship to international
locations are subject to a number of risks and uncertainties including, but not
limited to, changes

8
<PAGE> 12

in foreign government regulations and telecommunications standards, export
license requirements, tariffs and taxes, other trade barriers, fluctuations in
currency exchange rates, difficulty in collecting accounts receivable,
difficulty in staffing and managing foreign operations, and potential political
and economic instability. While international sales are typically denominated in
U.S. dollars and the Company generally extends limited credit terms,
fluctuations in currency exchange rates could cause the Company's products to
become relatively more expensive to customers in a particular country, leading
to a reduction in sales or profitability in that country. Additionally, payment
cycles for international distributors are usually longer than for distributors
in the United States. There can be no assurance that foreign markets will
continue to develop or that the Company will receive additional orders to supply
its products to foreign customers. The Company's business and operating results
could be materially and adversely affected if foreign markets do not continue to
develop or the Company does not receive additional orders to supply its products
for use by foreign customers. See "Business -- Sales and Marketing."

PROTECTION OF PROPRIETARY RIGHTS

The Company relies on a combination of patents, trademarks and
non-disclosure agreements in order to establish and protect its proprietary
rights. Proxim has been issued three U.S. patents which are important to the
current business of the Company, and has four patent applications pending in the
U.S. which relate to the Company's core technology. There can be no assurance
that patents will issue from any of these pending applications or, if patents do
issue, that the claims allowed will be sufficiently broad to protect the
Company's technology. In addition, there can be no assurance that any patents
issued to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection to the
Company. Since U.S. patent applications are maintained in secrecy until patents
issue, and since publication of inventions in the technical or patent literature
tend to lag behind such inventions by several months, the Company cannot be
certain that it was the first creator of the inventions covered by its issued
patents or pending patent applications or that it was the first to file patent
applications for such inventions or that the Company is not infringing on the
patents of others. In addition, the Company has filed, or reserved its rights to
file, a number of patent applications internationally. There can be no assurance
that any such international patent applications will issue or that the laws of
foreign jurisdictions will protect the Company's proprietary rights to the same
extent as the laws of the United States.

In view of the rapid technological change in this industry, Proxim believes
that the technical expertise and creative skills of its engineers and other
personnel are crucial in determining the Company's future technological success.
The Company's ability to compete in the marketplace may be enhanced by its
ability to protect its proprietary information through the ownership of patents,
registrations, and trademarks. The Company attempts to protect its trade secrets
and other proprietary information through agreements with customers and
suppliers, proprietary information agreements with employees and other security
measures. Although the Company intends to protect its rights vigorously, there
can be no assurance that these measures will be successful. Litigation may be
necessary to enforce the Company's patents, trademarks or other intellectual
property rights, to protect the Company's trade secrets, to determine the
validity and scope of the proprietary rights of others or to defend against
claims of infringement. Such litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on the Company's
business and operating results. No intellectual property of the Company has been
invalidated or declared unenforceable. However, there can be no assurance that
in the future such rights will be upheld. Furthermore, there can be no assurance
that any issued patents will provide the Company with a competitive advantage or
will not be challenged by third parties or that the patents of others will not
have an adverse effect on the Company's ability to do business. There can be no
assurance that the measures taken by the Company will prevent misappropriation
of its technology. In addition, there can be no assurance that others will not
independently develop similar products, design around the Company's proprietary
technology or duplicate the Company's products. See "Business -- Protection of
Proprietary Rights."

9
<PAGE> 13

MANAGEMENT OF GROWTH

The Company's growth to date has caused, and will continue to cause, a
significant strain on its management, operational, financial and other
resources. The Company's ability to manage its growth effectively will require
it to improve its operational and financial systems. These demands will require
the addition of new management personnel and the development of additional
expertise by existing management. The failure of the Company's management team
to effectively manage growth, should it occur, could have a material adverse
impact on the Company's results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

UNCERTAIN GOVERNMENT REGULATION

In the United States, the Company is subject to various FCC rules and
regulations. Current FCC regulations permit license-free operation in certain
FCC-certified bands in the radio spectrum. Proxim's spread spectrum wireless
products are certified for unlicensed operation in the 902-928 MHz and
2.4-2.4835 GHz frequency bands. Operation in these frequency bands is governed
by rules set forth in Part 15 of the FCC regulations. The Part 15 rules are
designed to minimize the probability of interference to other users of the
spectrum and, thus, accord Part 15 systems secondary status. In the event that
there is interference between a primary user and a Part 15 user, a higher
priority user can require the Part 15 user to curtail transmissions that create
interference. In this regard, if users of the Company's products experience
excessive interference from primary users, market acceptance of the Company's
products could be adversely affected, thereby materially and adversely affecting
the Company's business and results of operations. The FCC, however, has
established certain standards which create an irrebuttable presumption of
noninterference for Part 15 users and the Company believes that its products
comply with such requirements. There can be no assurance that the occurrence of
regulatory changes, including changes in the allocation of available frequency
spectrum or modification to the standards establishing an irrebuttable
presumption for unlicensed Part 15 users, would not significantly impact the
Company's operations by rendering current products obsolete, restricting the
applications and markets served by the Company's products or increasing the
opportunity for additional competition.

The Company's products are also subject to regulatory requirements in
international markets and, therefore, the Company has been monitoring the
development of spread spectrum regulations in certain countries that represent
potential markets for its products. The Company has limited experience in
gaining regulatory approval outside of the United States. Several foreign
countries, such as Canada, have regulations that closely follow those of the
FCC. To date, Proxim or its distribution partners have obtained certifications
for the Company's products in 22 countries as well as approval for use in over
20 additional countries which rely on or reference certification requirements of
regulatory bodies such as the FCC and the European Telecommunications Standards
Institute ("ETSI"). Each new Proxim product or OEM customer product must be
certified or otherwise qualified for use in each country. The Company has an
ongoing program to obtain certifications for its products and to assist certain
OEM customers in obtaining certification for their products in all available
markets. While there can be no assurance that the Company will be able to comply
with regulations in any particular country, the Company has designed its
RangeLAN2 products to minimize the design modifications required to meet various
2.4 GHz international spread spectrum regulations. Changes in, or the failure by
the Company to comply with, applicable domestic and international regulations
could have a material adverse effect on the Company's business and operating
results. In addition, with respect to those countries that do not follow FCC
regulations, Proxim may need to modify its products to meet local rules and
regulations.

EXPANDED DISTRIBUTION REQUIRED FOR BRANDED PRODUCTS

To date, a substantial percentage of Proxim's revenue has been derived from
OEM customers through the Company's direct sales force. The Company sells its
branded RangeLAN2 products through domestic and

10
<PAGE> 14

international distributors. In general, distributors offer products of several
different companies, including products that may compete with the Company's
products. Accordingly, these distributors may give higher priority to products
of other suppliers, thus reducing their efforts to sell the Company's products.
Agreements with distributors are generally terminable at the distributor's
option. A reduction in sales efforts or termination of a distributor's
relationship with the Company may have a material adverse effect on the
Company's future operating results. Use of distributors also entails the risk
that distributors will build up inventories in anticipation of substantial
growth in sales. If such growth does not occur as anticipated, these
distributors may substantially decrease the amount of product ordered in
subsequent quarters. Such fluctuations could contribute to significant
variations in the Company's future operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Sales and Marketing."

HEALTH AND SAFETY RISKS

Recently, there has been publicity regarding the potentially adverse health
and safety effects of electromagnetic emissions from cellular telephones,
particularly in hospitals and other medical environments. While Proxim's
wireless networking products also emit electromagnetic radiation, the Company
believes its products pose no material health and safety concerns because of the
low power output of the Company's products and the distance typically maintained
between the Company's products and the end user in normal operation. There can
be no assurance that health and safety issues related to the Company's products
will not arise in the future. Any such issues could have a material adverse
effect on the Company's business. Even if such concerns prove to be baseless,
the resultant publicity could have a material adverse effect on the Company's
stock price and its ability to market its products.

DEPENDENCE ON KEY EMPLOYEES

The Company is highly dependent on the technical and management skills of
its key employees, in particular David C. King, Chairman, President and Chief
Executive Officer, and Juan Grau, Vice President of Engineering. The Company
does not have employment agreements with, or life insurance on the life of,
either person. The loss of the services of any key employee could adversely
affect the Company's business and operating results. The Company's success also
depends in large part on a limited number of key technical, marketing and sales
employees and on the Company's ability to continue to attract, assimilate and
retain additional highly talented personnel. Competition for qualified personnel
in the wireless data communications and networking industries is intense. There
can be no assurance that the Company will be successful in retaining its key
employees or that it can attract, assimilate or retain the additional skilled
personnel as required. See "Business -- Employees" and "Management."

VOLATILITY OF STOCK PRICE

Recently, the price of the Company's Common Stock has been volatile. The
Company believes that the price of its Common Stock may continue to fluctuate,
perhaps substantially, as a result of factors such as announcements of
developments relating to the Company's business, fluctuations in the Company's
operating results, general conditions in the wireless communications industry or
the worldwide economy, a shortfall in revenue or earnings from securities
analysts' expectations or other changes in financial estimates by securities
analysts, announcements of technological innovations or new products or
enhancements by the Company or its competitors, developments in patent,
copyrights or other intellectual property rights and developments in the
Company's relationships with its customers, distributors and suppliers. In
addition, in recent years the stock market in general, and the market for shares
of high technology stocks in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. There can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuation in the
future, including fluctuations that are unrelated to the Company's performance.
See "Price Range of Common Stock."

11
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$95,019,000 ($109,374,000 if the Underwriters' over-allotment option is
exercised in full), based on an assumed public offering price of $40.25 per
share and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company intends to use the net
proceeds primarily for working capital, capital expenditures and other general
corporate purposes. In addition, a portion of the net proceeds may be used to
finance strategic acquisitions or corporate alliances. The Company considers
such acquisitions on an ongoing basis, but has no current commitments for any
acquisition which would have a material impact on the Company's results of
operations or financial condition. Pending such uses, the Company will invest
the net proceeds in investment grade short or medium term income producing
instruments.

DIVIDEND POLICY

The Company has paid no cash dividends on its Common Stock since its
incorporation and anticipates that for the foreseeable future it will continue
to retain any earnings for use in its business.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been traded on the Nasdaq National Market
since the Company's initial public offering on December 15, 1993 under the
symbol "PROX". Prior to that time, there was no public market for the Company's
Common Stock. The following table sets forth, for the periods indicated, the
high and low sale prices for the Common Stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1993
Fourth Quarter (from December 15, 1993)................... $ 10 $7 1/2
1994
First Quarter............................................. $ 11 $ 8
Second Quarter............................................ $9 1/2 $6 1/2
Third Quarter............................................. $7 1/4 $4 1/4
Fourth Quarter............................................ $6 7/8 $3 5/8
1995
First Quarter............................................. $6 3/8 $3 7/8
Second Quarter............................................ $9 5/8 $ 5
Third Quarter............................................. $14 3/4 $7 3/4
Fourth Quarter............................................ $17 7/8 $ 11
1996
First Quarter............................................. $26 1/8 $15 1/8
Second Quarter (through June 3, 1996)..................... $51 1/4 $24 3/4
</TABLE>

On June 3, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market was $40.25 per share. As of March 29, 1996, the Company
had approximately 185 holders of record of its Common Stock (including nominees
and brokers holding street accounts).

12
<PAGE> 16

CAPITALIZATION

The following table sets forth, at March 31, 1996, the capitalization of
the Company and the capitalization as adjusted to give effect to the issuance
and sale by the Company of 2,500,000 shares of Common Stock offered hereby (at
an assumed public offering price of $40.25 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company) and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with the Financial Statements of the
Company and the Notes thereto included elsewhere and incorporated into this
Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Preferred Stock, $0.001 par value, 5,000,000 shares authorized;
no shares issued and outstanding............................... $ -- $ --
Common Stock, $0.001 par value, 25,000,000 shares authorized;
7,456,000 shares issued and outstanding; 9,956,000 shares
issued and outstanding as
adjusted(1).................................................... 7 10
Additional paid-in capital....................................... 27,757 122,773
Accumulated deficit.............................................. (8,239) (8,239)
-------- --------
Total stockholders' equity............................... $19,525 $ 114,544
======== ========
</TABLE>

- ---------------
(1) Excludes as of March 31, 1996 (i) 1,377,250 shares reserved for issuance
upon exercise of outstanding stock options, (ii) 1,140,000 additional shares
reserved for future issuance pursuant to the Company's 1995 Long-Term
Incentive Plan, (iii) 231,413 additional shares reserved for future issuance
under the Company's 1993 Employee Stock Purchase Plan, and (iv) 53,542
additional shares reserved for future issuance under the Company's 1994
Director Option Plan.

13
<PAGE> 17

SELECTED FINANCIAL DATA

The selected financial data of the Company set forth below are qualified in
their entirety by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Financial Statements and Notes thereto included elsewhere
in and incorporated into this Prospectus. The statement of operations data for
the years ended December 31, 1993, 1994 and 1995, and the balance sheet data at
December 31, 1994 and 1995, are derived from, and are qualified by reference to,
the Company's financial statements audited by Price Waterhouse LLP, independent
accountants, included elsewhere in this Prospectus. The statement of operations
data for the years ended December 31, 1991 and 1992, and the balance sheet data
as of December 31, 1991, 1992 and 1993 are derived from audited financial
statements of the Company not included herein. The statement of operations data
for the three months ended March 31, 1995 and 1996, and the balance sheet data
at March 31, 1996 are derived from unaudited financial statements of the
Company, included elsewhere in this Prospectus. The unaudited financial
information of the Company, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial data for such periods. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of results that may be expected for any subsequent period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................... $ 2,672 $ 4,114 $ 8,078 $11,297 $22,083 $ 3,363 $ 8,901
Gross profit................ 558 1,696 4,171 6,076 11,240 1,744 4,362
Research and development.... 1,673 1,199 1,474 1,783 3,288 652 1,070
Selling, general and
administrative........... 1,368 2,383 2,821 3,982 6,694 1,235 2,127
Income (loss) from
operations............... (2,483) (1,886) (124) 311 1,258 (143) 1,165
Net income (loss)........... (2,494) (1,902) (99) 745 2,846 18 912
Net income (loss) per
share(1)................. -- (.36) (.02) .10 .35 .00 .11
Weighted average common
shares and
equivalents(1)........... -- 5,326 5,665 7,738 8,172 7,733 8,268
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH
----------------------------------------------- 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 920 $ 1,216 $13,303 $11,300 $ 6,247 $ 5,590
Working capital...................... 1,051 1,397 13,980 14,488 16,650 17,256
Total assets......................... 2,222 2,816 15,753 17,435 24,107 23,875
Mandatorily Redeemable Convertible
Preferred Stock................... 2,927 5,376 -- -- -- --
Stockholders' equity (deficit)....... (1,414) (3,612) 14,299 15,226 18,450 19,525
</TABLE>

- ---------------
(1) Net loss per share for 1992 is a pro forma calculation based on the weighted
average number of outstanding shares of Common Stock plus common stock
equivalents. Common stock equivalents include stock options and warrants
granted between October 1, 1992 and December 22, 1993 (using the treasury
stock method and the initial public offering price) and Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock
on their respective original dates of issuance, even though anti-dilutive
for all periods through the effectiveness of the Company's initial public
offering. Net loss per share for 1991 has not been presented as such
information is not meaningful. See Note 2 of Notes to Financial Statements.

14
<PAGE> 18

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains trend analysis and other forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in the forward-looking statements
as a result of the certain factors, including those set forth under "Risk
Factors" and elsewhere in, or incorporated by reference into, this Prospectus.

The following discussion should be read in conjunction with the Selected
Financial Data and the Company's Financial Statements and Notes thereto.

OVERVIEW

Since 1989, Proxim has focused on supplying spread spectrum RF transceiver
modules and wireless LAN adapters to OEM customers for integration into mobile
computing platforms, pen-based portables and handheld data collection terminals.
In 1990, the Company introduced its first commercial product for OEM customers,
a 900 MHz direct sequence spread spectrum RF transceiver. The Company introduced
ProxLink, its first branded wireless data communications product for the
commercial end user market in 1991, and RangeLAN(R), a family of 900 MHz direct
sequence wireless LAN adapters in 1992. In 1994, the Company began commercial
shipment of RangeLAN2, the industry's first family of 2.4 GHz frequency hopping
spread spectrum wireless LAN products. In 1995, the Company introduced
RangeLINKTM, a line of 2.4 GHz inter-building wireless remote bridges.

Since the introduction of the RangeLAN2 product family in 1994, Proxim's
2.4 GHz product sales have increased to over 70% of total revenue in the first
quarter of 1996. The Company further anticipates that its 2.4 GHz product family
will continue to increase as a percentage of total revenue as a result of the
worldwide availability of unlicensed 2.4 GHz spectrum as well as the higher
throughput and capacity achievable with 2.4 GHz wireless networks. To date, the
Company has realized lower gross margins from sales of its 2.4 GHz products
compared to its 900 MHz products due primarily to the higher component costs and
higher manufacturing costs associated with initial production of various 2.4 GHz
products. While the Company expects manufacturing costs to decline as a result
of greater efficiencies associated with higher volume production, there can be
no assurance that the Company will be able to achieve higher gross margins with
respect to 2.4 GHz product sales. Gross margins will be affected by a variety of
factors, including manufacturing efficiencies, competitive pricing pressures,
the degree of customization of individual products required by OEM customers and
component and assembly costs. In addition, gross profit as a percentage of total
revenue may fluctuate in the future depending primarily on the mix of revenue
between 900 MHz products and 2.4 GHz products.

Historically, the Company has marketed its products predominantly in the
United States and, until 1995, revenue from international sales was not
significant. During 1994 and 1995, the Company obtained regulatory
certifications for its 2.4 GHz RangeLAN2 products in 22 countries and approval
to ship to 20 additional countries. These certifications and approvals have
significantly increased the available markets for these products. Revenue from
sales directly to international customers were 36%, 24%, 6% and 4% during the
first quarter of 1996 and during 1995, 1994 and 1993, respectively. See
"Business -- Sales and Marketing."

A substantial portion of the Company's revenue to date has been derived
from a limited number of customers, most of which are OEM customers. Sales to
OEM customers represented approximately 76%, 79%, 56% and 83% of total revenue
during the first quarter of 1996 and during 1995, 1994 and 1993, respectively.
The Company expects that sales to a limited number of OEM customers will
continue to account for a substantial portion its revenue during any period for
the foreseeable future. The Company also has experienced quarter to quarter
variability in sales to each of its major OEM customers and expects this pattern
to continue in the future. The loss of one or more of the Company's major OEM
customers could have a

15
<PAGE> 19

material adverse effect on the Company's results of operations. The development
of products for OEM customer applications is characterized by a lengthy sales
process and design-in cycle which typically lasts from six months to two years
and requires the Company to integrate its technologies into, and in certain
cases adapt its products to fit, OEM customers' products. In addition, the
Company's OEM customers' products are generally required to be certified by the
FCC or the equivalent regulatory agency in each country where such products are
sold. The Company has committed substantial engineering, marketing and sales
resources to develop key OEM relationships and has broadened its OEM customer
base. Due to the Company's current dependency on its OEM customers for a
significant percentage of its total revenue and the nature of its OEM business,
the Company's annual and quarterly operating results are subject to fluctuations
as a result of the level and timing of OEM customer orders. The Company works
closely with its OEM customers to manage the order cycle process in an attempt
to reduce the fluctuations inherent in its OEM business. See "Business --
Customers."

The Company's RangeLAN2, RangeLINK, RangeLAN and ProxLink branded products
are marketed to value added resellers, systems integrators and end users
primarily through regional and national distributors. The Company grants certain
distributors limited rights of return and price protection on unsold products.
Product revenue on shipments to distributors which have rights of return and
price protection is recognized upon shipment by the distributor. Many of the
Company's packaged products are also sold to certain OEM customers. Packaged
products sold through distribution channels under Proxim's brand name and to OEM
customers under private label agreements, represented 55%, 49%, 52% and 27% of
total revenue during the first quarter of 1996 and during 1995, 1994 and 1993,
respectively.

RESULTS OF OPERATIONS

The following table sets forth the percentage of total revenue represented
by certain line items in the Statement of Operations for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 48.4 46.2 49.1 48.1 51.0
---- ---- ---- ---- ----
Gross profit................... 51.6 53.8 50.9 51.9 49.0
---- ---- ---- ---- ----
Operating expenses:
Research and development.... 18.2 15.8 14.9 19.4 12.0
Selling, general and
administrative........... 34.9 35.3 30.3 36.7 23.9
---- ---- ---- ---- ----
Total operating
expenses............ 53.1 51.1 45.2 56.1 35.9
---- ---- ---- ---- ----
Income (loss) from
operations.................. (1.5) 2.7 5.7 (4.2) 13.1
Interest and other income,
net......................... 0.3 4.6 2.4 4.8 0.9
---- ---- ---- ---- ----
Income (loss) before income
taxes....................... (1.2) 7.3 8.1 0.6 14.0
Provision (benefit) for income
taxes....................... -- 0.7 (4.8) 0.1 3.8
---- ---- ---- ---- ----
Net income (loss).............. (1.2)% 6.6% 12.9% 0.5% 10.2%
==== ==== ==== ==== ====
</TABLE>

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995

Revenue increased 165% in the first quarter of 1996 compared to the first
quarter of 1995. The increase in revenue was primarily attributable to increased
unit sales of 2.4 GHz OEM products and RangeLAN2 branded products, including
increased revenue from shipments to international distributors and to OEM
customers that have recently introduced RangeLAN2-based 2.4 GHz product lines in
North America, Europe and Asia.

Gross profit as a percentage of revenue was 49% and 52% in the first
quarters of 1996 and 1995, respectively. Gross profit as a percentage of revenue
decreased in the first quarter of 1996 compared to the first

16
<PAGE> 20

quarter of 1995 due to a change in the mix of revenue from higher gross margin
900 MHz products to lower gross margin 2.4 GHz products, and costs related to
initial manufacturing of 2.4 GHz product versions designed to meet certification
requirements in Europe and Japan. Gross profit as a percentage of total revenue
may fluctuate in future periods depending primarily on the mix of revenue
between 900 MHz products and 2.4 GHz products.

Research and development expenses consist primarily of personnel expenses
and, to a lesser extent, consulting fees, prototype material and other costs of
ASIC/MMIC development. Research and development expenses are related primarily
to the development and enhancement of radio transceivers, ASICs/MMICs, wireless
protocols and network software drivers. Research and development expenses
increased in the first quarter of 1996 compared to the first quarter of 1995
primarily due to the increased number of engineering employees, costs related to
product certifications and other development program expenses. Research and
development expenses declined as a percentage of revenue in the first quarter of
1996 compared to the first quarter of 1995 primarily due to the substantial
increase in revenue. To date, all of the Company's research and development
costs have been expensed as incurred. The Company currently does not anticipate
further significant declines in research and development expenses as a
percentage of revenue. The Company expects that research and development
expenses to increase substantially in absolute dollars but may vary over time as
a percentage of revenue.

Selling, general and administrative expenses consist primarily of personnel
expenses, sales commissions, costs related to both domestic and international
product certifications, customer support, trade show and advertising expenses,
and to a lesser extent, professional fees and facilities costs. Selling, general
and administrative expenses increased in the first quarter of 1996 compared to
the first quarter of 1995 primarily due to the hiring of additional marketing
and sales personnel to support the Company's growth, particularly its expansion
into international markets, as well as increased trade show and promotional
expenses. Selling, general and administrative expenses declined as a percentage
of revenue in the first quarter of 1996 compared to the first quarter of 1995
primarily due to the substantial increase in revenue. The Company currently does
not anticipate further significant declines in selling, general and
administrative expenses as a percentage of revenue. The Company expects that
selling, general and administrative expenses will continue to increase in
absolute dollars but may vary over time as a percentage of revenue.

Interest and other income consists primarily of interest income and a minor
amount of interest expense. Interest income is derived from interest earned on
cash and cash equivalent investments. Interest and other income decreased in the
first quarter of 1996 compared to the first quarter of 1995 primarily due to the
decrease in cash balances.

The Company's estimated effective income tax rate was 27% and 10% for the
first quarters of 1996 and 1995, respectively. The 1996 estimated effective
income tax rate is less than the combined federal and state statutory rates
based on the expected utilization of available net operating loss carryforwards
and tax credits. The provision for income taxes in the first quarter of 1995
primarily represented alternative minimum taxes.

Three Years Ended December 31, 1995, 1994 and 1993

Revenue increased 95% from 1994 to 1995 and 40% from 1993 to 1994. Revenue
increased from 1994 to 1995 primarily due to increased unit sales of 2.4 GHz OEM
products and RangeLAN2 branded products, including increased revenue from
shipments to international distributors and to OEM customers. Revenue increased
from 1993 to 1994 primarily due to increased total unit sales, including sales
of the RangeLAN2 product family in the U.S., and increased ProxLink sales.

Gross profit as a percentage of revenue was 51%, 54% and 52% in 1995, 1994
and 1993, respectively. Gross profit as a percentage of revenue decreased in
1995 compared to 1994 due to a change in the mix of revenue from higher gross
margin 900 MHz products to lower gross margin 2.4 GHz products and costs related
to initial manufacturing of new 2.4 GHz product versions designed to meet
certification requirements

17
<PAGE> 21

in Europe and Japan. Gross profit as a percentage of revenue increased in 1994
compared to 1993 principally due to increased unit sales which resulted in
improved manufacturing efficiencies and reduced material costs due to purchasing
economies.

Research and development expenses since 1993 have increased each year
primarily due to the increased number of engineering employees, continued
investment in integrating the Company's technology into ASICs, development of
wireless protocols and network software drivers, costs related to performance
enhancements in the RangeLAN2 architecture, and costs related to both domestic
and international product certifications. Research and development expenses as a
percentage of revenue were 15%, 16% and 18% in 1995, 1994 and 1993,
respectively. Research and development expenses since 1993 have declined as a
percentage of revenue primarily due to increases in revenue.

Selling, general and administrative expenses since 1993 have increased each
year primarily due to the hiring of additional marketing and sales personnel to
support the Company's growth, particularly its expansion into international
markets, as well as increased trade show and promotional expenses. Selling,
general and administrative expenses as a percentage of revenue were 30%, 35% and
35% in 1995, 1994 and 1993, respectively. Selling, general and administrative
expenses since 1994 have declined as a percentage of revenue primarily due to
increases in revenue.

Interest and other income increased significantly from 1993 to 1994
primarily due to investment in cash equivalents of the proceeds from the
Company's December 1993 initial public offering, and increased moderately from
1994 to 1995 due to higher average interest rates partially offset by lower
invested cash balances.

The Company recognized a benefit for income taxes in 1995 of $1,051,000
compared to a provision of $83,000 in 1994. No provision for income taxes was
recorded in 1993 as the Company incurred a loss. The provision of $83,000 in
1994 primarily represented alternative minimum taxes. The benefit recognized in
1995 was due to a current provision of $180,000, primarily representing
alternative minimum taxes, offset by the recognition of $1,231,000 of deferred
tax assets based on the Company's assessment that this portion of the deferred
tax assets will be realized. At December 31, 1995, the Company had approximately
$5,000,000 of federal net operating loss carryforwards ("NOLs") which expire
from 2003 to 2008. As a result of a prior financing which resulted in a
cumulative change in ownership in 1991 of greater than 50%, approximately
$3,000,000 of the Company's NOLs may be limited to usage of approximately
$300,000 per year through 2005. See Note 7 of Notes to Financial Statements.

To date, inflation has not had a significant impact on the Company's
operating results.

Quarterly Results of Operations

The following table presents selected unaudited quarterly financial
information for the Company and the same information as a percentage of revenue
for each of the five quarters ended March 31, 1996. This information has been
derived from unaudited financial statements that, in the Company's opinion,
reflect all normal recurring adjustments that are necessary to present fairly
the results of operations in the quarterly periods. The data set forth below
should be read in conjunction with the Financial Statements and Notes thereto.
The operating results for any quarter are not necessarily indicative of results
for future quarters.

18
<PAGE> 22

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
1995 1996
----------------------------------------- ---------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... $3,363 $ 4,202 $ 5,930 $ 8,588 $ 8,901
Cost of revenue........................... 1,619 2,002 2,948 4,274 4,539
------ ------ ------ ------- ------
Gross profit.............................. 1,744 2,200 2,982 4,314 4,362
------ ------ ------ ------- ------
Operating expenses:
Research and development............... 652 754 865 1,017 1,070
Selling, general and administrative.... 1,235 1,360 1,711 2,388 2,127
------ ------ ------ ------- ------
Total operating expenses......... 1,887 2,114 2,576 3,405 3,197
------ ------ ------ ------- ------
Income (loss) from operations............. (143) 86 406 909 1,165
Interest and other income, net............ 163 142 130 102 84
------ ------ ------ ------- ------
Income before income taxes................ 20 228 536 1,011 1,249
Provision (benefit) for income taxes...... 2 23 54 (1,130) 337
------ ------ ------ ------- ------
Net income................................ $ 18 $ 205 $ 482 $ 2,141 $ 912
====== ====== ====== ======= ======
Net income per share...................... $ .00 $ .03 $ .06 $ .26 $ .11
====== ====== ====== ======= ======
Weighted average common shares and
equivalents............................ 7,733 7,842 8,084 8,179 8,268
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
1995 1996
-------------------------------------------- ---------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
-------- ------- --------- -------- ---------
(AS A PERCENTAGE OF REVENUE)
<S> <C> <C> <C> <C> <C>
Revenue................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......................... 48.1 47.6 49.7 49.8 51.0
-------- ------- --------- -------- ---------
Gross profit............................ 51.9 52.4 50.3 50.2 49.0
-------- ------- --------- -------- ---------
Operating expenses:
Research and development............. 19.4 17.9 14.6 11.8 12.0
Selling, general and
administrative.................... 36.7 32.4 28.9 27.8 23.9
-------- ------- --------- -------- ---------
Total operating expenses....... 56.1 50.3 43.5 39.6 35.9
-------- ------- --------- -------- ---------
Income (loss) from operations........... (4.3) 2.1 6.8 10.6 13.1
Interest and other income, net.......... 4.9 3.4 2.2 1.2 0.9
-------- ------- --------- -------- ---------
Income before income taxes.............. 0.6 5.5 9.0 11.8 14.0
Provision (benefit) for income taxes.... 0.1 0.6 0.9 (13.1) 3.8
-------- ------- --------- -------- ---------
Net income.............................. 0.5% 4.9% 8.1% 24.9% 10.2%
======= ====== ====== ====== =======
</TABLE>

The Company has experienced and may in the future continue to experience
significant annual and quarterly fluctuations in revenue, gross margins and
operating results due to numerous factors, some of which are outside the
Company's control. These factors include fluctuating market demand for, and
declines in the average selling prices of, the Company's products, the timing of
and potential delays or cancellations of significant orders from OEM customers,
the cost, availability and quality of components from the Company's suppliers,
the availability, quality and cost of assemblies from subcontractors, the
lengthy sales and design-in cycles for OEM products, delays in the introduction
of the Company's new products, competitive product introductions, market
adoption of new technologies and standards, the mix of products sold, the
effectiveness of the Company's distribution channels, the failure to anticipate
changing customer product requirements, seasonality, manufacturing capacity and
efficiency, changes in the regulatory environment and general

19
<PAGE> 23

economic conditions. Historically, the Company has not operated with a
significant order backlog and a substantial portion of the Company's revenue in
any quarter has been derived from orders booked and shipped in that quarter.
Accordingly, the Company's revenue expectations are based almost entirely on its
internal estimates of future demand and not on firm customer orders. Planned
expense levels are relatively fixed in the short term and are based in large
part on these estimates, and if orders and revenue do not meet expectations, the
Company's operating results could be materially adversely affected. In this
regard, in the third quarter of 1994, the Company experienced a decrease in
revenue and an operating loss as a result of lower than expected orders in
connection with the transition from 900 MHz products to 2.4 GHz RangeLAN2
products. There can be no assurance that the Company will not experience future
quarter-to-quarter decreases in revenue and gross margins or quarterly operating
losses. In addition, due to the timing of orders from OEM customers, the Company
has often recognized a substantial portion of its revenue in the last month of a
quarter. As a result, minor fluctuations in the timing of orders and the
shipment of products have caused, and may in the future cause, operating results
to vary significantly from quarter to quarter. It is possible that due to such
fluctuations or other factors, the Company's future operating results could be
below the expectations of securities analysts and investors. In such an event,
or in the event that adverse market conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock would likely be materially adversely affected. Although
the Company has been profitable on a quarterly basis for the past six quarters
and has experienced revenue growth in the last six quarters, the Company
experienced a decrease in revenue and an operating loss for the quarter ended
September 30, 1994, and there can be no assurance that revenue growth or
profitability will continue on a quarterly or annual basis in the future.

As shown in the table above, revenue has increased in each of the past four
quarters primarily due to increased unit sales of 2.4 GHz OEM products and
RangeLAN2 branded products, including increased revenue from shipments to
international distributors and to OEM customers that have recently introduced
RangeLAN2-based 2.4 GHz product lines in North America, Europe and Asia.
Although revenue has increased during each of the past four quarters in absolute
dollars, the percentage increase in each quarter over the prior quarter has
fluctuated significantly. During the second and third quarters of 1995, the
Company experienced higher than expected demand for its products. This increased
demand, together with temporary shortages of certain components, increased lead
times for certain components and the time required to increase manufacturing
capacity, resulted in delays in the shipment of certain products and the
deferral of revenue into subsequent periods. Because of the Company's
significant dependence on OEM customers, future quarterly revenue may continue
to fluctuate significantly in accordance with the timing of OEM customers'
orders. In addition, the quarter-to-quarter changes in the rate of the Company's
revenue growth, if any, may fluctuate due to unit sales volume and product mix
changes.

Gross profit as a percentage of revenue has declined in each of the past
three quarters primarily due to a change in the mix of revenue from higher
margin 900 MHz products to lower margin 2.4 GHz products and the ramp up costs
related to manufacturing 2.4 GHz product versions designed to meet certification
requirements in Europe and Japan. Gross profit as a percentage of total revenue
may fluctuate in future periods depending on numerous factors including the mix
of revenue between 900 MHz products and 2.4 GHz products.

Research and development expenses increased in each of the past four
quarters in absolute dollars, but decreased as a percentage of revenue in each
quarter other than the first quarter of 1996, primarily due to increases in
revenue. Research and development expenses have increased in absolute dollars in
each of the past four quarters primarily due to the increased number of
engineering employees, continued investment in integrating the Company's
technology and designs into ASICs, development of wireless protocols and network
software drivers, costs related to performance enhancements in the RangeLAN2
architecture, and costs related to product certifications.

20
<PAGE> 24

Selling, general and administrative expenses have increased in absolute
dollars in three of the past four quarters primarily due to the hiring of
additional marketing and sales personnel to support the Company's growth
particularly its expansion into international markets, as well as increased
trade show and promotional expenses. Selling, general and administrative
expenses decreased as a percentage of revenue in each quarter, however,
primarily due to increases in revenue. The decrease in selling, general and
administrative expenses in the first quarter of 1996 compared to the fourth
quarter of 1995 was principally due to certain sales commission incentives and
employee bonuses which were earned at the end of 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date primarily through private
placements of its equity securities, and its initial public offering in December
1993. As of March 31, 1996, the Company had an accumulated deficit of
$8,239,000.

In 1995, 1994 and 1993, the Company used $3,853,000, $1,070,000 and
$485,000, respectively, of cash in operations. In 1995 and 1994, cash was used
primarily to fund increases in inventories and accounts receivable, partially
offset by cash provided by net income and by increases in accounts payable and
accrued liabilities. In 1993, cash was used primarily to fund operating losses
and increases in inventories and accounts receivable, partially offset by cash
provided by increases in accounts payable and accrued liabilities. The increases
in inventories and accounts receivable in 1995, 1994 and 1993 were primarily
attributable to the addition of new products and the growth in revenue. In the
first quarter of 1996, $191,000 of cash was used in operating activities
primarily to fund increases in inventories and decreases in accounts payable,
partially offset by net income for the period, and cash provided by decreases in
accounts receivable and increases in accrued liabilities.

In 1995, 1994 and 1993, the Company purchased $1,578,000, $681,000 and
$129,000, respectively, of property and equipment using cash raised in equity
financings. Capital expenditures in 1995 and 1994 related primarily to the
acquisition of manufacturing and engineering test equipment, and leasehold
improvements. Capital expenditures in 1993 primarily related to the acquisition
of manufacturing and engineering test equipment. The Company expects to incur
approximately $1,500,000 of capital expenditures during the remainder of 1996,
consisting primarily of leasehold improvements, telecommunications equipment,
manufacturing and engineering test equipment, engineering systems software and
equipment, and general office equipment. In the first quarter of 1996, the
Company purchased $629,000 of property and equipment. Capital expenditures in
the first quarter of 1996 were primarily for manufacturing and engineering test
equipment, office furniture and leasehold improvements related to the Company's
facilities expansion.

At March 31, 1996, the Company had cash and cash equivalents of
approximately $5,590,000. The Company believes that the net proceeds from this
offering, together with its existing working capital and cash generated from
operations, if any, will be sufficient to finance any cash acquisitions which
the Company may consider and provide adequate working capital for the
foreseeable future. However, to the extent that additional funds may be required
in the future to address working capital needs and to provide funding for
capital expenditures, expansion of the business or additional acquisitions, the
Company will consider additional financing. There can be no assurance that such
financing will be available on terms acceptable to the Company, if at all.

21
<PAGE> 25

BUSINESS

Proxim designs, manufactures and markets high performance wireless local
area networking ("LAN") products. Based on spread spectrum radio frequency
("RF") technology, Proxim's highly integrated wireless client adapters and
network infrastructure systems seamlessly extend existing enterprise LANs to
enable mobility-driven applications in a wide variety of in-building or campus
area environments. Proxim's RangeLAN2 2.4 GHz wireless LAN technology has been
adopted by a number of mobile computer and handheld data terminal system
manufacturers, as well as many leading wireless solution providers, for real-
time data collection applications in manufacturing, warehousing, transportation
and retailing and for point-of-service network applications in healthcare,
hospitality and financial services. Proxim is a leading supplier of both branded
and OEM spread spectrum wireless LAN products and has shipped over 175,000 of
these products to date.

BACKGROUND

In recent years, organizations have shifted from centralized computing
environments to distributed client/server networks in order to move information
processing power closer to end users. Traditionally, these networks have been
accessed from desktop computers situated in fixed locations throughout the
enterprise and, accordingly, have not addressed the needs of organizations which
require their employees to be mobile within the workplace. In response,
organizations have begun to utilize wireless technologies to extend their
client/server networks to mobile end users.

Significant technological advances and changes in the regulatory
environment have facilitated the development and proliferation of wireless
networking solutions which extend the reach of existing wired networks. In voice
communications, wireless technology has made possible the extension of wired
networks to serve mobile users through devices such as cordless and cellular
telephones. Similarly, advances in wireless data communications, including
wireless LAN adapters and radio modems, have enabled the extension of enterprise
networks to notebook computers, pen-based notepads and handheld data collection
terminals in the local area environment. By providing network connectivity for
mobile users, these products increase the accuracy, timeliness and convenience
of data collection and information access, thereby improving productivity and
enhancing customer service.

Commercial applications of wireless local area networking technology
initially addressed a limited number of vertical markets such as retailing,
warehousing and distribution. In these industries, businesses quickly recognized
the benefits of mobile handheld data collection devices and the productivity
benefits associated with applications such as on-line inventory management and
real-time asset tracking. Early wireless networking products failed to achieve
widespread adoption, however, because these systems typically involved
proprietary wireless network architectures operating at low data rates with
limited connectivity to existing enterprise LANs. Furthermore, because these
systems operated in licensed narrowband frequencies or in the 900 MHz frequency
bands, they were generally authorized for use only in the U.S. and in a limited
number of international markets.

During the past several years, technological advances have enabled the
development of a new generation of wireless LAN systems designed to operate in
the 2.4 GHz frequency band. This new generation of 2.4 GHz products operates at
significantly higher data rates and utilizes standard network interfaces and
protocols, seamlessly extending existing enterprise data networks. The recent
development of these high performance, open systems products has enabled the
emergence of a number of new high bandwidth applications in established
industrial data collection markets and has fostered the creation of many
promising applications in new vertical markets such as healthcare, hospitality
and financial services. In healthcare, for example, wireless LANs now allow
medical professionals to access clinical data and input patient charting
information at the point-of-care anywhere in a hospital environment. These same
wireless networks can also be used to facilitate

22
<PAGE> 26

timely and accurate billing and administrative recordkeeping. Data-intensive
markets, such as healthcare, require robust and scalable wireless networks
capable of supporting an increasing number of applications and users over time.

The figure below illustrates a wireless communications system integrated
into a hospital's existing network infrastructure.

LOGO

Concurrent with the emergence of new applications and new vertical markers,
two primary factors have led to a significant expansion in the worldwide market
potential for wireless LANs. First, from a regulatory perspective, the 2.4 GHz
frequency band has recently been allocated for unlicensed wireless networks in
virtually every developed country around the world. Second, the universal
availability of this unlicensed spectrum has encouraged wireless LAN suppliers
to design standard products and solutions which can be marketed and sold
globally.

The Company believes that the convergence of worldwide spectrum
availability, emerging standards and new high performance products will lead to
more widespread deployment of wireless LAN products in both traditional
industrial data collection applications as well as emerging point-of-service
network applications. BIS Strategic Decisions estimates that sales of wireless
local area networking products in the U.S. will increase from $90 million in
1994 to approximately $550 million by the year 2000. This growth is expected to
be even stronger in certain industries such as healthcare, where BIS Strategic
Decisions estimates the number of wireless LAN products deployed to increase
from approximately 3,000 in 1994 to over 600,000 by the end of the decade.

THE PROXIM SOLUTION

In 1984, Proxim pioneered 2.4 GHz frequency hopping wireless LAN technology
by being first to market with its RangeLAN2 product family. Since then, the
Company has captured a substantial number of key design wins with major 2.4 GHz
OEM customers. The Company attributes this success to the architectural
advantages of its RangeLAN2 product line as well as key aspects of the Company's
overall technology approach, including the following:

- Seamless Extension of Existing Enterprise Data Networks. Proxim designs
high performance open systems wireless communications products that
transparently extend the reach of existing enterprise LANs using standard
network interfaces and protocols.

23
<PAGE> 27

- Robust, Scalable Wireless Network Architecture. RangeLAN2's unique
frequency hopping systems architecture and wireless LAN protocols create
a robust RF network environment that cost-effectively expands to
accommodate an increasing in the number of mobile users and applications.

- Superior Product Performance and Functionality. The RangeLAN2 family
incorporates a number of technological innovations to achieve superior
product performance and functionality, including a fully-integrated,
single chip gallium arsenide ("GaAs") RF transceiver for enhanced radio
sensitivity and power amplification, a high throughput frequency hopping
modulation approach with a fallback mode for extended range and coverage,
and sophisticated wireless networking protocols for state-of-the-art
roaming and power management capabilities.

- Broad Array of Interoperable Products and Applications. Based on the
highly integrated design of Proxim's RangeLAN2 miniaturized adapter
products for the OEM market, numerous mobile systems and handheld device
manufacturers have designed RangeLAN2 technology into their products. The
widespread availability of RangeLAN2-based mobile computer and peripheral
systems allows end users to select from numerous interoperable products
in meeting their application requirements.

STRATEGY

Proxim designs its products to address the needs of organizations seeking
to extend their enterprise networks to mobile end users. Proxim's objective is
to maintain its leadership position in the high performance wireless LAN market
by pursuing the following strategies:

- Leveraging Core Competencies to Maintain Technology Leadership. Proxim's
technological strengths have positioned the Company as a leader in the
emerging worldwide 2.4 GHz wireless LAN market. The Company intends to
leverage its core competencies in wireless systems architecture, radio
transceiver design, ASIC development, wireless communications protocols
and network software drivers both to enhance the functionality of its
existing products and to develop new technologies for future wireless LAN
products. In addition, Proxim will begin to invest significant research
and development resources in order to introduce new technologies and
products for other wireless communications markets.

- Focusing on Key Vertical Market Opportunities. The Company currently
markets its wireless networking products as an enabling technology for a
variety of applications in specific industries, including healthcare,
hospitality, retailing, warehousing, manufacturing and transportation.
Proxim believes that wireless applications in several of these
industries, such as healthcare, are only now beginning to emerge and that
demand for these applications will grow over the next several years. The
Company plans to work closely with its OEM customers and wireless
solutions partners to increase the base of applications developed on
RangeLAN2 networks for both existing and new vertical markets.

- Strengthening International Marketing and Distribution
Capabilities. Given the increasing adoption of local area networks
globally and recent regulatory changes opening the 2.4 GHz frequency band
to permit unlicensed wireless LAN products outside the U.S., Proxim
intends to aggressively expand its international marketing and sales
efforts. Specifically, the Company plans to invest significant resources
in strengthening its branded marketing and distribution capabilities
throughout Europe and Asia, and to enhance the marketing, sales and
technical support provided to OEM partners with worldwide distribution
channels.

- Expanding OEM Customer Relationships. Proxim seeks to have its products
designed into OEM products for a broad range of industry-specific and
general purpose applications. Currently, the Company has relationships
with over 50 OEM customers and application solutions providers for its
RangeLAN2 products. In addition to expanding sales of products to
existing OEM customers such as

24
<PAGE> 28

AMP, Data General, DEC, Fujitsu, Intermec, LXE, Norand, SpaceLabs Medical
and Zenith Data Systems, Proxim is committed to forging relationships
with new OEM customers and application solutions providers that serve a
wide variety of end user markets.

PRODUCTS

Since 1989, Proxim has focused on supplying spread spectrum RF transceiver
modules and wireless LAN adapters to OEM customers for integration into mobile
computing platforms, handheld data terminals and portable peripheral devices.
Proxim designs its products to be small, lightweight, cost-effective and power
efficient in order to meet the needs of its OEM customers and the vertical
markets they serve. Proxim currently offers three wireless networking product
lines: RangeLAN2, RangeLINK and 900 MHz products. The RangeLAN2 and RangeLINK
product families are based on the Company's latest 2.4 GHz frequency hopping
technology, while Proxim's 900 MHz products utilize the Company's first
generation direct sequence technology.

Since the introduction of the RangeLAN2 product family in 1994, Proxim's
2.4 GHz product sales have increased to over 70% of total revenue in the first
quarter of 1996. Although 900 MHz product sales are still increasing in absolute
terms, the Company anticipates that its 2.4 GHz product family will continue to
increase as a percentage of total revenue based on the worldwide availability of
unlicensed 2.4 GHz spectrum as well as the higher throughput and capacity
achievable with 2.4 GHz wireless networks.

RangeLAN2. Introduced in 1994, RangeLAN2 was the industry's first
FCC-certified 2.4 GHz frequency hopping wireless LAN product family. The
RangeLAN2 family consists of two product lines: OEM design-in modules and
packaged "off the shelf " products. The design-in modules are integrated by OEM
customers into handheld computing and data collection devices. Packaged products
are used with standard notebook and desktop computers to extend existing
enterprise networks and to create ad hoc wireless networks. All RangeLAN2
products are designed to share the same software and are functionally
interoperable. RangeLAN2 products operate in the 2.4 GHz frequency band, which
has become widely available in North and South America, Europe and Asia for
unlicensed wireless LAN products.

RangeLAN2 packaged products include PCMCIA and ISA wireless LAN adapters
for client computer systems as well as a network Access Point for transparent
bridging to existing 802.3 Ethernet LANs. In addition, RangeLAN2 packaged
products are available as private label models, enabling OEM customers to offer
a complete line of 2.4 GHz wireless LAN products under their brand name. Private
label versions of these products are currently marketed by AMP, DEC, Intermec,
LXE, and Zenith Data Systems, among others.

RangeLAN2 OEM modules are credit card-sized, design-in wireless LAN
adapters. These modules are highly integrated, miniaturized products which
reduce the design-in cycle time and expedite the time to market for OEMs by
offering industry standard interfaces and, if required, the ability to port to
non-standard interfaces and computing platforms with software tools and licensed
source code. RangeLAN2 OEM modules have been designed into more than 30 OEM
handheld computing and data collection devices by companies such as Alps
Electric (formerly Kalidor), Bass, Citadel, Fujitsu, Intermec, LXE, Norand and
Zenith Data Systems.

The RangeLAN2 family has received numerous industry awards since its
introduction. PC Magazine (February 1996) recently selected RangeLAN2 as
"Editors' Choice" in a comprehensive review of wireless LAN products over eight
competitive offerings and LAN magazine (April 1996) awarded RangeLAN2 its "1996
Wireless Networking Product of the Year."

25
<PAGE> 29

The Company believes that the commercial success RangeLAN2 has achieved to
date derives in part from several key design advantages inherent in the
RangeLAN2 architecture as set forth below.

<TABLE>
<CAPTION>
RANGELAN2 FEATURE RANGELAN2 SPECIFICATION ADVANTAGES
<S> <C> <C>
- --------------------------------------------------------------------------------------
Frequency Band 2.4 GHz Worldwide spectrum
availability; increased
wireless bandwidth
Spread Spectrum Frequency hopping Most prevalent 2.4 GHz
Technology technology due to increased
scalability and enhanced
interference-immunity
Data Rate per Channel 1.6 Mbps/800 Kbps Highest data rate among
available frequency hopping
products
Number of Channels 15 Multiple co-located wireless
Available networks in a single location
Modulation Technique 4GFSK/2GFSK High throughput modulation
approach with range-extending
fallback mode (IEEE proposed
standard)
Media Access Control CSMA/CA Highly reliable "wireless
(MAC) Ethernet" MAC protocol (IEEE
proposed standard)
Maximum Range 300-500 feet (standard Extended RF range for
antenna); cost-effective coverage
1000+ feet (high gain
antenna)
Power Consumption 350 mA transmit; Lowest average power
175 mA receive consumption among available
high speed 2.4 GHz spread
spectrum products
Power Saving Mode 5 mA doze; Advanced power management
2 mA sleep system for extended battery
life
Roaming Automatic handoff with Seamless microcellular
configurable speeds roaming feature for mobile
applications
Network Management SNMP compliant Standards-based management
Diagnostic Tools Site survey utility First software-based solution
available
</TABLE>

RangeLINK. RangeLINK, a family of building-to-building wireless remote
bridges designed to connect local area networks at distances of up to three
miles, utilizes Proxim's 2.4 GHz frequency hopping technology, specialized
software and directional antennas. These products provide a cost-effective
alternative to leased 56 Kbps and T1 data communications lines and other more
expensive wireless products. Proxim offers two different RangeLINK models: one
operates point-to-point with maximum throughput exceeding 1 Mbps, and the other
serves as a multipoint "hub and spoke" campus area interconnection bridging
system with throughput in the 500-600 Kbps range.

900 MHz Products. The Company offers four types of products based on the
Company's 900 MHz direct sequence spread spectrum technology: RF transceivers;
dual board radio-modems that combine a RF transceiver, controller and RS 232
interface in a single unit; ProxLink, a packaged version of the dual board
radio-modem units; and RangeLAN, a family of wireless LAN adapters. The RF
transceiver products

26
<PAGE> 30

and dual board radio-modems are OEM design-in products. ProxLink products,
originally introduced in 1991, are self-contained ruggedized networking devices
which enable point-to-point wireless data communications. The RangeLAN product
family, originally introduced in 1992, includes Proxim's first generation of
open systems wireless LAN adapters.

TECHNOLOGY

Proxim's core technology strengths include high performance spread spectrum
radios, sophisticated wireless networking protocols, highly integrated ASIC/MMIC
designs and advanced network software drivers. The Company's expertise in these
key technology areas has allowed it to design small, lightweight and power-
efficient products that easily integrate into mobile computing and handheld data
collection devices. These technologies enable Proxim's customers to create
products and applications that seamlessly extend existing enterprise data
networks, particularly to mobile end users.

Spread Spectrum Radios. Since 1989, Proxim has focused on developing high
performance spread spectrum radio products for the 900 MHz and 2.4 GHz frequency
bands. The Company was among the first to certify and market 900 MHz direct
sequence RF transceivers, modems and adapters, and has become a leading OEM
supplier of such products to a wide variety of handheld terminal and mobile
computer systems manufacturers. In 1994, Proxim introduced its 2.4 GHz RangeLAN2
wireless LAN product family based on frequency hopping spread spectrum
technology. Frequency hopping provides enhanced interference immunity and
increased wireless network scalability compared to direct sequence products
operating in the 2.4 GHz band. In addition, the Company's RangeLAN2 product
family incorporates an advanced dual data rate, high throughput modulation
technique with a fallback mode for extending RF coverage, an innovation the IEEE
802.11 Committee has adopted as part of its frequency hopping draft standard.

ASIC/MMIC Designs. Proxim's RangeLAN2 performance advantages derive in
part from the high degree of functionality integrated into its custom ASICs and
MMICs. RangeLAN2 mobile client adapter products incorporate a highly integrated
single chip GaAs RF transceiver which provides enhanced radio sensitivity and
power amplification as well as reduced size, weight and power consumption. To
date, Proxim is the only wireless LAN supplier utilizing a fully integrated GaAs
RF transceiver in its 2.4 GHz wireless LAN products. In addition, Proxim has
developed both a custom mixed-signal DSP ASIC and a network controller ASIC
based on CMOS technology for its RangeLAN2 product line. The Company intends to
integrate these two ASICs into a single chip solution in the future. The Company
believes that its RangeLAN2 products reflect the highest degree of ASIC/MMIC
integration of any 2.4 GHz wireless LAN solution available. See "Risk
Factors -- Sole or Limited Sources of Supply."

Wireless Networking Protocols. Implemented in a combination of firmware
and software, Proxim's sophisticated RangeLAN2 MAC protocol is a result of the
Company's extensive experience delivering wireless LAN solutions in a broad
range of applications environments over the past several years. The Company's
CSMA/CA ("Carrier Sense Multiple Access with Collision Avoidance") MAC protocol
provides the equivalent of a robust "wireless Ethernet" RF communications
system, and incorporates a performance-enhancing acknowledgement system that
ensures fairness of access and reliable communications, even in large multi-user
applications environments. This CSMA/CA approach closely resembles the MAC
protocol included in the current IEEE 802.11 draft standard. The RangeLAN2 MAC
protocol also provides for advanced wireless networking features such as
seamless roaming and multi-level power management to support mobile users. These
advanced features, while permitted, are not specifically defined or required in
the current IEEE 802.11 draft standard.

Network Software Drivers. As part of its standard RangeLAN2 product
offering, Proxim provides software drivers such as ODI and NDIS to support most
major network operating systems, including TCP/IP, Novell IPX and Microsoft
Windows (including Windows 95 and Windows NT), among others. These

27
<PAGE> 31

network software drivers enable RangeLAN2 users to seamlessly access existing
enterprise LANs. In addition, the Company offers a "C" version RangeLAN2
software driver to facilitate the customization of Proxim source code in order
to meet specialized OEM hardware and software requirements.

CUSTOMERS

The majority of Proxim's revenue has been derived from sales to OEM
customers that offer wireless LANs products as part of a complete solution that
typically includes specialized mobile computers developed by the OEM, network
infrastructure systems, peripheral devices, software and services. The Company's
OEM partners traditionally target industrial applications in one or more
specific markets such as manufacturing, warehousing, transportation and
retailing. Additionally, Proxim markets its branded products to value added
resellers and systems integrators in emerging wireless markets that include
healthcare, hospitality and financial services, where access to real-time
information is critical. Proxim's 2.4 GHz OEM customers include, among others,
AMP, Bass, Digital, Fujitsu, Intermec, LXE, Norand, NTT-IT, SpaceLabs Medical,
and Zenith Data Systems.

In 1995, Intermec and NTT-IT represented 27% and 14%, respectively, of the
Company's total revenue; in 1994 Intermec and Zenith Data Systems represented
17% and 15%, respectively, of the Company's total revenue; and in 1993, Intermec
and Comtec Information Systems, Inc. represented 18% and 13%, respectively, of
the Company's total revenue. Sales to OEM customers were $17,465,000,
$6,286,000, and $6,691,000 in 1995, 1994 and 1993, respectively, representing
79%, 56% and 83% of total revenue during such periods.

Sales to three OEM customers represented approximately 27%, 17% and 11% of
the Company's total revenue during the first quarter of 1996. The Company
expects that sales to a limited number of OEM customers will continue to account
for a substantial portion of its revenue during any period for the foreseeable
future. The Company also has experienced quarter to quarter variability in sales
to each of its major OEM customers and expects this pattern to continue in the
future. The loss of one or more of the Company's major OEM customers could have
a material adverse effect on the Company's results of operations. See "Risk
Factors -- Dependence on a Limited Number of OEM Customers."

The Company's products are used by a diverse set of customers in a wide
variety of applications. The following are representative examples of
industry-specific applications of Proxim's wireless networking products:

Saint Joseph Hospital. Saint Joseph Hospital, the largest private
inpatient facility in Denver, Colorado, has implemented an innovative
point-of-care solution utilizing Proxim's RangeLAN2 wireless LAN technology with
notebook computers and customized medical carts. Nurses and therapists utilize
approximately 100 of these carts to go from room to room, accessing and entering
clinical information directly to the hospital's database via the RangeLAN2
wireless network. This automated charting system allows Saint Joseph Hospital
medical professionals to spend more time interacting with patients while
providing numerous quality and productivity benefits: real-time access to
patient information, elimination of redundant data entry and reduction of
transcription errors.

Chicago Board Options Exchange. The Chicago Board Options Exchange
("CBOE") has adopted RangeLAN2 technology as its standard wireless LAN
technology for wireless trading and information systems applications on the
trading floor. RangeLAN2 products, including over 30 access points and over 200
wireless LAN adapters, are deployed with handheld PCs to create secure private
wireless networks for each CBOE member firm to connect traders with the central
database. Members of the CBOE have used Proxim's spread spectrum RF products in
trading floor environments for over two years. On the CBOE, wireless computers
provide real-time access to bids, offers, trades and other proprietary
information, enabling the CBOE to make the highest quality markets for brokers
and investors.

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<PAGE> 32

T.G.I. Friday's. T.G.I. Friday's has implemented a table management system
in over 20 restaurants that utilizes a Fujitsu Stylistic 500 RF with a
fully-integrated RangeLAN2 wireless LAN adapter. With this system, T.G.I.
Friday's employees maintain real-time information about the seating preferences
of each group of customers and the status of each table, coordinating
information from a variety of locations within the restaurant. The result is
better customer service, more efficient guest seating and increased sales.

SALES AND MARKETING

The Company sells its products directly to OEM customers, and indirectly to
value added resellers, system integrators, SIs and end users through regional,
national and international distributors. Proxim offers both its design-in
products directly to OEM customers who incorporate these products into their
wireless computing platforms and its branded products as private label models.

The Company generally does not operate with a significant order backlog.
The Company's agreements with OEM customers typically do not require minimum
purchase quantities and a significant reduction in orders from any of these
customers could have a material adverse effect on the Company's results of
operations. The Company's sales to any single OEM customer are also subject to
significant variability from quarter to quarter. Such fluctuations could have a
material adverse effect on the Company's operating results. In addition, there
can be no assurance that the Company will become a qualified supplier for new
OEM customers or that the Company will remain a qualified supplier for existing
OEM customers.

Proxim's branded products are sold to value added resellers, systems
integrators and end users in the U.S. through regional distributors, and through
TechData Corporation and Anixter Corporation, two nationwide distribution and
sales organizations.

In general, distributors generally offer products of several different
companies, including products that may compete with the Company's products.
Accordingly, these distributors may give higher priority to products of other
suppliers, thus reducing their efforts to sell the Company's products.
Agreements with distributors are generally terminable at the distributor's
option. A reduction in sales efforts or termination of a distributor's
relationship with the Company may have a material adverse effect on future
operating results. Use of distributors also entails the risk that distributors
will build up inventories in anticipation of substantial

29
<PAGE> 33

growth in sales. If such growth does not occur as anticipated, these
distributors may substantially decrease the amount of product ordered in
subsequent quarters. Such fluctuations could contribute to significant
variations in the Company's future operating results. In addition, distributors
generally have stock rotation rights and price protection on unsold merchandise,
which may adversely impact the Company's profit margins.

Proxim is expanding the international distribution channels for its
products. The Company is authorized to ship its RangeLAN2 products into more
than 40 countries. In addition to the Company's relationships with numerous OEM
customers who market the RangeLAN2 technology internationally, the Company has
over 30 international authorized distributors in over 40 sales territories.
Revenue from shipments by the Company to customers outside the United States,
principally to a limited number of distributors and OEM customers, represented
36%, 24%, 6% and 4% of total revenue during the first quarter of 1996 and during
1995, 1994 and 1993, respectively. The Company expects that revenue from
shipments to international customers will continue to represent a substantial
portion of total revenue for the foreseeable future. Sales to international
customers or to U.S. OEM customers who ship to international locations are
subject to a number of risks and uncertainties including, but not limited to,
changes in foreign government regulations and telecommunications standards,
export license requirements, tariffs and taxes, other trade barriers,
fluctuations in currency exchange rates, difficulty in collecting accounts
receivable, difficulty in staffing and managing foreign operations, and
potential political and economic instability. While international sales are
typically denominated in U.S. dollars and the Company typically extends limited
credit terms, fluctuations in currency exchange rates could cause the Company's
products to become relatively more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country.
Additionally, payment cycles for international distributors are typically longer
than for distributors in the United States. There can be no assurance that
foreign markets will continue to develop or that the Company will receive
additional orders to supply its products to foreign customers. The Company's
business and operating results could be materially and adversely affected if
foreign markets do not continue to develop or the Company does not receive
additional orders to supply its products for use by foreign customers.

MANUFACTURING

The Company's manufacturing operations consist primarily of final assembly
and testing, quality assurance, packaging and shipping at the Company's
manufacturing facility in Mountain View, California. The Company purchases all
of the circuit boards, integrated circuits and other components used in its
products from third party suppliers. The Company inspects these components for
quality, groups the components into kits by production order, and ships the kits
to its subcontractors for interim assembly and test.

The Company designs its products to provide a high degree of reliability.
The Company's products have achieved a field failure rate of its installed base
of less than 1% per annum to date. The Company believes that this reliability is
the result of its careful quality assurance procedures. Proxim has developed a
supplier selection procedure and approved vendor list to maintain quality. In
addition, the Company monitors its suppliers' performance to ensure consistent
quality, reliability and yields. While the Company's quality assurance program
is not currently certified under ISO 9000, it is modeled after the ISO 9000
quality standards, including process documentation, test procedures, quality
assurance procedures, process control, equipment maintenance, quality record
keeping and training of personnel. In addition, the Company generally uses ISO
9000 certified manufacturing assembly subcontractors and intends to pursue ISO
9000 certification for its internal manufacturing processes in the future.

The Company currently has limited manufacturing capability and has no
experience in large scale manufacturing. If the Company's customers were to
place or concurrently place orders for unexpectedly large quantities of the
Company's products, the Company's present manufacturing capacity might be
inadequate to manage such demand. There can be no assurance that the Company
will be able to develop or contract for additional manufacturing capacity on
acceptable terms on a timely basis. In addition, in order to compete

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<PAGE> 34

successfully, the Company will need to achieve significant product cost
reductions. Although the Company intends to achieve cost reductions through
engineering improvements and production economies, there can be no assurance
that the Company will be able to do so. In order to remain competitive, the
Company must continue to introduce new products and processes into its
manufacturing environment. The Company currently conducts its manufacturing
operations for all of its products in a single facility in Mountain View,
California. In addition, the Company relies on certain outside contract
manufacturers for circuit board assemblies which subjects the Company to a
number of risks, including a potential inability to obtain an adequate supply of
assembled circuit boards as well as reduced control over the price, timely
delivery and quality of such assembled circuit boards. If the Company's Mountain
View facility were to become incapable of operating, even temporarily, or were
unable to operate at or near its current or full capacity for an extended
period, the Company's business and operating results could be materially
adversely affected. Further, in order to remain competitive the Company expects
to continue to introduce new processes into its manufacturing environment.
Changes to the manufacturing process to incorporate new products and processes
could cause disruptions, which, in turn, could adversely affect customer
relationships, cause a loss of market opportunities and have a material adverse
effect on the Company's business and operating results.

RESEARCH AND DEVELOPMENT

The wireless communications industry is characterized by very rapid
technological change, short product life cycles and evolving industry standards.
To remain competitive, the Company must develop or gain access to new
technologies in order to increase product performance and functionality, reduce
product size and maintain cost-effectiveness. The Company's research and
development efforts are focused on investigating new technologies, developing
new products and implementing enhancements to existing products. The Company's
research and development efforts since 1994 have been primarily concentrated on
enhancing features and performance of the Company's RangeLAN2-based products.
These efforts include the development of new ASICs/MMICs, software drivers,
enhanced wireless adapter and access point products; and additional networking
software features. The Company expects that it will continue to devote
substantial research and

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<PAGE> 35

development resources to enhance its RangeLAN2 architecture in the foreseeable
future. Given the emerging nature of the wireless LAN market, there can be no
assurance that the RangeLAN2 products and technology, or the Company's other
products or technology, will not be rendered obsolete by alternative
technologies.

The Company's success is also dependent on its ability to develop new
products for existing and emerging wireless communications markets, to introduce
such products in a timely manner and to have them designed into new products
developed by OEM customers. The development of new wireless networking products
is highly complex, and wireless LAN companies, including Proxim, from time to
time have experienced delays in developing and introducing new products. Due to
the intensely competitive nature of the Company's business, any delay in the
commercial availability of new products could have a material adverse effect on
the Company's operating results. If the Company is unable to develop or obtain
access to advanced wireless networking technologies as they become available, or
is unable to design, develop and introduce competitive new products on a timely
basis, or is unable to hire qualified engineers to develop such technologies and
products, its future operating results would be materially and adversely
affected. In particular, the Company intends to expend substantial resources in
developing products that are designed to conform to the potential IEEE 802.11
specifications. There can be no assurance that these specifications will be
ultimately adopted or that such standards will have a meaningful commercial
impact. To the extent these standards or other standards are adopted, the
Company could be at a disadvantage if its competitors are able to develop and
introduce competitive products which conform to such standards more rapidly than
the Company.

As of March 31, 1996, the Company's research and development department
consisted of 31 full-time employees and one consultant. Research and development
expenses were $1,070,000, $3,288,000, $1,783,000 and $1,474,000 during the first
quarter of 1996 and during 1995, 1994 and 1993, respectively.

COMPETITION

Proxim has several current competitors which offer 2.4 GHz products,
including IBM, Lucent Technologies, Symbol Technologies and Telxon. In addition,
certain other companies, such as 3Com Corporation, have announced their
intention to offer competitive 2.4 GHz products. Some of these competitors have
announced their intention to develop IEEE 802.11 standards-based products or
other higher performance systems in the future. In addition to competition from
companies that offer or have announced their intention to develop wireless LAN
products, the Company could face future competition from companies that offer
products which replace network adapters or which offer alternative wireless
communications solutions, or from large computer and network equipment
companies. There can be no assurance that the Company will be able to compete
successfully against these competitors or that competitive pressures faced by
the Company will not adversely affect its business or operating results.

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<PAGE> 36

competes with companies with high volume manufacturing and extensive marketing
and distribution capabilities, areas in which the Company has limited
experience. Increased competition, direct and indirect, could adversely affect
the Company's revenue and profitability through pricing pressure and loss of
market share. There can be no assurance that the Company will be able to compete
successfully against existing and new competitors as the market evolves and the
level of competition increases.

GOVERNMENT REGULATION

PROTECTION OF PROPRIETARY RIGHTS

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<PAGE> 37

will be sufficiently broad to protect the Company's technology. In addition,
there can be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide proprietary protection to the Company. Since U.S. patent
applications are maintained in secrecy until patents issue, and since
publication of inventions in the technical or patent literature tend to lag
behind such inventions by several months, the Company cannot be certain that it
was the first creator of the inventions covered by its issued patents or pending
patent applications or that it was the first to file patent applications for
such inventions or that the Company is not infringing on the patents of others.
In addition, the Company has filed, or reserved its rights to file, a number of
patent applications internationally. There can be no assurance that any such
international patent applications will issue or that the laws of foreign
jurisdictions will protect the Company's proprietary rights to the same extent
as the laws of the United States.

In view of the rapid technological change in this industry, Proxim believes
that the technical expertise and creative skills of its engineers and other
personnel are crucial in determining the Company's future technological success.
The Company's ability to compete in the marketplace may be enhanced by its
ability to protect its proprietary information through the ownership of patents,
registrations and trademarks. The Company attempts to protect its trade secrets
and other proprietary information through agreements with customers and
suppliers, proprietary information agreements with employees and other security
measures. However, although the Company intends to protect its rights
vigorously, there can be no assurance that these measures will be successful.
Litigation may be necessary to enforce the Company's patents, trademarks or
other intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business and operating results. No intellectual property
of the Company has been invalidated or declared unenforceable. However, there
can be no assurance that in the future such rights will be upheld. Furthermore,
there can be no assurance that any issued patents will provide the Company with
a competitive advantage or will not be challenged by third parties or that the
patents of others will not have an adverse effect on the Company's ability to do
business. There can be no assurance that the measures taken by the Company will
prevent misappropriation of its technology. In addition, there can be no
assurance that others will not independently develop similar products, design
around the Company's proprietary technology or duplicate the Company's products.

EMPLOYEES

As of March 31, 1996, the Company employed 112 full-time employees and 35
temporary employees. Of these individuals, 31 are in engineering and product
development, 37 are in marketing, sales and customer support, 70 are in
manufacturing and quality assurance and 9 are in finance and administration. The
Company believes that its future success will depend in large measure on its
ability to retain certain key technical and management personnel and to attract
and retain additional highly skilled employees. Competition for qualified
personnel in the wireless data communications and networking industries is
intense, and there can be no assurance that the Company will be successful in
retaining its key employees or that it will be able to attract, assimilate or
retain the additional skilled personnel that will be required to support the
Company's anticipated growth. None of the Company's employees are represented by
a labor union. The Company believes that its relations with employees are good.

FACILITIES

The Company maintains its corporate headquarters in a 40,000 square foot
building located in Mountain View, California pursuant to a lease that expires
in June 2000. The Company also leases sales offices in Atlanta, Georgia and
Nashua, New Hampshire. The Company believes that its facilities are adequate to
meet its current needs and that additional or alternative space will be
available as necessary in the future on commercially reasonable terms.

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<PAGE> 38

MANAGEMENT

The following table sets forth certain information concerning the Company's
directors and executive officers as of March 31, 1996:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
David C. King................. 36 Chairman of the Board of Directors, President and
Chief Executive Officer
Brian T. Button............... 37 Vice President of Marketing
Keith E. Glover............... 39 Vice President of Finance and Administration and
Chief Financial Officer
Juan Grau..................... 38 Vice President of Engineering
Warren A. Hackbarth........... 49 Vice President of Sales
Yosh Sato..................... 51 Vice President of Manufacturing
Raymond Chin.................. 42 Director
Leslie G. Denend.............. 55 Director
Michael D. Kaufman............ 54 Director
G. Russell Mortenson.......... 46 Director
</TABLE>

DAVID C. KING joined Proxim in December 1992 as Vice President of Marketing
and acting Chief Financial Officer, in July 1993 was appointed President, Chief
Executive Officer and Director, and in January 1996 was named Chairman of the
Board of Directors. From December 1990 to November 1992, Mr. King served in
various executive capacities at Vitalink Communications Corporation
("Vitalink"), a LAN internetworking subsidiary of Network Systems Corporation,
most recently as Vice President of Marketing and Customer Services. From 1985 to
1990, Mr. King was Senior Manager in the San Francisco office of McKinsey &
Company, Inc., an international management consulting firm, where he was a
member of the firm's high technology and health care practices.

BRIAN T. BUTTON joined Proxim as Vice President of Marketing in June 1994.
From March 1989 to June 1994, Mr. Button worked for Stratacom Corporation, where
he held several management positions, most recently as Director, Product
Marketing. From May 1982 to February 1989, Mr. Button worked for Hewlett-Packard
Company, where he held several marketing management positions.

KEITH E. GLOVER has served as the Vice President of Finance and
Administration and Chief Financial Officer since he joined Proxim in September
1993. From March 1986 to June 1993, Mr. Glover worked for Vitalink, where he
held several financial management positions, most recently as Vice President of
Finance.

JUAN GRAU joined Proxim in August 1988 as RF Communications Manager. Mr.
Grau was appointed Director of Product Engineering in November 1989 and, in June
1991, was promoted to Vice President of Engineering. From 1980 to 1988, Mr. Grau
worked at Hewlett-Packard Company, where he served in several engineering and
project management positions.

WARREN A. HACKBARTH joined Proxim in May 1994 as Director of Market
Development. In July 1994, Mr. Hackbarth was promoted to Vice President of
Sales. From March 1991 to May 1994, Mr. Hackbarth worked for Fujitsu Personal
Systems, Inc. (formerly Poqet Computer Corp.), where he held several sales
management positions, most recently as Director, Value Integration Services.
From September 1989 to February 1991, Mr. Hackbarth served as an Account Manager
at Informix Corporation. From October 1984 to September 1989, Mr. Hackbarth
worked for Wang Laboratories, Inc., where he held several sales and marketing
management positions.

YOSH SATO joined Proxim in January 1993 as Director of Manufacturing and
has served as Vice President of Manufacturing since June 1993. From August 1989
to September 1992, Mr. Sato served as

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<PAGE> 39

Director of Operations at Maxoptix Corporation, an optical disk drive company.
From 1988 to 1989, he served as a program manager at MIPS Computer Systems,
Inc., a semiconductor and computer systems manufacturer.

RAYMOND CHIN became a Director of the Company in May 1991 and was Chairman
of the Board of Directors from July 1991 until October 1995. Since January 1995,
Dr. Chin has served as a general partner of Alpine Technology Ventures, a
venture capital firm. From May 1990 to December 1994, Dr. Chin served as a
general partner of MK Global Ventures, a venture capital firm. From June 1984 to
May 1990, Dr. Chin served as a Director at Ameritech Development Corporation, a
subsidiary of Ameritech Corporation, a regional Bell operating company.

LESLIE G. DENEND became a Director of the Company in March 1996. Since
February 1993, Mr. Denend has served as President and Chief Executive Officer,
and, since June 1993, also as Director, of Network General Corporation. From
October 1990 until December 1992, Mr. Denend was President and Chief Executive
Officer of Vitalink Communications. From January 1989 until October 1990, Mr.
Denend served as Executive Vice President of Product Operations at 3Com
Corporation.

MICHAEL D. KAUFMAN became a Director of the Company in September 1991.
Since October 1987, Mr. Kaufman has served as the managing general partner of MK
Global Ventures. From August 1981 until October 1987, Mr. Kaufman was a general
partner of Oak Investment Partners, a venture capital firm. Mr. Kaufman is also
a director of Asante Technologies, Inc., Davox Corporation, Document
Technologies, Inc., Document Imaging Systems Corporation, and HyperMedia
Communications, Inc.

G. RUSSELL MORTENSON became a Director of the Company in August 1994. Mr.
Mortenson served as the President, Chief Operating Officer and Director of
Amtech Corporation from August 1987 until his appointment as Chief Executive
Officer in January 1992.

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<PAGE> 40

UNDERWRITING

Under the terms and subject to the conditions contained in Underwriting
Agreements, each of the U.S. Underwriters named below, for whom UBS Securities
LLC, Montgomery Securities, Unterberg Harris and Volpe, Welty & Company are
serving as U.S. Representatives, have severally agreed to purchase and the
Company has agreed to sell to them, and the International Underwriters named
below, for whom UBS Limited, Montgomery Securities, Unterberg Harris and Volpe,
Welty & Company are acting as International Representatives (the "International
Underwriters"), have severally agreed to purchase, and the Company has agreed to
sell to them, the respective number of shares of Common Stock set forth opposite
their respective names below:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
------------------------------------------------------------ ----------------
<S> <C>
U.S. Underwriters:
UBS Securities LLC........................................
Montgomery Securities.....................................
Unterberg Harris..........................................
Volpe, Welty & Company....................................
----
Subtotal............................................... 1,875,000
----
International Underwriters:
UBS Limited...............................................
Montgomery Securities.....................................
Unterberg Harris..........................................
Volpe, Welty & Company....................................
----
Subtotal............................................... 625,000
----
Total............................................ 2,500,000
====
</TABLE>

The U.S. Underwriters and International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by counsel and to certain other conditions. The Underwriters are
obligated to take and pay for all of the shares of Common Stock offered hereby
(other than those covered by the over-allotment option described below) if any
are taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any shares of Common Stock being sold by
it (the "U.S. Shares") for the account of anyone other than a United States or
Canadian Person (as defined below) and (b) it has not offered or sold, and will
not offer or sell, directly or indirectly, any U.S. Shares or distribute this
Prospectus outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement Between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions set forth below, (a) it is not purchasing
any shares of Common Stock being sold by it (the "International Shares") for the
account of any United States or Canadian Person and (b) it has not offered or
sold, and will not offer or sell, directly or indirectly, any International
Shares or distribute this Prospectus within the United States or Canada or to
any United States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between the U.S. and International Underwriters. With respect to UBS
Securities LLC, Montgomery Securities, Unterberg Harris and Volpe, Welty &
Company, the foregoing representations or agreements (i) made by each of them in
their capacity as a U.S. Underwriter shall apply only to shares of Common Stock
purchased by each of them in their capacity as a U.S.

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<PAGE> 41

Underwriter, (ii) made by each of them in their capacity as an International
Underwriter shall apply only to shares of Common Stock purchased by each of them
in their capacity as an International Underwriter and (iii) shall not restrict
either of their abilities to distribute the Prospectus to any person. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside of the
United States or Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person and "United States" means the United States of
America, its territories, its possessions and all areas subject to its
jurisdiction.

Pursuant to the Agreement Between the U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares so sold shall be the offering price set forth on the cover page hereof,
in United States Dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance that,
by purchasing such shares such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of shares of Common Stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made, and that such
dealer will deliver to any other dealer to whom it sells any of such shares of
Common Stock a notice to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and will not offer or sell any shares of Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed on.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account or any resident thereof, any shares of Common Stock acquired in
connection with this offering, except for offers or sales to Japanese
International Underwriters or dealers and except pursuant to any exemption from
the regulation requirement of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such

38
<PAGE> 42

shares of Common Stock a notice stating in substance that such dealer may not
offer or sell any of such shares, directly or indirectly, in Japan or to or for
the account of any resident thereof, except pursuant to any exemption for the
registration requirement of the Securities and Exchange Law of Japan, and that
such dealer will send to any other dealer to whom it sells any shares a notice
to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer and sell, directly or indirectly or offer or sell to
any person for re-offering or resale, directly or indirectly any shares of
Common Stock to any resident of the Republic of Korea (as the term is defined
under the Foreign Exchange Management Law of the Republic of Korea), or in the
Republic of Korea, except pursuant to applicable laws and regulations of the
Republic of Korea.

The Underwriters have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share, and the Underwriters may
allow, and such dealers may reallow, a concession not more than $ per
share to certain other dealers. After the offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or part.

The Company has granted an option to the Underwriters exercisable during
the 30-day period after the date of this Prospectus to purchase up to 375,000
additional shares of Common Stock to cover over-allotments, if any, at the same
price per share as the initial 2,500,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.

The Underwriting Agreements provide that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.

The Company's executive officers and directors, who collectively hold an
aggregate of 900,696 shares of Common Stock and options to purchase Common
Stock, have agreed that without the consent of the Underwriters, acting jointly,
they will not, directly or indirectly offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable therefor for a period of 90 days from the date of this Prospectus,
subject to certain limited exceptions. The Company has agreed that, for a period
of 90 days from the date of this Prospectus, it will not, without the written
consent of the Underwriters acting jointly, directly or indirectly, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities, convertible or exchangeable therefor, subject to limited exceptions.

In connection with this offering, the Underwriters and selling group
members (if any) or their respective affiliates intend to engage in passive
market-making transactions in the Common Stock of the Company on the Nasdaq
National Market in accordance with Rule 10b-6A under the Securities Exchange Act
of 1934, as amended, during the two business day period before commencement of
offers or sales of the shares of Common Stock offered hereby. The passive market
making transactions must be identified as such and comply with applicable volume
and price limits. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; however, if
all independent bids are lowered below the passive market makers bid, such bid
must then be lowered when certain purchase limits are exceeded.

From time to time, certain of the Underwriters or their affiliates have
provided, and may continue to provide, investment banking services to the
Company.

39
<PAGE> 43

ADDITIONAL INFORMATION

This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments, schedules and exhibits, referred to as
the "Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement and certain parts are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement. Statements contained
in this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, each such statement being
qualified in all respects by such reference.

AVAILABLE INFORMATION

The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied, at the Commission's Public Reference
Section, Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. The Common Stock of
the Company is quoted on the Nasdaq National Market. Reports and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 9513 Key West Avenue, Rockville, Maryland 20850.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;

(2) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996; and

(3) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on October 22,
1993.

All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for

40
<PAGE> 44

such documents should be submitted in writing to the Chief Financial Officer of
the Company, at the Company's principal executive offices at 295 North Bernardo
Avenue, Mountain View, California 94043 or by telephone at (415) 960-1630.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Brobeck, Phleger & Harrison
LLP, Palo Alto, California are acting as counsel for the Underwriters in
connection with certain legal matters relating to the shares of Common Stock
offered hereby.

EXPERTS

The financial statements as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus and incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

41
<PAGE> 45

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheet at December 31, 1994 and 1995, and March 31, 1996 (unaudited)........... F-3
Statement of Operations for the Years Ended December 31, 1993, 1994 and 1995, and for
the Three Months Ended March 31, 1995 and 1996 (unaudited).......................... F-4
Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 1993,
1994 and 1995, and for the Three Months Ended March 31, 1996 (unaudited)............ F-5
Statement of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995, and for
the Three Months Ended March 31, 1995 and 1996 (unaudited).......................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 46

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
Proxim, Inc.

In our opinion, the accompanying balance sheet and the related statements
of operations, stockholders' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of Proxim, Inc. at December 31,
1994 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
San Jose, California
January 24, 1996

F-2
<PAGE> 47

PROXIM, INC.

BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- -----------
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $11,300 $ 6,247 $ 5,590
Accounts receivable, net.................................. 2,129 6,810 6,350
Inventories............................................... 3,026 7,891 8,112
Deferred tax assets....................................... -- 1,231 1,275
Other assets.............................................. 242 128 279
-------- ------- -------
Total current assets.............................. 16,697 22,307 21,606
Property and equipment, net................................. 738 1,800 2,269
-------- ------- -------
$17,435 $24,107 $23,875
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,687 $ 3,747 $ 2,331
Accrued liabilities....................................... 522 1,910 2,019
-------- ------- -------
Total current liabilities......................... 2,209 5,657 4,350
-------- ------- -------
Commitments (Note 9)
Stockholders' equity:
Common Stock, $.001 par value, 25,000 shares authorized;
7,011, 7,257 and 7,456 shares issued and outstanding... 7 7 7
Additional paid-in capital................................ 27,216 27,594 27,757
Accumulated deficit....................................... (11,997) (9,151) (8,239)
-------- ------- -------
Total stockholders' equity........................ 15,226 18,450 19,525
-------- ------- -------
$17,435 $24,107 $23,875
======== ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 48

PROXIM, INC.

STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
------ ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue..................................... $8,078 $11,297 $22,083 $3,363 $8,901
Cost of revenue............................. 3,907 5,221 10,843 1,619 4,539
------ ------- ------- ------ ------
Gross profit................................ 4,171 6,076 11,240 1,744 4,362
------ ------- ------- ------ ------
Operating expenses:
Research and development.................. 1,474 1,783 3,288 652 1,070
Selling, general and administrative....... 2,821 3,982 6,694 1,235 2,127
------ ------- ------- ------ ------
Total operating expenses.......... 4,295 5,765 9,982 1,887 3,197
------ ------- ------- ------ ------
Income (loss) from operations............... (124) 311 1,258 (143) 1,165
Interest and other income, net.............. 25 517 537 163 84
------ ------- ------- ------ ------
Income before income taxes.................. (99) 828 1,795 20 1,249
Provision (benefit) for income taxes........ -- 83 (1,051) 2 337
------ ------- ------- ------ ------
Net income (loss)........................... $ (99) $ 745 $ 2,846 $ 18 $ 912
====== ======= ======= ====== ======
Net income (loss) per share................. $ (.02) $ .10 $ .35 $ .00 $ .11
====== ======= ======= ====== ======
Weighted average common shares and
equivalents............................... 5,665 7,738 8,172 7,733 8,268
====== ======= ======= ====== ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 49

PROXIM, INC.

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCRETION
OF PREFERRED
COMMON STOCK ADDITIONAL STOCK
--------------- PAID-IN REDEMPTION ACCUMULATED
SHARES AMOUNT CAPITAL VALUE DEFICIT TOTAL
------ ------ ---------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992............... 1,519 $1 $ 9,498 $ (468) $ (12,643) $(3,612)
Exercise of stock options................ 258 -- 40 -- -- 40
Accretion of Mandatorily Redeemable
Convertible Preferred Stock redemption
value................................. -- -- -- (466) -- (466)
Conversion of Mandatorily Redeemable
Convertible Preferred Stock into
Common Stock.......................... 3,578 4 5,755 934 -- 6,693
Issuance of Common Stock, net of issuance
costs of $812......................... 1,500 2 11,741 -- -- 11,743
Net loss................................. -- -- -- -- (99) (99)
----- ------- ----- -------- -------
--
Balance at December 31, 1993............... 6,855 27,034 -- (12,742) 14,299
7
Exercise of stock options................ 131 52 -- -- 52
--
Issuance of Common Stock under Stock
Purchase Plan......................... 25 130 -- -- 130
--
Net income............................... -- -- -- 745 745
--
----- ------- ----- -------- -------
--
Balance at December 31, 1994............... 7,011 27,216 -- (11,997) 15,226
7
Exercise of stock options................ 172 102 -- -- 102
--
Issuance of Common Stock under Stock
Purchase Plan......................... 74 276 -- -- 276
--
Net income............................... -- -- -- 2,846 2,846
--
----- ------- ----- -------- -------
--
Balance at December 31, 1995............... 7,257 27,594 -- (9,151) 18,450
7
Exercise of stock options (unaudited).... 130 33 -- -- 33
--
Issuance of Common Stock under Stock
Purchase Plan (unaudited)............. 69 130 -- -- 130
--
Net income (unaudited)................... -- -- -- 912 912
--
----- ------- ----- -------- -------
--
Balance at March 31, 1996 (unaudited)...... 7,456 $ 27,757 $ -- $ (8,239) $19,525
$7
===== ======= ===== ======== =======
==
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE> 50

PROXIM, INC.

STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ (99) $ 745 $ 2,846 $ 18 $ 912
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Depreciation and amortization.............. 197 262 516 94 160
Deferred tax assets........................ -- -- (1,231) -- (44)
Changes in assets and liabilities:
Accounts receivable..................... (508) (1,036) (4,681) 342 460
Inventories............................. (325) (2,115) (4,865) (465) (221)
Other assets............................ (85) (115) 114 64 (151)
Accounts payable........................ 142 1,047 2,060 (649) (1,416)
Accrued liabilities..................... 193 142 1,388 199 109
------- ------- ------- ------- -------
Net cash used in operating
activities......................... (485) (1,070) (3,853) (397) (191)
------- ------- ------- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES FOR
PURCHASES OF PROPERTY AND EQUIPMENT........ (129) (681) (1,578) (539) (629)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capitalized lease
obligations............................. (50) (17) -- -- --
Proceeds from issuance of Mandatorily
Redeemable Convertible Preferred
Stock................................... 551 -- -- -- --
Proceeds from issuance of Common Stock..... 12,595 182 378 127 163
Payment of initial public offering issuance
costs................................... (395) (417) -- -- --
------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities............... 12,701 (252) 378 127 163
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents................................ 12,087 (2,003) (5,053) (809) (657)
Cash and cash equivalents, beginning of
period..................................... 1,216 13,303 11,300 11,300 6,247
------- ------- ------- ------- -------
Cash and cash equivalents, end of period..... $13,303 $11,300 $ 6,247 $10,491 $ 5,590
======= ======= ======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of Series A and B Mandatorily
Redeemable Convertible Preferred Stock
into Common Stock upon completion of
initial public offering................. $ 6,693 $ -- $ -- $ -- $ --
Accretion of Mandatorily Redeemable
Convertible Preferred Stock redemption
value................................... 466 -- -- -- --
Conversion of convertible subordinated
promissory notes into Series B
Mandatorily Redeemable Convertible
Preferred Stock......................... 300 -- -- -- --
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 51

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY:

Proxim, Inc. (the "Company") designs, manufactures and markets high
performance wireless local area data networking products. Based on spread
spectrum radio frequency technology, Proxim's highly integrated wireless client
adapters and network infrastructure systems seamlessly extend existing
enterprise LANs to enable mobility-driven applications in a wide variety of
in-building and campus area environments.. The Company operates in one industry
segment and has no assets located outside the United States.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Management estimates and assumptions

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 reported amounts of revenue, cost of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Cash equivalents

The Company considers all highly liquid instruments with a maturity of
three months or less when purchased to be cash equivalents.

Revenue

Product revenue is generally recognized upon shipment to the customer. The
Company grants certain distributors limited rights of return and price
protection on unsold products. Product revenue on shipments to distributors
which have rights of return and price protection is recognized upon shipment by
the distributor. The provision for estimated future warranty is recorded at the
time revenue is recognized.

Inventories

Inventories are stated at the lower of cost or market, cost being
determined using the first in, first out method.

Property and equipment

Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets, ranging from two to five years. Amortization of leasehold
improvements is computed using the straight-line method over the shorter of the
remaining lease term or the estimated useful lives of the improvements.

Software development costs

Software development costs are included in research and development and are
expensed as incurred. Statement of Financial Accounting Standards No. 86
requires the capitalization of certain software development costs once
technological feasibility is established, which the Company defines as
completion of a working model. The capitalized cost is then amortized on a
straight-line basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater. To date, the
period between achieving technological feasibility and the general availability
of such software has been short and

F-7
<PAGE> 52

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs.

Income taxes

A deferred tax liability or asset, net of valuation allowance, is
established for the expected future consequences resulting from the differences
between the financial reporting and income tax bases of assets and liabilities
and from net operating loss carryforwards.

Net income (loss) per share

Net income (loss) per share is based upon the weighted average number of
outstanding shares of Common Stock plus dilutive common stock equivalents.
Through the initial public offering of the Company's Common Stock on December
22, 1993, common stock equivalents also included shares of Mandatorily
Redeemable Convertible Preferred Stock assuming conversion into Common Stock on
their respective original dates of issuance and stock options and warrants
granted subsequent to September 30, 1992 (using the treasury stock method and
initial public offering price).

Interim results (unaudited)

The accompanying balance sheet as of March 31, 1996, the statements of
operations and of cash flows for the three months ended March 31, 1995 and 1996,
and the statement of stockholders' equity for the three months ended March 31,
1996 are unaudited. In the opinion of management, the statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair statement of the results of these interim periods. The data disclosed in
these notes to financial statements for these periods are also unaudited.

F-8
<PAGE> 53

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable:
Gross accounts receivable......................... $ 2,129 $ 6,930 $ 6,450
Less: allowance for doubtful accounts............. -- (120) (100)
------- ------- -------
$ 2,129 $ 6,810 $ 6,350
======= ======= =======
Inventories:
Raw materials..................................... $ 1,303 $ 1,609 $ 1,665
Work-in-process................................... 731 2,987 3,070
Finished goods.................................... 992 3,295 3,377
------- ------- -------
$ 3,026 $ 7,891 $ 8,112
======= ======= =======
Property and equipment:
Computer and test equipment....................... $ 2,038 $ 3,163 $ 3,722
Furniture and fixtures............................ 164 385 392
Leasehold improvements............................ 220 519 582
------- ------- -------
2,422 4,067 4,696
Less: accumulated depreciation and amortization... (1,684) (2,267) (2,427)
------- ------- -------
$ 738 $ 1,800 $ 2,269
======= ======= =======
Accrued liabilities:
Accrued compensation.............................. $ 311 $ 1,119 $ 970
Income taxes payable.............................. 64 220 553
Deferred revenue.................................. 83 340 358
Other............................................. 64 231 138
------- ------- -------
$ 522 $ 1,910 $ 2,019
======= ======= =======
</TABLE>

NOTE 4 -- STOCKHOLDERS' EQUITY:

Initial Public Offering

In December 1993, the Company completed an initial public offering of
1,500,000 shares of Common Stock at $9.00 per share and realized proceeds of
$11,743,000, net of issuance costs of $812,000.

Preferred Stock

In December 1993, the stockholders approved a class of Preferred Stock
consisting of 5,000,000 shares, at a par value of $.001 per share, issuable in
series and having such rights, preferences, privileges and restrictions as may
be determined by the Board of Directors. As of December 31, 1995, no Preferred
Stock had been issued.

1986 Stock Option Plan

The Company's 1986 Stock Option Plan (the "1986 Plan") provides for the
grant of stock options to employees and consultants at prices not less than 85%
of the fair value of the Company's Common Stock on the date of grant. The
options terminate ten years after the date of grant. All options granted have
been at the

F-9
<PAGE> 54

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- STOCKHOLDERS' EQUITY, CONTINUED:
fair market value of the stock at the dates of grant. An aggregate of 2,272,088
shares of Common Stock have been reserved for issuance pursuant to the 1986
Plan.

Unless otherwise provided for by the Board, the options are exercisable
only upon vesting. Options generally vest ratably over a 48 month period. At
December 31, 1995, there were 527,778 shares vested and exercisable under the
1986 Plan. The 1986 Plan (but not outstanding options issued thereunder)
terminated by its terms on March 20, 1996.

A summary of transactions relating to the 1986 Plan follows (in thousands):

<TABLE>
<CAPTION>
SHARES OPTIONS
AVAILABLE OUTSTANDING OPTION PRICE
--------- ----------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1992..................... 200 806 $ .15 - .25
Shares authorized.............................. 500 --
Options granted................................ (741) 741 .15 - 8.00
Options exercised.............................. -- (258) .15 - .25
Options canceled............................... 305 (305) .15 - .25
---- -----
Balance at December 31, 1993..................... 264 984 .15 - 8.00
Shares authorized.............................. 500 --
Options granted................................ (345) 345 4.00 - 6.81
Options exercised.............................. -- (131) .15 - 1.50
Options canceled............................... 47 (47) .25 - 1.50
---- -----
Balance at December 31, 1994..................... 466 1,151 .15 - 8.00
Options granted................................ (257) 257 4.13 - 16.75
Options exercised.............................. -- (172) .15 - 7.13
Options canceled............................... 36 (36) .15 - 7.13
---- -----
Balance at December 31, 1995..................... 245 1,200 .15 - 16.75
Options granted................................ (151) 151 17.75 - 21.88
Options exercised.............................. -- (125) .15 - 9.63
Termination of 1986 Plan....................... (94) --
---- -----
Balance at March 31, 1996........................ -- 1,226 $ .15 - 21.88
==== =====
</TABLE>

1995 Long-Term Incentive Plan

In April 1995, the Company established the 1995 Long-Term Incentive Plan
(the "1995 Plan") which provides for the grant of awards in the form of stock
options, restricted stock, performance shares, restricted stock units, and stock
unit awards to employees, consultants and officers at prices not less than 100%
of the fair value of the Company's Common Stock on the date of grant. The
options terminate ten years after the date of grant. All options granted have
been at the fair market value of the stock at the dates of grant. The 1995 Plan
is intended to supplement and eventually replace the Company's 1986 Plan. At
March 31, 1996, 110,000 options had been granted at an exercise price of $6.50
per share, and no shares were vested and exercisable under the 1995 Plan. In
March 1996, the Company's Board of Directors increased the number of shares of
Common Stock authorized for issuance under the 1995 Plan by 1,000,000 shares to
an aggregate of 1,250,000 shares.

F-10
<PAGE> 55

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- STOCKHOLDERS' EQUITY, CONTINUED:
1993 Employee Stock Purchase Plan

In September 1993, the Company established the 1993 Employee Stock Purchase
Plan (the "Purchase Plan"). The Company initially reserved 200,000 shares of
Common Stock for issuance to employees under the Purchase Plan. Under the
Purchase Plan, an eligible employee may purchase shares of Common Stock from the
Company through payroll deductions of up to 10% of his or her total
compensation, at a price per share equal to 85% of the lesser of the fair market
value of the Company's Common Stock at the first day or last day of each
six-month offering period. Offering periods commence on August 15 and February
15. During 1994 and 1995 and the three months ended March 31, 1996, 24,592,
74,354 and 69,141 shares of the Company's Common Stock were issued under the
Purchase Plan respectively. In March 1996, the Company's Board of Directors
increased the number of shares of Common Stock reserved for issuance under the
Purchase Plan by 200,000 shares to an aggregate of 400,000 shares.

1994 Director Option Plan

In May 1994, the Company adopted the 1994 Director Option Plan (the
"Directors' Plan") which provides for the grant of stock options to directors at
the fair value of the Company's Common Stock on the date of grant. The options
terminate ten years after the date of grant. All options granted have been at
the fair market value of the stock at the dates of grant. An aggregate of
100,000 shares of Common Stock have been reserved for issuance under the
Directors' Plan. At March 31, 1996, 55,000 options had been granted at exercise
prices ranging from $4.25 to $18.63 per share, 5,208 options had been exercised,
8,542 options had been canceled and 53,542 shares were available for grant under
the Directors' Plan.

NOTE 5 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

The Company's Articles of Incorporation were amended and restated in
October 1992 to authorize the issuance of four series of Mandatorily Redeemable
Convertible Preferred Stock aggregating 9,861,448 shares, of which two series of
Mandatorily Redeemable Convertible Preferred Stock (Series A and Series B)
aggregating 3,578,000 shares were issued prior to the initial public offering.
In connection with the public offering of the Company's Common Stock in December
1993, the Mandatorily Redeemable Convertible Preferred Stock was converted into
Common Stock.

A summary of Series A Mandatorily Redeemable Convertible Preferred Stock
("Series A") and Series B Mandatorily Redeemable Convertible Preferred Stock
("Series B") transactions is as follows (in thousands):

<TABLE>
<CAPTION>
SERIES A SERIES B
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Balance at December 31, 1992.................. 2,430 $ 3,451 793 $ 1,925
Conversion of Bridging Notes.................. -- -- 125 300
Accretion of redemption value................. -- 269 -- 197
Exercise of Series B Warrants................. -- -- 230 551
Conversion of Mandatorily Redeemable
Convertible Preferred Stock into Common
Stock upon the closing of the initial public
offering in December 1993................... (2,430) (3,720) (1,148) (2,973)
------ ------- ------ -------
Balance at December 31, 1993.................. -- $ -- -- $ --
====== ======= ====== =======
</TABLE>

In conjunction with the issuance of Series B and the Bridging Notes in
1992, the Company issued warrants to purchase 104,540 and 125,000 shares,
respectively, of the Company's Series B at $2.40 per share,

F-11
<PAGE> 56

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK, CONTINUED:
which represented the fair market value of the Company's preferred stock at the
date of issuance. All such warrants were exercised prior to the initial public
offering.

NOTE 6 -- RETIREMENT SAVINGS PLAN:

Effective January 1, 1993, the Company implemented a retirement savings
plan which qualifies as a thrift plan under section 401(k) of the Internal
Revenue Code. All employees who have completed two months of service and are
twenty-one years of age or older on or before the quarterly entry periods are
eligible to participate in the Plan. The Plan allows participants to contribute
up to 25% of the total compensation that would otherwise be paid to the
participant, not to exceed the amount allowed by applicable Internal Revenue
Service guidelines. The Company may make a discretionary matching contribution
equal to the percentage of the participant's contributions subject to a maximum
of 4%. The Company made no contributions to the plan through December 31, 1995.

NOTE 7 -- INCOME TAXES:

The provision (benefit) for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1994 1995
---- ---- -------
<S> <C> <C> <C>
Current:
Federal.................................................... $-- $60 $ 149
State...................................................... -- 23 31
--- --- -------
-- 83 180
--- --- -------
Deferred:
Federal.................................................... -- -- (1,093)
State...................................................... -- -- (138)
--- --- -------
-- -- (1,231)
--- --- -------
$-- $83 $(1,051)
=== === =======
</TABLE>

Deferred tax assets comprise the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Net operating loss carryforwards................................. $ 2,441 $ 1,788
Capitalized research and development costs....................... 214 181
Accrued expenses and reserves.................................... 403 586
------- -------
Total deferred tax assets........................................ 3,058 2,555
Valuation allowance.............................................. (3,058) (1,324)
------- -------
$ -- $ 1,231
======= =======
</TABLE>

F-12
<PAGE> 57

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- INCOME TAXES, CONTINUED:
The tax provision (benefit) reconciles to the amount computed by
multiplying income (loss) before tax by the U.S. federal statutory rate of 35%
as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
---- ----- -------
<S> <C> <C> <C>
Tax at federal statutory rate............................. $(35) $ 290 $ 628
State taxes, net of federal tax benefit................... -- 50 109
Net operating loss carryforwards, net of minimum tax
effect.................................................. 35 (257) (503)
Change in valuation allowance............................. -- -- (1,231)
Other..................................................... -- -- (54)
---- ----- -------
$ -- $ 83 $(1,051)
==== ===== =======
</TABLE>

Management has established a valuation allowance covering a portion of
gross deferred tax assets based on management's expectations of future taxable
income and the actual taxable income of the Company during the three years ended
December 31, 1995.

At December 31, 1995, the Company had approximately $5,000,000 of net
operating loss carryforwards for federal tax reporting purposes available to
offset future taxable income; such carryforwards expire through 2008.

The amounts of and the benefit from net operating losses that can be
carried forward may be impaired or limited in certain circumstances. Events
which may cause changes in the Company's taxes include, but are not limited to,
a cumulative stock ownership change of greater than 50%, as defined, over a
three year period. As a result of a prior financing which resulted in a
cumulative ownership change in 1991 of greater than 50%, approximately
$3,000,000 of the Company's net operating loss carryforwards may be limited to
usage of approximately $300,000 per year through 2005.

NOTE 8 -- CONCENTRATION OF SALES AND CREDIT RISK:

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable. The Company places its cash and cash equivalents
primarily in market rate accounts and highly rated commercial paper. The
Company, by policy, limits the amount of credit exposure to any financial
institution or commercial issuer.

The Company generally extends 30-day credit terms to its customers, which
is consistent with industry business practices. The Company performs ongoing
credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. To date the Company has not
experienced any material credit losses. All transactions are denominated in U.S.
dollars.

In 1993, revenue from two customers represented 18% and 13% of total
revenue. During 1994, revenue from two customers represented 17% and 15% of
total revenue. During 1995, revenue from two customers represented 27% and 14%
of total revenue. During the three months ended March 31, 1996, revenue from
three customers represented 27%, 17% and 11% of total revenue.

Revenue from shipments to customers outside the United States, primarily in
Asia Pacific, Europe and South America, represented 4%, 6%, 24% and 36% of total
revenue in 1993, 1994, 1995 and the three months ended March 31, 1996,
respectively. Revenue from sales to Asia Pacific represented 17% and 23% of

F-13
<PAGE> 58

PROXIM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- CONCENTRATION OF SALES AND CREDIT RISK, CONTINUED:
total revenue in 1995 and the three months ended March 31, 1996, respectively.
Revenue from sales to South America represented 11% of total revenue in the
three months ended March 31, 1996.

At December 31, 1994, outstanding receivables from one customer represented
36% of gross receivables. At December 31, 1995, outstanding receivables from
three customers represented 26%, 25% and 11% of gross receivables. At March 31,
1996, outstanding receivables from two customers represented 27% and 21% of
gross receivables.

NOTE 9 -- COMMITMENTS:

The Company occupies its facility under a non-cancelable operating lease
agreement which expires in June 2000 and which requires payment for property
taxes, insurance, maintenance and utilities. Total rental expense related to
this operating lease was $168,000, $194,000, $364,000 and $114,000 for 1993,
1994, 1995 and the three months ended March 31, 1996, respectively.

Future minimum lease payments under non-cancelable leases at December 31,
1995 were as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
Year ending:
1996............................................................. $ 456
1997............................................................. 488
1998............................................................. 504
1999............................................................. 504
2000............................................................. 252
------
Total minimum lease payments............................. $ 2,204
======
</TABLE>

F-14
<PAGE> 59

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

No dealer, salesperson or any other person has been authorized to give any
information or make any representations not contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company, any Selling Stockholder or the
Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date of this Prospectus.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 12
Dividend Policy....................... 12
Price Range of Common Stock........... 12
Capitalization........................ 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 22
Management............................ 35
Underwriting.......................... 37
Additional Information................ 40
Available Information................. 40
Information Incorporated by
Reference........................... 40
Legal Matters......................... 41
Experts............................... 41
Financial Statements.................. F-1
</TABLE>

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

- ------------------------------------------------------
- ------------------------------------------------------
2,500,000 SHARES
LOGO
Common Stock

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

, 1996
------------------------
UBS SECURITIES
MONTGOMERY SECURITIES
UNTERBERG HARRIS
VOLPE, WELTY & COMPANY
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 60

APPENDIX - DESCRIPTION OF GRAPHIC IMAGES

INSIDE FRONT COVER

RANGELAN2 Interoperability. Illustration of the Company's RangeLAN2
technology showing a central processing unit communicating with various
computing devices manufactured by Badger, Epson, Intermec, Dell, Citadel, WISE,
ALPS Electric (formerly Kalidor), BASS, Fujitsu, LXE and Zenith Data Systems.

PAGE 23

Illustration of a wireless communications system integrated into a
hospital's existing network infrastructure. Showing a central server and
wireless network access points communicating with devices in a medical supply
room, a maternity ward, patient admissions and an emergency room.

INSIDE BACK COVER

PHOTO UPPER RIGHT:

RANGELAN2 OEM Products

PHOTO LEFT CENTER:

RANGELINK Family

PHOTO LOWER RIGHT:

RANGELAN2 Branded Products with awards showing PC Magazine Editors' Choice
from February 20, 1996 and LAN Magazine 1996 Products of the Year, April 1996.
<PAGE> 61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various costs and expenses payable by
the Company, other than underwriting discounts and commissions, of the sale and
distribution of the securities being registered. All of the amounts shown are
estimates except the Securities and Exchange Commission registration fee, the
Nasdaq Stock Market listing fee and the NASD filing fee.

<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 40,771
NASD Filing Fee................................................... 12,324
Nasdaq Stock Market Listing Fee................................... 17,500
Blue Sky Fees and Expenses........................................ 10,000
Legal Fees and Expenses........................................... 200,000
Accounting Fees and Expenses...................................... 75,000
Printing.......................................................... 200,000
Transfer Agent and Registrar Fees................................. 10,000
Miscellaneous..................................................... 109,405
--------
Total.................................................. $675,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The Company's Bylaws
provide that the Company shall indemnify its officers and directors and may
indemnify its employees and other agents to the fullest extent permitted by law.
The Company has entered into indemnification agreements with its officers and
directors containing provisions which are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors 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. The Company believes that
these agreements are necessary to attract and retain qualified persons as
directors and officers.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.

The Company currently maintains director and officer liability insurance.

Reference is also made to Section 11 of the Underwriting Agreements
contained in Exhibits 1.1 and 1.2 hereto, indemnifying officers and directors of
the Registrant against certain liabilities.

II-1
<PAGE> 62

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
4.1 Restated Certificate of Incorporation of Registrant (incorporated by
reference to the Registrant's Statement No. 33-70712 filed with the
Securities and Exchange Commission).
4.2 Form of Common Stock Certificate (incorporated by reference to the
Registrant's Registration Statement No. 33-70712 filed with the Securities
and Exchange Commission).
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
11.1 Computation of net income (loss) per share.
23.1 Consent of Price Waterhouse LLP (see page II-4).
23.2* Consent of counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions of the Company's Certificate of Incorporation
and Bylaws, the Delaware General Corporation Law, the Underwriting Agreement 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 Securities 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 hereunder, the Registrant
will, unless in the opinion of its counsel the question has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 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 Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, 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-2
<PAGE> 63

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, Proxim, Inc., a corporation organized and existing under the law of
the State of Delaware, certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Mountain View, State of California, on the 5th
day of June, 1996.

Proxim, Incorporated

By: /s/ DAVID C. KING

------------------------------------
David C. King
Chairman of the Board of Directors,
President
and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David C. King and Keith E. Glover,
jointly and severally, his attorneys-in-fact, each with power of substitution,
for him in any and all capacities, to sign any amendments to this Registration
Statement (including post-effective amendments), or any new registration
statement filed pursuant to Rule 462(b), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ ---------------------------------- -------------
<C> <S> <C>
/s/ DAVID C. Chairman of the Board of June 5, 1996
KING Directors, President and Chief
- ------------------------------------ Executive Officer (Principal
David C. King Executive Officer)
/s/ KEITH E. Chief Financial Officer (Principal June 5, 1996
GLOVER Financial Officer and Principal
- ------------------------------------ Accounting Officer)
Keith E. Glover
/s/ RAYMOND Director June 5, 1996
CHIN
- ------------------------------------
Raymond Chin
/s/ LESLIE G. Director June 5, 1996
DENEND
- ------------------------------------
Leslie G. Denend
/s/ MICHAEL D. Director June 5, 1996
KAUFMAN
- ------------------------------------
Michael D. Kaufman
/s/ G. RUSSELL Director June 5, 1996
MORTENSON
- ------------------------------------
G. Russell Mortenson
</TABLE>

II-3
<PAGE> 64

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated January 24, 1996 relating
to the financial statements of Proxim, Inc., which appears in such Prospectus
and is incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. We also consent to the references to us under
the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."

PRICE WATERHOUSE LLP
San Jose, California
June 4, 1996

II-4
<PAGE> 65

PROXIM, INC.

REGISTRATION STATEMENT ON FORM S-3

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------- ------------
<C> <S> <C>
1.1* Form of U.S. Underwriting Agreement..............................
1.2* Form of International Underwriting Agreement.....................
4.1 Certificate of Incorporation of Registrant (incorporated by
reference to the Registrant's Statement No. 33-70712 filed with
the Securities and Exchange Commission)..........................
4.2 Form of Common Stock Certificate (incorporated by reference to
the Registrant's Registration Statement No. 33-70712 filed with
the Securities and Exchange Commission)..........................
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation......................................................
11.1 Computation of net income (loss) per share.......................
23.1 Consent of Price Waterhouse LLP (see page II-4)..................
23.2* Consent of Counsel (included in Exhibit 5.1).....................
24.1 Power of Attorney (see page II-3)................................
</TABLE>

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

* To be filed by amendment.

<PAGE> 1

EXHIBIT 11.1

PROXIM, INC.

COMPUTATION OF NET INCOME (LOSS) PER SHARE(1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
---------------------------- MARCH 31, MARCH 31,
1993 1994 1995 1995 1996
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (loss)..................... $ (99) $ 745 $2,846 $ 18 $ 912
====== ====== ====== ======
Weighted average shares outstanding:
Common Stock........................ 1,767 6,922 7,150 7,051 7,328
Convertible Preferred Stock......... 2,736 -- -- -- --
Convertible Preferred Stock issued
subsequent to September 30,
1992(2).......................... 403 -- -- -- --
Common Stock issuable upon exercise
of options and warrants(2)....... 759 816 1,022 682 940
------ ------ ------ ------
Weighted average common shares and
equivalents......................... 5,665 7,738 8,172 7,733 8,268
====== ====== ====== ======
Net income (loss) per share........... $(0.02) $ 0.10 $ 0.35 $ 0.00 $ 0.11
====== ====== ====== ======
</TABLE>

- ---------------
(1) This Exhibit should be read with Note 2 of Notes to Financial Statements.

(2) Stock options and warrants granted (using the treasury stock method and the
initial public offering price) and Convertible Preferred Stock issued
between October 1, 1992 and December 22, 1993 (using the if converted
method) have been included in the calculation of common and common
equivalent shares as if they were outstanding for all periods presented
through the effectiveness of the Company's initial public offering in
December 1993.