Mobile phones and other handheld mobile devices, such as Blackberrys and smartphones, have become ubiquitous. iSuppli Corporation predicts that the total number of worldwide mobile device subscribers will grow from 2.7 billion in 2006 to 3.7 billion by 2010. Historically, demand for voice communications has driven the rapid growth in wireless services. The availability of affordable handsets and lower service costs, such as flat-rate pricing for long distance calling, has increased demand for voice communications.

Until recently, mobile phones were used primarily for voice communication. The recent introduction of mobile broadband services is beginning to drive significant growth in the use of data services.

Both consumers and business users have a need for mobile broadband services. For consumers, mobile broadband presents an opportunity to access wirelessly all of the multimedia services they normally access from their home or office using their wireline broadband connection. These services include music downloads, video streaming, gaming, information access (searches, news, weather, financial data) and electronic commerce.

Mobile broadband can also help carriers increase their revenues and profitability. Just as wireline broadband created demand for new multimedia services, the availability of mobile broadband will create demand for new services through wireless networks.

While email and instant messaging are currently the primary applications for wireless data, faster and more reliable wireless networks are enabling carriers to offer new multimedia services tailored for mobile users, providing an opportunity for higher revenues. As a result, wireless carriers have joined efforts with media providers to develop content for mobile handsets. This content has led to increased use of multimedia services, such as music downloads, video streaming, gaming, IP-TV and location-based services.

The Company’s cellular network EV-DO products are IP-based and comply with the CDMA2000 1xEV-DO standard. A typical cellular radio access network, or RAN, consists of a specific combination of base stations, radio network controllers, or RNCs, and a network management system. The Company’s cellular network EV-DO products consist primarily of software for all three RAN elements. These three elements are designed to work in conjunction with each other and cannot be deployed independently. The Company also designs and offers base station channel cards and other hardware for use with its software.

The Company has developed a comprehensive suite of products for deployment in both Rev 0 and Rev A radio access networks.

A radio network controller, or RNC, directs and controls many base stations. The Company’s RNC consists of proprietary software and a carrier-grade, off-the-shelf hardware platform. The Company’s RNC software manages EV-DO mobility as users move between cell towers.

The Company’s AirVista Network Management System is software designed for the remote management of all of its components in a cellular network deployment. The Company’s AirVista software is used to access securely, configure and control all of its RAN elements over an IP network.

The Company is developing a base station that combines base station and RNC software with the functionality of a packet data serving node, which is a router for CDMA mobile networks, to create a new product category. The Company calls this integrated product a flat-architecture EV-DO base station. The flat architecture will reduce the number of network elements required to build an EV-DO network, making the network more reliable, more flexible, easier to engineer and deploy and less costly to operate. This flat architecture base station may be connected directly to the Internet and is intended for use initially in enterprise, campus, hot spot and public safety deployments.

The Company’s first Fixed-Mobile Convergence, or FMC, product is its universal access gateway, or UAG, which the Company expects to deliver in the second half of 2007. When deployed in a carrier’s network, the Company’s UAG will enable mobile phone users to roam between cellular and in-building networks. UAG products under development include versions to support CDMA, UMTS and WiMAX networks.

Cost of revenue increased by $38.8 million to $45.3 million in fiscal 2006 from $6.5 million in fiscal 2005.

Gross profit increased by $129.2 million from $(4.2) million in fiscal 2005 to $125.0 million in fiscal 2006.