Ladies and gentlemen, thank you for standing by and welcome to the Alvarion Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode, later we will open up the lines for questions and answers. If you should require assistance during the call, please press * then 0. As a reminder, today’s conference is being recorded. At this time, I’d like to turn the conference over to the first speaker, Carmen Deville, Investor Relations for Alvarion. Please go ahead.

Thank you very much operator. Good morning everybody and welcome to Alvarion’s Second Quarter 2006 Results Conference Call. I’m Carmen Deville and together with me today are Alvarion’s CEO, Tzvika Friedman, and Dafna Gruber, Alvarion’s CFO. The earnings release was issued this morning and is now available on all major news feeds. Please note that matters discussed in this conference call may contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or the beliefs of Alvarion’s management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors among others could cause actual results to differ materially from those described in those forward-looking statements -- inability to further identify, develop, and achieve market success for new products, services, and technologies including the WiMAX and cellular mobile product offerings, increased competition and its effect on pricing, spending, third-party relationships, revenues, as well as the inability to establish and maintain relationships with commerce, advertising, marketing, and technology providers, as well as other risk details from time to time in filings with the Securities and Exchange Commission. In addition, our limited history in completing acquisitions may adversely impact our ability to successfully integrate the businesses of Alvarion and interWAVE, and we may face liabilities and expenses in excess of those currently anticipated with respect to the acquisition. After all of that I’d like to turn the call over to our CEO, Tzvika Friedman. Tzvika, please go ahead.

Thank you. Good morning everyone. We are very pleased with our progress during the second quarter. We had a number of important targets and milestones during the quarter and our execution was excellent. We met every major target and timeline, reduced significantly the loss in the cellular mobile units, and achieved break even results on a non-GAAP basis; especially some of our accomplishments during the quarter are: we continue to lead the market for WiMAX with continued strong growth in WiMAX revenue. We made several important product launch dates and we were the first to demonstrate mobile interoperability, which is a very important milestone in the development of this market for the future. We fulfilled our commitment to pass Wave 1 certification, we achieved our goal of increasing our business in Asia-Pacific. We also achieved our financial objective reaching non-GAAP break even and achieving profitability in the broadband wireless businesses despite an aggressive commitment to continue investing in the development of mobile WiMAX. In the second quarter, our WiMAX revenue grew 23% sequentially from the first quarter and accounted for about a third of total revenues, or almost $70 million for the quarter. The importance of our large customer base is becoming more prevalent as many early WiMAX customers continue to expand their mixes. We have been shipping WiMAX equipment for nearly two years and our extensive field experience and feature rich, high quality products are clearly an advantage in getting and keeping customers. We had six WiMAX builds of over $1 million in the second quarter and the majority represented expansion by existing customers. Meanwhile, we are continuing to add new customers generally with smaller initial orders that we expect to grow over time. The early stage of WiMAX deployments tends to be SKU’ed toward infrastructure, which had a positive impact on our gross margins this quarter. During the second quarter we announced commercial availability of our self-install CPE based on Intel’s Rosedale chip, our high-power base stations, and fulfilled our commitments regarding certification. Our proven ability to deliver work in WiMAX products in a variety of frequencies within the timeframe we promised is an important comparative advantage. Having a base of satisfied customers is quite significant in a market where most competitors are just beginning to ship WiMAX solutions. Europe continued to be our strongest market in the second quarter. The majority of our largest WiMAX customers in Europe continued to expand their networks this quarter. A significant development in Europe is that the French regulator, ARCEP, has timely awarded regional licenses for WiMAX as part of a plan to ensure that we have nationwide coverage by 2008. These licenses were originally expected to be awarded about this time last year. We have conducted successful trials with all five operators who received the bulk of the licenses. So, we are well positioned to benefit probably most in 2007 because most of the operators are looking to deploy 802.16e solutions. Licenses were also awarded to local governmental clients who will be choosing operators they plan to work with. Prior to this option, the only nationwide license was acquired from our customer Altitude. We have a very well known and successful ISP in France which is owned by Iliad. Altitude retained the operations in all areas and continues to be a customer as well. Altitude with a partner started a new company, Maxtel, which owns the largest number of licenses in the recent times. Other major winners included an operator called…and a privatized TV broadcasting company in France. This quarter we began shipping orders for the large Latin American operator for deployment outside of Mexico. We met our objective of substantially increasing our revenue from A-PAC going partly to a large GSM deployment in Southern Asia and continue growth in BreezeMAX revenues in China through one of our OEM partners. In North America we are very encouraged by recent developments such as the Intel-Motorola Clearwire deal. This shows growing confidence that the amount of broadband is happening at the user level and this transaction is good for the industry as a whole. The AWS Spectrum auction is scheduled to begin in August after substantial wrangling and delays. All the trends are put in, but it will take time. We continue to develop our partnership with IBM, which we announced last quarter, and we believe this represents important, excellent long-term potential as an increasing number of municipalities disclosed plans of broadband coverage. When we factor in all the same trials with large U.S operators this represents an enormous amount of activity on our part. With such long sales cycles particularly amongst Tier 1 carriers the market is shifting its focus towards 802.16e-based solutions, even for fixed applications. Therefore, another important development was Intel’s recent announcement about the Rosedale II chip, which we are incorporating in our “e” ready solutions. We expect to have “e” ready solutions in a variety of frequencies beginning with 2.3 and 2.5 Gigahertz in the fourth quarter followed by the 3.5 Gigahertz around year end. As evidenced with the confidence we have been able to build in our roadmap, we are pleased to report that we have converted one of our U.S. trials into an initial order for our “e” ready solution. It is relatively small but is significant because the deployment is with a Tier 1 operator. Unfortunately, this carrier does not want to be identified at this time. Meanwhile, we continue to demonstrate technical progress in our 4Motion mobile WiMAX solution achieving several important milestones during the quarter. We demonstrated a mobile WiMAX handle and we achieved important interoperability milestones with a variety of mobile devices. We are continuing to build our 4Motion ECHO systems and we are pursuing several strategic partnerships that will strengthen our position in the mobile WiMAX. This is a fairly complex process and Mr. Zvika Harnik, who built the mobile unit till now has agreed to devote his time to the all important business development effort for WiMAX. Therefore, we will be having a new executive, Mr. Uzi Breier to the management to head the mobile business unit in about a month. In his last two positions Uzi was the CEO of Optibase, a provider of IPTV solutions, for telecom operators, and was formally the CEO of Emblaze Semiconductor, a leader in the cellular multimedia arena. Turning to the outlook, we have a strong base from which to grow. Through the end of the second quarter we achieved over $75 million worth of WiMAX solutions and there were about 70 commercial deployments of WiMAX networks from Alvarion around the world; all of them candidates for future expansion. We still have more than 100 active trials and we expect to continue to grow as we continue to convert trials into deployment and expand existing deployments. Recently research conducted a survey of 273 established providers who are actively deploying or plan WiMAX deployments between 2006 and 2008, plus another 176 operators have planned to trial and deploy WiMAX during 2008 and 2009. Their numbers showed moderate growth in 2006 over 2005 with accelerating growth in 2007 and a major surge in growth in 2008. The report described the first wave of spending in 2006 and 2007 coming from extending non-WiMAX networks, migrating of existing networks to WiMAX, and new holder of WiMAX spectrum building out for the first time…expect to total $2.5 billion for the three-year period of 2005 to 2007. By contrast operators plan to spend $7.5 billion during 2008 and 2009 as the original players expand their network geographically to serve a large number of subscribers and upgrade equipment to support new applications such as mobility. The near time outlook is consistent with our view, but there will be continuous growth in WiMAX for rural broadband and in developing regions. Our strength in addressing the first type of customers, application, and geography, our partnership capability, our strong local channels, partners, and excellent products indicate that we will continue to be very successful in this market. Regarding mobile WiMAX, we are preparing now for 2008 where we expect personal broadband wedging from portable to mobile applications will become stronger. Our extensive trials wit the new innovative challenges as well as Tier 1 operators plus the technology and milestones we have achieved are signs of our early success in this market segment as well. To summarize, we expect to continue to capitalize on our traditional BAA market, leaders of WiMAX for fixed nomadic applications and invest in the future of portable and mobile WiMAX while showing progressive improvement in our financial results. Before I turn the call over to Dafna, I’d also like to say a word about CMU where we have been successful in reducing the loss in cash balance significantly by focusing on the GSM solution and reducing expenses. We are pleased with our progress during the second quarter and we are on track to make this business cash flow positive by the end of the year, but we also have to note that revenue in this business can be lumpy, which can also affect the amount of the loss in a specific quarter. Now, I’d like to turn the call over to Dafna to discuss the financial results of the quarter in detail. Dafna…

Thank you Tzvika, hello everyone. The second quarter revenue was $50.5 million. This represents a sequential increase of 5%. We are very satisfied to record a non-GAAP break even per share this quarter. EMEA accounted for about 56% of revenues, North America is about 14%, Central and Latin America stayed about the same at 15%, and Asia-Pacific increased to 15% reflecting our objectives of increasing ourselves in this region. Direct sales accounted for about 45% of revenues, distributors declined slightly to about 40%, and OEMs represent the remaining 15%. For those of you who have asked about specific trends in our non-WiMAX business, I would like to give some clarification. The largest portion of this category is our product for the unlicensed business. This business was stable in the second quarter. The next largest category this quarter was the multi-service business. These are our WALKair products in frequencies outside the scope of WiMAX and this business has also been stable. The second quarter decrease in the non-WiMAX category came from the voice-based EMGW products, which are transitioning to WiMAX-based products in the fourth quarter. Starting this quarter, we will provide information on shipments of BreezeMAX products in addition to information on revenue. As most of you know, revenue recognition is becoming more complex. If your factor in acceptance closes or commitments to supply specific features in the future, it can result in an ability to recognize revenue in the quarter the equipment is shipped. Providing this additional metric may make it easier to accurately track our progress in the market. During the second quarter, while we recognized revenues of $17 million of BreezeMAX, shipments totaled over $18 million. The aggregate impact from FAS 123R on net income in the second quarter was $1.7 million compared with $1.5 million in the first quarter. This expense shows up in several different line items in the P&L and we refer to the reconciliation table attached to the press release for all the details. As we explained in our last call, during the early part of the second quarter, we noted that new orders from the cellular mobile unit were coming in lower than we previously anticipated. Therefore, we checked our model going forward and conducted goodwill and other intangible intermittent analyses. This process resulted in the write off in the second quarter of the $23.4 million of goodwill related to the CMU. This was a non-cash charge. We also had a restructuring charge of $1.1 million related to our cost initiative in the cellular mobile unit and it is making this unit cash flow positive as soon as possible. This cost includes expenses related to layoff of some employees. For the purpose of discussing comparison to prior periods, we will refer to the non-GAAP numbers that excludes the impairment charge, the restructuring charge, the impact of FAS 123R, and amortization of intangibles. Our gross margin was 49%, up from 46% in the first quarter and better than our long-term target which continues to be 45%. This reflects better volume in the CMU and a favorable mix in the rest of the business reflecting WiMAX deployments which tend to be coordinately infrastructure and the fact that most of the deals this quarter continued to be small in size. It is important to note that our long-term model, which is based on assumptions of mass deployments of WiMAX solutions, is still at 45%. However, given the favorable term of the current mix of products, our dominance of this market and our cost reduction efforts, we believe the gross margin at least in the next two to three quarters will be higher than the long-term targets and range between 45% and 50%. Operating expenses were up slightly from the first quarter but grew less than revenues. Excluding amortization and one-time charges our non-GAAP net loss decreased significantly to only $242,000, which was break even on a per share basis. The most important point here is that our broadband wireless businesses achieved a small operating profit this quarter and we are committed to further improvement in profitability. Turning to the balance sheet, cash and cash equivalents were $107 million at the end of the second quarter. We had a significant decrease in our cash balance. Inventory levels totaled $36.6 million and were lower by $1.5 million compared to the first quarter. DSO increased slightly to 79 days due to increase in credit terms to certain customers. In the third quarter, we expect revenues to range between $50 million and $54 million. Based on this revenue level we expect non-GAAP earnings per share, which excludes amortization, the effect of stock option expensing, and one-time charge to range between -$0.01 and +$0.02. GAAP per share results are expected to range between a loss of $0.03 and $0.06. Now, we would be pleased to take your questions.

Ladies and gentlemen, we will now conduct a question and answer session. If you wish to ask a question, please press * then 1 on your touchtone phone. You may remove yourself from queue at any time by pressing the # key. Once again if you have a question, please press * and 1 at this time. Our first question today comes of Troy Peery from Oppenheimer. Please go ahead.

Hello, congratulations on the results. You mentioned the losses from CMU were lower than they had been, what were those losses specifically you mentioned?

I didn’t mention a specific number but I said that the broadband side of the business is already profitable and most of the operating loss this quarter came from the CMU business.

And I assume in that small profitability that you mentioned you are including the WALKair product lines and not just the newer generation stuff, correct?

Yes.

Okay, what about revenues from CMU?

Revenues from CMU were about $6 million this quarter.

Oh, they were, okay! With the write downs that you took in the quarter, was that on CDMA and lower expectations there on the revenue mix as well as in OpEx; I guess two questions: a) can you give us a little bit more detail about all of what those write downs consisted of in addition to just the CDMA if anything, and then what’s the new revenue level for operating or cash flow break even for CMU?

We’ve done an analysis that is looking at the business going forward a few years from now and we looked at that business and we made the permanent charge rate to lower volume of activity there, both on the revenue on expenses side. The new break even point of this business is around $8 million.

Okay, I see. And shifting to the U.S., the timeline for expectations around the Tier 1 carrier, I believe you mentioned that it’s small at this point, is that correct? And then, can you give us any more color there as to size or what the benchmarks you are looking at are, how meaningful that can be to you?

First of all in the U.S. there are several deployments. There are deployments of those who are holding 2.3 licenses that have some commitments to deploy by mid 2007, but there will be deployments first of all to keep the license. We are talking also on deployment of operator after charge intends to use the technology to provide their services to residential business in certain regions. We expect these initial deployments to range in 2006 and 2007 with several millions of dollars.

Several millions of dollars in each year?

No, 2006 and 2007 with a potential for offset if it expands to more space and area.

And then following up on that, my last question to you, the AWS options here, have any customers or prospective customers voiced expectations to you that the outcome of those options could be a meaningful gating factor for your prospects in addition to what you’ve already talked about, anything specific there, is it kind of all up in the air from the point of view of your customers or your prospects?

It’s clear to all of us that this is a gating factor because some of the players are waiting to see if they will get license on bands or not or if they should team up with those who have spectrum; you can read it in the news, it’s not for me to say. We have had some discussions with some of the bidders and we’re all waiting for this to finish.

So, it’s safe to say that you are in conversations with prospects that are kind of aggressively looking forward to the outcome of these options perhaps to move forward with you?

Yes, Troy, we are.

Okay, thanks, congratulations again on the results and thanks for taking my questions.

Thank you and our next question will come from Erik Zamkoff from Morgan Joseph, please go ahead.

Hey, good morning, congrats on a nice quarter, that was the biggest butchering of my name I’ve heard. Anyway, in terms of the outlook, can you talk about what steady state OpEx will look like following this restructuring in terms of direction from the current quarter on a non-GAAP basis? Then, in terms of new business versus wireless broadband business, can you give us a breakout in terms of how much of BreezeMAX of that growth is to existing wireless broadband customers that are migrating to WiMAX versus new customers? Finally, can you give us an update on sort of the satellite equation and how you see that playing out?

Regarding the question on expansion, our model talks about moderate increase in OpEx from quarter to quarter but much lower growth in expenses than what we want to see in revenues. So, we should expect a moderate growth in expenses going forward in the next few quarters. Most of the increase is coming from additional investments in our mobile WiMAX unit.

So, we’re not going to get a reduction from that non-GAAP $25.8 million run rate over the next few quarters?

No, it will probably be equal to what we have now and a bit higher.

Okay, thanks.

Regarding the satellite, I think all of us are reading in the news what’s happening, there is a great potential there. It’s a very good strategic feat. It’s not up to us say what exactly their plans are and what they are doing. I think both players discussed some of the plans…as well as some international plans other DBS may have. I think it’s a long-term profit and until it settles and until the licenses will be awarded, people would not announce them.

Then, finally some kind of a breakout of the BreezeMAX between existing customers migrating to WiMAX versus new customers.

I can’t give you an exact number of that, but I can tell you that we are adding new customers every quarter. Still the majority of the business every quarter is coming from existing customers, whether it’s people that used to buy old products before or people who started buying our BreezeMAX product one or two years ago.

Thank you.

Thank you for your questions, Mr. Zamkoff, sorry for the mispronunciation. Next we’ll go to Rich Church from Unterberg, please go ahead.

Okay, thank you. Tzvika, you gave us a bunch of statistics on the market sizing. I was wondering what overall do you expect the markets to grow by in 2007? Do you have anything specific on that?

Good morning, Rick. We see the market growing in ’06 and ’07 in the range of 15% to 30%. In 2006, I can say that we think it would also grow with a proprietary self-install solution, which gradually will change to the 802.16e personal broadband in 2007. As I indicated this is roughly the growth in 2007 where we believe that a bigger growth and surge will be in 2008 when large deployment of mobile WiMAX will kick in. It maybe bigger if there will be one big deployment in 2007, but I believe also this big deployment will start in a way of trials and will actually move to be large in 2008.

Okay, and the 15% to 30% for ’07, do you think that your broadband wireless business can grow at or faster than the markets?

Our target is to grow at the rate of the markets.

Okay, and with regards to the Tier 1 order, can you just give us any color on how that customer is using the system, are they using it more to cover rural areas where DSL doesn’t reach or is it for a municipal application?

First of all for us it’s important that we’ve shown that investments we’ve been doing for the last one and a half year in building the company to address Tier 1 carrier has happened specifically here in North America. So, we’re additionally working and geared to address the market — you need capable people — and we’ve shown our ability to get such orders. I think it’s very important also for our other customers. Specifically, this customer in the initial application is using it to address customers who don’t have access to broadband by other technology, and you can do it very cost effectively with broadband wireless.

And are you doing this direct or is this through a partner?

This is done directly.

Okay, last question, maybe you could give us your views on Germany in terms of the licensing process there and also do you think Germany or France hold the bigger opportunities for you.

First, Germany. Germany launched a license process and I think you can look at it more in the sight of the regulator. They were surprised to get about 900 applicants for the license and we don’t know what they will do. I think it will stay closer and hopefully by year end there will be some progress there. In France, as we indicated, they already gave the licenses, there were a few surprises, the large operator did not get much; new operators got licenses. As I indicated, we were trialing with all of the licensees before, and now we will start the process where we’ll do trials and we’ll review again the business model. So, we expect to be successful with some of them hopefully, and we are expected to create revenues probably in 2007.

Okay, thanks a lot.

Thank you and our next question comes from the line of Daniel Meron from RBC, please go ahead.

Thanks Tzvika and hi Dafna. A quick question on competition with the move that Motorola did with NextNet through the investment in Clearwire, how does that change the competitive picture in your markets, and also if you can discuss the competitive landscape because of the merger between Lucent and Alcatel and also the joint venture between Siemens and Nokia?

Okay, Motorola is a very strong competitor and it’s a very good company and we look at them as a major competitor in this industry, mainly targeting mobile WiMAX. The acquisition of NextNet by Motorola certainly increased competition from Motorola to also the NextNet solution. We don’t see it as something which is a very long term or surprise in the sense that Motorola were expected to come up with their self-install “e” solution towers probably in the first quarter or second quarter next year. It’s not something which is for a long term, so we don’t see as a major change in competition. However, naturally with having Motorola pushing the NextNet product it’s more competitive NextNet by itself, but it will take time. As in every acquisition initially there will be post-merger integration issues and focus is internally and not externally, so I think the effect would not be so high. Regarding Lucent-Alcatel as well Nokia-Siemens, I believe that in the short term it actually reduced the competition. They are busy internally with their old plans and people are thinking of how will do what, who will manage whom and so on. I think once it settles down there will be a competitor in this industry. Certainly Alcatel announced plans and they intend to be a player in the mobile WiMAX. And as we indicated, we believe Motorola and Alcatel will also be playing in the fixed WiMAX based system, but we believe they will have a big focus and big project that will be most competitive but also they’ll have the most retention.

Great, thanks Tzvika, and also as far as OEM now, how do you think your OEM list will look like once everything settles down?

As you know, some of our OEMs are actually developing competitive products and we have competition relations department that works with us very closely and we work together on some areas, in the some areas we are competing. We believe that in the long term some of these OEMs will not be our OEM anymore, but when the market develops and people see the growth coming, and they would love to have a solution because who did not start in time it would be too late for the first phase at least, we’ll have an opportunity to team up with others. By that time it will really depend if we are interested in doing so, because we are preparing our own direct force as well as strong local partner in many regions, and we not necessarily need large global OEMs to address the opportunities we target.

Great, and Dafna maybe you can provide us with some insight; you mentioned that you are expecting the next two or three quarters the gross margins to range in 45% to 50%, can you elaborate what will swing it one way or another; I mean for the next two or three quarters that seems like a pretty wide range?

The main point that what we’ve seen over the last few quarters already is that because of the volume of deals driven most of the customers…the customers are big the old ones are relatively small…and we make a good margin on that, and also the fact that we sell a lot of infrastructure and much less customer premises unit than we would expect in the long term, it makes the margin look better than the long-term model. Therefore, since we have two or three quarters of improvement and I see the same trends in the near future, it’s important to note that the margin is going to be higher than the 45% in the next two to three quarters. The exact number would mainly be based on the volume of base stations compared to CPEs.

Okay, and how much of self-install units…I mean is this part of the growth pattern that you see in the next sequential quarter? Also, can you give us a sense on how you see the balance for the fourth quarter, some preliminary notion on that, and kind of dive in with visibility is there any change in visibility or in linearity around the quarter, can you give us a sense on those?

Regarding self-install we’ve just started shipping products at the end of the quarter and it would have some contribution in third quarter or usually it takes some time. Regarding visibility and visibility is the about the same as it used to be before, and I can’t give indications for the fourth quarter at this moment.

Do you still hold your guidance for sequential growth down to 2006?

That’s our target.

Okay, and then last one, once you do move to net profits, you’re obviously moving away to net profits, what will be the impact on your share count here?

Once we report profit we’ll add about $5 million to $6 million to the share count options on a fully diluted basis.

And GAAP profit should be by fourth quarter, I guess?

Excuse me.

And when do you expect GAAP stability?

I can’t give information on that at this moment.

Okay, thank you Dafna, and Tzvika good luck going forward.

Thank you, and next we’ll go to Steve Ferranti from Stephens, please go ahead.

Hi guys, good morning, congratulations on a good quarter. Can you give us an idea of which OEMs you’ve seen greater strength in recently, in terms of reselling your product?

I think this quarter was strong with Alcatel and Siemens.

Was there are a region in particular where you saw that strength?

We indicated that we have strong progress in China.

Okay. And you had mentioned earlier about kind of targeting the A-PAC region and growing sales there, can you give your reasoning for targeting that region, do you see potential there above and beyond maybe other regions globally?

Yeah, also some of the market research indicates that A-PAC is an area that grew from very low tele densities to have cellular deployments which is quite high, so many of the potential customers don’t have copper in the route to provide the service, but the percent of broadband wireless in overall broadband solutions in some of the more developing areas is bigger. In addition, for us specifically, once we introduce products in the 2.3 and 2.5 range, more opportunities open up in Asia-Pacific, and the third point is we are building ourselves to be stronger in Asia-Pacific with our own force and with regional partners. So, all of it leads us to target higher growth. In A-PAC it’s not short term; I mean in the long term if you look at the research it shows growth in A-PAC and that investment we need to do now in order to put in A-PAC as we do in other places the seeds for growth for coming years.

I understand, and how would you characterize the pricing environment there as opposed to other regions in the world?

Asia-Pacific is not one country, so there are countries there that there is more price competition like India and China, which is known to all, and the rest of it is actually reasonable like any other region in the world.

Great, and then one final question, you mentioned your long-term gross margin target, it’s 45%, give us an idea of what mix of products that might represent in terms of percentage of revenues coming from premise devices versus base stations?

I can’t be very specific at this point but I can tell you that the majority of revenues right now is coming from infrastructure sales, while in the long term it would probably be 50/50 or even more in base stations.

Terrific, that’s all I had, thank you.

Thank you, and we have a question from Ehud Eisenstein from Oscar Gruss, please go ahead.

Hi, what were the revenues from American operators this quarter and what do you expect for the September quarter?

It was roughly $2 million, and regarding September quarter we’ll have to wait and see.

Okay, thank you very much.

Thank you and we have a question from Anton Wahlman from ThinkEquity, please go ahead.

Hey, good morning, there are a couple of quick things. First of all, Dafna, I couldn’t quite hear what you said, OEM was the rest and then 45% of revenue was something and I wasn’t quite sure I heard that correctly, can you repeat that please?

Yes, OEM was about 15%, distribution was about 40%, and the rest came from direct sales.

Okay. In terms of you selling 802.16e to North America in the U.S. in particular, is there anything else other than 2.5 Gig for that that you are planning for; I mean BellSouth that you’re doing this stuff at 2.3 and…there’s a semi-licensed stuff at 3.65, or is there really a complete focus for 2.5 Gig for you?

No, no we are focusing both on 2.3 and 2.5 Giga and either band will be open now, you know, capability and ownership of the technology will allow us to quickly adapt to other bands -- AWS or other special bands. We released 2.5 and 2.3 targeting North America; in the U.S. 2.3 has some special requirements concerning to national 2.3 and will have both.

Okay, so you’re saying you’re prepared to tweak your 802.16e solution to potentially any frequency band?

Yes.

And outside of France and Germany and Europe, anything that you can characterize there in terms of availability of spectrum; I assume really it’s mostly 3.5 there, I mean any other places where you see licensing freeing up and so forth?

There was progress also in New Zealand this quarter, there was progress in Malaysia this quarter, in Japan they continued the process to award licenses probably towards the first quarter next year, in Taiwan as well probably we’ll give licenses at the end of this year in 3.5 and next year for 2.5. Licenses have been awarded in Ukraine, in Russia, so there is progress, it’s mainly in 3.5, 2.5, and 2.3. There are some esoteric bands with 3.6 and 3.3 in some countries where they have satellites interfering on the 3.5, which belongs to a radar alarm.

And at this point have you seen any activity in the 700 Megahertz?

There is low activity in the 700 Megahertz here in the U.S.; it’s not WiMAX based, and I think people are expecting to see how this will be developed long term.

Okay, thank you very much, good job.

Thank you, and next we’ll go to Kevin Dede from Merriman, please go ahead.

Thanks, Tzvika and Dafna, nice job on the quarter. I missed revenues from the CMU division somehow.

We indicated it was over $6 million.

Okay, can you give us an update on the situation with Telmax and what you think their strategy might be going forward?

Again, I’m very careful in talking about my customers’ strategy, it’s not fair to discuss, but as we indicated in the past we believe that Telmax would go to deploy mobile WiMAX only in Mexico City in Mexico, because they are the incumbent that provides DSL and they indicate the progress of the broadband in their corporate policy. However, outside of Mexico where they have challenges, and in many countries there are challenges to their fixed solutions or mobile solutions, we are expected to go and deploy WiMAX to address businesses and residential customers.

Lastly, can you give us an update on certification, exactly where you stand on the fixed side and what you think is happening at the forum with regard to mobile?

For the fixed side as you know we passed certification for Wave 1 and we expect in the end of 802.16e to have probably…in the fourth quarter to do publicly initial interoperability between devices. We expect Wave 1 certification to probably be in the mobile WiMAX. We’re very careful because it is…testers and in the profiles and everything ready, but I expect it to start in the first quarter or the second quarter next year, and it’ s a major focus for us to be in the first wave of the mobile wireless certification, which we believe is a more important certification going forward.

Okay, with regard to fixed though there is some controversy surrounding exactly which aspects of equipment in your product portfolio are certified, can you just clarify that for us, Tzvika, so there is no more confusion?

This is a public information, you can go to the WiMAX website and you can see the certified CPE board circuit store and our CEP as well as our base station, both macro base station and micro base station, and we probably installed the WiMAX phone in their website.

Great, thanks very much for addressing that, I appreciate that, congrats on a nice job in the quarter.

Thank you, and next we’ll go to Ittai Kiddron from CIBC World Markets, please go ahead.

Hi guys, nice job on the cost side. Dafna, I had a couple of questions again digging into the gross margin, did you in this quarter sell any products that were previously written off on your books?

We sold some but that was a very small amount, and amounts are in line with what we had before.

So, if we looked in to three quarters forward, you said that you’re going to go closer towards your long-term gross margin target of 45% because it’s the CPE mix that’s going to improve or increase?

Yes, and not because of utilization of the previously written inventory.

And as we move into 2008 where — correct me if I’m wrong — your expectations for CPE would that over time disappear, does that mean then you’re going back towards the 50 range when CPE goes away?

No, first of all the process of CEP going away probably will take a long period of time and it would not happen in one day. And the long-term target for selling a lot of infrastructure in the market of CPE is at this point 45%.

Now, as you start working with more Tier 1s, is there a difference in the way you will need to record your revenue? I think Tzvika mentioned in his speech that it’s typically longer sales cycles and longer deployment cycles as well, are you going to have to recognize revenue on that more as milestone accepted versus shipped that you do with most of your Tier 2s and Tier 3s?

That’s a possibility.

Okay. So, we might gate into the same loop that you have with your CMU business, the same issues that you’ve had in recognizing revenue and we might have very significant lumpiness in revenue recognition?

I think we might get into this situation, I’m not sure it would create lumpiness, and I think that’s what we’ll try to do, is to provide the best information we have on these types of projects.

Tzvika, when we look into 2007, how much of your target do you think Tier 1 can represent, what would be an optimistic and a pessimistic scenario from your standpoint?

I want to highlight, we are not necessarily targeting Tier 1s, and Tier 1s may not necessarily be the driver of this industry, as well as it’s not necessarily the Tier 1s we are all thinking of, which are the RBOCs in the U.S. and all those with the T -- BT, DT, ST -- actually a new challenge here is a fixed operator doesn’t have the license for mobile, satellite operator and so on, not necessarily it will be Tier 1. So, I cannot say that we have a specific target for Tier 1s for next year.

And do you anticipate a requirement for hiring additional people to deal with these accounts; those are typically what I would call high maintenance type of customers?

As Dafna indicated, we expect to increase our investment in penetrating what we call long-term targets, and the investment of people and supports of such a project usually is being paid by the customer. So, it’s not such a big issue once you have to give this maintenance.

So, the operating margin from a Tier 1 deal should be identical to that of another deal?

Roughly yes.

Okay, and also with regards to this Tier 1 that you mentioned, are you by the way the sole suppliers for these types of solutions right now and how quickly do you think this can ramp to be anything more meaningful? Is this just a small trial or do you expect this to be a really significant commercial deployment?

I cannot indicate if or with whom else we might be working. What I can say about it is that we’ve passed the lab trials and we are now out for initial commercial deployment. As we indicated, we expect revenues to start probably towards the end of 2007.

Very good, congratulations, good luck.

Thank you, and we’ll go to Franck Marsala from First Albany, please go ahead.

Hey everyone, a couple of quick questions. On the Tier 1 that you mentioned that you have been awarded in North America, did you mention if that was licensed or unlicensed or did you mention what frequency you were serving there?

It’s a licensed frequency, we didn’t mention which one.

Okay, that’s fine. And then in France where you say some licenses have recently been awarded, do you know the frequency band that those licenses are in?

I’m sorry, could you repeat Frank, I didn’t hear you well.

The licenses that are awarded in France, what are the frequencies of those licenses?

It’s in 3.5 Gigahertz.

And 3.5 you’re saying that the operators are looking to buy the mobility product?

In 3.5 operators are looking for products which are not only mobile, also products which are based on the “e” standard which is the mobile standard, not necessarily for mobility. Actually in many cases full mobility in 3.5 Gigahertz was not likely to be the first application. It will start more with fixed, fixed-nomadic ranging to portability; it’s less suitable for full mobility because of the issue of coverage -- the higher the frequency the more base stations you will need to deploy and penetrate through walls.

So, would you say the application that will end up with is a more fixed and nomadic rather than mobile for that frequency?

I think fixed nomadic, portable, and technology also will develop. I think the things you can’t do now maybe in two to three years’ time you’ll be able to do it.

And then just one last question, you said strength in Europe, I know you’ve had some customers in Western Europe, is Eastern Europe moving along for you, is that helping that European growth rate as well?

Yes, Eastern Europe is also helping and contributing for us. We indicated in the past licenses in Poland, licenses in Russia, it’s a growth area for us as well.

Okay, thanks very much, I appreciate the help.

Thank you, next we’ll go to Dan Harverd from Deutsche Bank, please go ahead.

Hi, good afternoon. You told us a couple of times about maybe some sort of a shift in strategy towards regional and local partners, can you give a sense of what the profile of a typical regional partner is, and geographically what parts of the world do you feel that you already have that in place and where do you need to do more work?

We have strong local partners in several areas. The profile is usually by its nature, because it’s local and it’s changing, and mostly we are targeting local partners that can provide us the infrastructure to support the customers, the relations with the large customers, what I call the political connections, the high level relations as well so we can leverage on previous relations they had. In some of the regions we are also targeting partners that can also help and complement from a technical point of view, and regions we are targeting are Asia-Pacific. The example I gave in the previous conference call is that for us Japan is an example we can partner — I cannot indicate names — but we can partner with companies like Mitsubishi, NEC, Hitachi, Fujitsu. These are the type of strong local partners that can help us address large opportunities in those regions.

And do you see any partners that are cross-region or is that irrelevant here?

It will be on a local and regional basis, not necessarily be local only.

Okay, thank you and good luck.

Thank you, our next question is from the line of Andy Schopick representing Nutmeg Securities, please go ahead.

Thank you and good morning. I’m not sure if you covered so let me please ask it; currently, how many WiMAX revenue customers do you have or were in this quarter?

We had 10 customers this quarter; we now have about 70 commercial deployments and over 100 trials.

And would you repeat Dafna what you first said, did you say 10?

Yes, 10.

Meaning like 30 or 40?

Or higher, yes.

Thirty commercial customers, not all of them buy in each quarter.

I understand and that’s what I was trying to get specified. And the large deals that you had, they were all from existing customers in the WiMAX area?

Some of them are from existing customers and we had a few new ones.

Okay, thank you very much.

Thank you, and our next question is from the line of Scott Sullivan from Smith Barney, please go ahead.

Good morning, a couple of quick questions if I might. Regarding France, could you give us any color on what percentage of license holders in that market you’re currently working with?

As we indicated we have had trials with all of them in the past and we’re now trying to work with all of them. It doesn’t mean you have to be careful about all of them, but we’re working with all of them on the future plans and we’re trying address the trial requirements and business plan going forward.

Forgive me if you mentioned this, are those both mobile and fixed?

They are all 3.5 Giga licenses, although we believe they will go more to a fixed-nomadic solution.

Okay thank you, shifting to A-PAC, could you comment at all on the progress in India please?

India is a market where there is a lot of noise about WiMAX. Currently, the frequency which we did license is 3.3 Giga where we provide equipment. There is a great potential there and there are talks about licensing the 2.5 Giga very shortly, though recently a large WiMAX vendor with the industry, with the government and the operators and as I said there are is a lot of hope. I think from my experience we should be more careful about the pace things are going when government needs to issue licenses, it will take some time.

Okay, could you talk a little bit about current sales in terms of percentage base stations versus CPEs, if you break that out?

Well, we usually don’t break it out. I can tell you that most of the revenues are coming from base stations these days.

And is most of that backhaul or just basic infrastructure.

Basic infrastructure, operators are starting their deployment. Initially you’ll start by covering an area and then start selling to customers.

Okay, and shifting to the municipal side, I guess specifically your IBM relationship; number one, have you done any studies on the total guesstimate of addressable market?

The total addressable market is published by market research; however, we are not playing in the whole market, we are not a provider of Wi-Fi solutions, we provide the backhauling for this solution and other high-speed connectivity in building and home line securities as well as in some of the applications we provide those solutions to mobile cars covering broadband to…what I can tell about is that we have very strong relations with IBM, there is a big potential. What we learned about this market is that the cycles are very similar to the same cycles of teleco, even lower sometimes. You have the mayor, you have the sheriff, you have many groups involved in taking up and creating a project, and that’s a good strength of IBM, including their ability to provide overall solution applications. So, we believe it’s something that will gradually start contributing to revenue, but it’s in the long term.

Terrific, can you talk a little bit more about the interoperability and upgradability between the 2005 and “e” products?

Our product BreezeMAX is a product that can be upgraded to support 802.16e. As we indicated, towards the fourth quarter we will release also CPEs which are based on the new Intel chip that can be upgraded to support the 802.16e solution allowing customers to deploy what we call “e” ready until we certify the pass certification and download the line software to this CPE.

Fantastic, and lastly, could you give us any broad comments, opinions, color on the IPR rate issues?

We did was we started on some of the IPRs as well as some other large vendors in this industry. We don’t currently see it as something that will stall the industry. There is an initiative to create for the WiMAX within the WiMAX forum an arrangement for an IPR similar to what happened in the space. It will be a very small IPR, it will be a shared IPR between recent players.

Okay, fantastic and thank you for taking my questions.

Thank you, and our next question is a followup question from the line of Rick Church representing Unterberg, please go ahead.

Thanks. Tzvika, do you expect the licensees in France to take one more than one vendor or do you think they’ll just go with a single vendor solution?

It depends on the application, probably for rural broadband they will take two. If they go for more portable mobile probably they will go for two vendors, and it depends also on the operator specific strategy. It costs more to have two vendors, supporting two vendors than a specific operator. However, they have their advantage in terms of competition, so clearly it’s specific to a customer.

Okay that’s helpful. And then on the Tier 1 in the U.S., have they been a customer in the past?

That specific Tier 1 was not a customer.

All right, thank you.

Thank you, our next question is also a followup from the line of Ehud Eisenstein with Oscar Gruss, please go ahead.

Thanks for the clarification about the non-WiMAX business, where do you see these elements trading looking forward?

We expect it to be roughly in the same range, it could gradually go down when some of the products are being replaced by WiMAX.

Okay, and then with the situation in the Northern border of Israel, do you have any problems with component manufacturers, RH Telecom?

We have subcontracted in the North part of Israel and as a global company you know we have subcontractors in several countries, and currently we don’t see it affecting our business as usual.

Okay, so basically business is usual for you guys?

At the moment, yes.

Excellent, thank you.

Thank you and our final question today is from the line of Daniel Meron representing RBC, please go ahead.

Thanks, just a quick followup question. Dafna, can you give us again the breakdown between the regions and also how do you see this breakdown going in the next quarter as well?

The breakdown between regions was quite stable this quarter. We had the largest regions for WiMAX in this quarter, in EMEA it was about 56% of revenues, North America was 14%, Central and Latin America was about 15%, and Asia-Pacific was also 15%.

Okay, and now how do you see it in the September quarter?

Excuse me, I didn’t hear you.

How do you see it in the September quarter, do you have a sense on how we should look at in the September quarter?

Usually over the last few quarters the picture looks about the same.

Okay, thanks Dafna and good luck going forward.

Thank you, and speakers at this time we have no further questions in queue, please continue.

Okay, I would like to thank everyone for joining our call and getting all the information we could provide you. We’ll be happy to provide you additional information, and thank you for your support.

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