UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
		WASHINGTON, D.C. 20549
		FORM 10-Q
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to ____
Commission file number 0-24673
METAWAVE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware                  (State or other jurisdiction of incorporation or organization)			91-1673152             (I.R.S. Employer Identification No.)
10735 Willows Road NE, Redmond, WA (Address of principal executive offices)			98052                (Zip Code)
(425) 702-5600 (Registrant's telephone number, including area code)
NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock as of August 3, 2001 was 47,374,444.

		METAWAVE COMMUNICATIONS CORPORATION FORM 10-Q For the Quarter Ended June 30, 2001 INDEX
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements		Page
	Consolidated Balance Sheets - June 30, 2001 and December 31, 2000		1
	Consolidated Statements of Operations - Three months ended June 30, 2001 and 2000; Six months ended June 30, 2001 and 2000		2
	Consolidated Statements of Cash Flows - Six months ended June 30, 2001 and 2000		3
	Notes to Consolidated Financial Statements		4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		7
Item 3.	Quantitative and Qualitative Disclosure of Market Risk		12
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		13
Item 2.	Changes in Securities and Use of Proceeds		13
Item 4.	Submission of Matters to a Vote of Security Holders		13
Item 6.	Exhibits and Reports on Form 8-K		14
Signature			15
Index to Exhibits			16

				PART I.             Financial Information
Item 1. Financial Statements
METAWAVE COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
					June 30,		December 31,
					2001		2000
					(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents				$           22,304		$              37,921
	Accounts receivable, net				17,576		21,533
	Inventories				7,604		17,022
	Note receivable				4,473		--
	Prepaid expenses and other assets				5,619		2,448
Total current assets					57,576		78,924
Property and equipment, net					5,049		6,642
Goodwill, net					67,157		75,109
Other intangibles, net					4,899		6,308
Other noncurrent assets					1,079		1,372
Total assets					$         135,760		$            168,355
					==========		===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable				$           13,398		$              17,568
	Accrued liabilities				3,549		2,604
	Accrued compensation				2,770		2,478
	Current portion of notes payable and capital lease obligations				2,668		2,914
	Deferred revenues				620		719
Total current liabilities					23,005		26,283
Notes payable and capital lease obligations less current portion					1,485		2,542
Total liabilities					24,490		28,825
Commitments
Stockholders' equity:
	Preferred stock, $.0001 par value:
		Authorized shares - 10,000,000 at June 30, 2001 and December 31, 2000; Issued and outstanding shares - none			-		-
	Common stock, $.0001 par value:
		Authorized shares - 150,000,000 at June 30, 2001 and December 31, 2000; Issued and outstanding shares - 47,370,909 and 43,483,300 at June 30, 2001 and December 31, 2000, respectively			331,363		321,451
	Deferred stock compensation				(4,780	)	(11,591	)
	Accumulated other comprehensive income				(155	)	(155	)
	Accumulated deficit				(215,158	)	(170,175	)
			Total stockholders' equity		111,270		139,530
			Total liabilities and stockholders' equity		$ 135,760 ==========		$            168,355 ===========
See accompanying notes to consolidated financial statements.

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		METAWAVE COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share and share data) (Unaudited)
			Three Months Ended June 30,			Six Months Ended June 30,
			2001		2000		2001		2000
Revenues			$                  8,521		$                 11,645		$                 20,088		$                 20,771
Cost of revenues			12,805		8,099		23,233		15,193
Gross (loss) profit			(4,284	)	3,546		(3,145	)	5,578
Operating expenses:
	Research and development		10,286		6,313		19,897		12,687
	Sales and marketing		2,525		2,533		5,942		4,876
	General and administrative		2,507		1,620		7,001		2,945
	Amortization of intangibles and goodwill		4,455		-		9,361		-
Total operating expenses			19,773		10,466		42,201		20,508
Loss from operations			(24,057	)	(6,920	)	(45,346	)	(14,930		)
Other income, net			274		795		681		1,011
Interest expense			(180	)	(131	)	(318	)	(285		)
Other income (expense), net			94		664		363		726
Net loss before cumulative effect of change in accounting principle			(23,963	)	(6,256	)	(44,983	)	(14,204		)
Cumulative effect on prior years of change in accounting principle			-		-		-		(764		)
Net loss			$              (23,963	)	$                (6,256	)	$              (44,983	)	$               (14,968		)
			==============		==============		==============		==============
Basic and diluted net loss per share before cumulative effect of			$                  (0.54	)	$                  (0.24	)	$                  (1.03	)	$                  (0.99		)
	Change in accounting principle
Cumulative effect on prior years of change in      accounting principle			-		-		-		$                  (0.05	)
Basic and diluted net loss per share			$                  (0.54	)	$                  (0.24	)	$                  (1.03	)	$                  (1.04	)
			============		============		============		============
Weighted average shares used in computation of      basic and diluted
Net loss per share			44,672		26,187		43,851		14,378
See accompanying notes to consolidated financial statements.

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METAWAVE COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except earnings per share and share data)

(Unaudited)

				Six Months Ended June 30,
				2001		2000
Operating Activities
Net loss				$               (44,983	)	$               (14,968	)
Adjustments to reconcile net loss to net cash used in
	Operating activities:
		Depreciation and amortization expense		11,076		1,515
		Amortization of deferred stock compensation		5,227		1,257
		Proceeds from insurance recovery		1,233		-
		Other		54		(1	)
Changes in operating assets and liabilities:
		Decrease (increase) in accounts receivable		3,658		(3,328	)
		Increase in inventories		(4,454	)	(2,417	)
		Increase in prepaids and other noncurrent assets		(1,045	)	(328	)
		(Decrease) increase in accounts payable, accrued liabilities,
			and accrued compensation	(2,991	)	3,184
		Decrease in deferred revenues		(105	)	(1,411	)
Net cash used in operating activities				(32,330	)	(16,497	)
Investing Activities
Net proceeds from sale of inventory and fixed assets				7,964		-
Purchases of equipment				(1,780	)	(174	)
Other				230		-
Net cash provided by (used in) investing activities				6,414		(174	)
Financing activities
Proceeds from issuance of common stock				10,466		58,887
Net proceeds from exercise of common stock options				968		447
Principal payments on notes payable and capital lease obligations				(1,330	)	(1,395	)
Net cash provided by financing activities				10,104		57,939
Net (decrease) increase in cash and cash equivalents				(15,812	)	41,268
Effect of exchange rate changes on cash				195		(77	)
Cash and cash equivalents at beginning of period				37,921		20,165
Cash and cash equivalents at end of period				$                22,304		$                61,356
				============		============
Noncash transactions and supplemental disclosures
Capital lease obligations incurred to purchase assets				$                          -		$                   1,531
Noncash conversion of preferred stock to common stock				-		143,945
Noncash conversion of preferred warrants to common stock warrants				-		157
Deferred stock compensation				-		2,532
Cash interest paid				267		226
Note receivable from manufacturing outsourcing				4,473		-
See accompanying notes to consolidated financial statements.

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		METAWAVE COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1.	Description of Business
	Metawave Communications Corporation, a Delaware corporation (the "Company") headquartered in Redmond, Washington, provides smart antenna systems and embedded solutions to wireless network operators facing capacity constraints in the wireless communications industry. The Company's SpotLight smart antenna systems consist of antennas that improve the reception and transmission of radio signals dynamically through the use of the Company's proprietary software. The Company believes that wireless operators can increase overall network capacity, improve or maintain network quality, reduce network operating costs and better manage network infrastructure by implementing the SpotLight systems. The Company is also to developing embedded solutions based on its proprietary technologies that address the associated network capacity problems faced by wireless network operators.
2.	Principles of Consolidation and Basis of Presentation
	The accompanying consolidated financial statements of Metawave Communications Corporation have been prepared in conformity with generally accepted accounting principles in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included have been condensed or omitted. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. We have used estimates in determining certain provisions, including the allowance for doubtful accounts receivable, inventory valuation, useful lives for property and equipment, and warranty accruals. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10 - -Q should be read in conjunction with the audited financial statements of the Company as of and for the year ended December 31, 2000.
	The Company uses a 52-week fiscal year ending on the Sunday closest to December 31. The 2000 fiscal year ended on December 31, 2000, with each of the fiscal quarters representing a 13-week period. The second quarter of 2001 ended on July 1, 2001. For convenience of presentation, all fiscal periods in these financial statements are treated as ending on a calendar month end.
3.	Revenue Recognition and 2000 Change in Revenue Recognition Accounting Principle
	The Company generates revenues through the sales of smart antenna systems and related installation and optimization services. System revenues are recognized when title to the system and risk of loss has been transferred to the customer and all customer acceptance conditions, if any, have been satisfied, and when collection is probable. During 2000, the Company began deferring that portion of equipment revenue that is billable after completion of installation and optimization services. The amount of revenues and gross profit deferred for the second quarter of 2001 was approximately $607,000. The change in accounting principle resulted in a charge of $764,000 for the cumulative effect of the change through the end of fiscal 1999 which was recognized in the first quarter of 2000.
	Service revenues, generally for installation and optimization, are recognized when the services have been performed and all customer acceptance conditions, if any, have been satisfied. Revenues from maintenance contracts are deferred and recognized ratably over the term of the agreement (which is typically one year). Any billings in excess of revenues are classified as deferred revenues and related systems are recorded as inventory.
4.	Manufacturing Outsourcing Arrangement
	During the first quarter of 2001, we entered into an exclusive, five-year supply agreement with Viasystems Group, Inc. ("Viasystems") to outsource substantially all of our manufacturing operations to Viasystems. Viasystems is a leading global provider of electronics manufacturing services. Under the terms of the agreement, Viasystems purchased approximately $11.4 million of fixed assets and inventory to date. As part of the purchase price we accepted a $4.5 million note receivable due based on sales to the Company by Viasystems.
5.	Long-Lived Assets
	We continually evaluate revenues and costs related to our long-lived assets, principally goodwill, from our third quarter 2000 acquisition of Adaptive Telecom. The impact of current market conditions may, in the future, erode the value of long-lived assets and could result in an impairment charge.

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6.	New Accounting Pronouncements
	In June 2001 the Financial Accounting Standards Board approved Statement of Financial Accounting Standard (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of interest method of accounting for business combinations initiated after June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that more likely than not would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the Company's discontinuation of amortization of its goodwill; however, the Company will be required to test its goodwill for impairment under the new standard beginning in the firs t quarter of 2002, which could have an adverse effect on the Company's future results of operations if an impairment occurs. The Company is in the process of evaluating the financial statement impact of adoption of SFAS No. 142.
7.	Inventories
			June 30, 2001	December 31, 2000
			(In thousands)
		Purchased parts	$                      281	$                     11,038
		Subassemblies	6,099	3,752
		Finished goods	1,224	2,232
			$                 7,604 =============	$                     17,022 ==============
	Purchased parts include purchased components and partially assembled units. Subassemblies primarily represent components that are assembled and ready for final configuration pending the detailed requirements for the specific customer.
8.	Line of Credit Agreement
	The Company has a credit facility with Imperial Bank. The facility provides for a revolving credit line of $10.0 million to support working capital with a $3.3 million sub-limit for issuance of trade-related commercial and standby letters of credit. Outstanding balances on the credit line bear interest at the bank's prime rate (6.75% as of June 30, 2001 and 9.5% as of December 31, 2000), and are secured by the Company's accounts receivable. At June 30, 2001 and December 31, 2000, $3.3 million and $2.8 million, respectively, were outstanding related to the issuance of standby letters of credit for facilities and equipment. The Company is required to comply with certain covenants set forth in the line of credit agreement. We are currently in compliance with these covenants.

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9.

Net Loss Per Share

Basic and diluted net loss per share is calculated using the weighted average number of shares of common stock outstanding. The effect of stock options, warrants and convertible and redeemable preferred stock have not been included in the calculation of diluted net loss per share as their effect is antidilutive. Pro forma basic and diluted net loss per share is computed on the basis of the weighted average number of shares of common stock outstanding plus the pro forma effect of convertible preferred shares as if such shares were converted to common stock at the time of issuance. Antidilutive restricted stock, options and warrants not included in the loss per share calculation were 6,493 and 3,148 in 2001 and 2000, respectively.

	Three Months Ended June 30,			Six Months Ended June 30,
	2001		2000		2001		2000
	(Unaudited) (In thousands, except per share data)
Net loss	$              (23,963 ============	)	$              (6,256 ============	)	$              (44,983 ============	)	$             (14,968 ============	)
Weighted average shares outstanding:
Common Stock	44,672		26,187		43,851		14,378
Convertible and redeemable preferred stock	-		9,530		-		18,751
Pro forma weighted average shares outstanding	44,672 ============		35,717 ============		43,851 ============		33,129 ============
Basic and diluted net loss per share before cumulative effect of change in accounting principle	$                  (0.54 ============	)	$                  (0.24 ============	)	$                  (1.03 ============	)	$                  (0.99 ============	)
Cumulative effect on prior years of change in accounting principle	$                   - ============		$                   - ============		$                   - ============		$                  (0.05 ============	)
Pro forma net loss per share	$                  (0.54 ============	)	$                  (0.18 ============	)	$                  (1.03 ============	)	$                  (0.45 ============	)

10.	Business Segments
	The Company operates in one material segment as a manufacturer of wireless telecommunications equipment. While certain expenses for sales and marketing activities are incurred in various geographical regions, substantially all of the Company's assets are located and the majority of the Company's operating expenses are incurred at the corporate headquarters. Revenue information by geographic region is as follows:
		Three Months Ended June 30,		Six Months Ended June 30,
		2001	2000		2001	2000
		(In thousands)			(In thousands)
	United States	$                 5,960	$                 6,794		$              10,030	$               10,863
	Mexico	2,346	4,582		7,998	9,639
	China	-	-		1,558	-
	Peru	-	269		-	269
	Korea	215	-		502	-
	Total	$                  8,521 ============	$                 11,645 ============		$             20,088 ============	$                  20,771 ============
11.	Sale of Capital Stock
	The Company issued a total of 3,562,929 shares of common stock to Acqua Wellington North American Equities Fund Ltd. pursuant to purchase agreements entered into at the time of sale. Proceeds from the issuance of the shares totaled approximately $10.0 million.
12.	Significant Events
	On May 15, 2001, the Company's facility in Taipei, Taiwan was destroyed by fire. As a result of the fire, the Company incurred property losses of approximately $2.9 million. To date the Company has recovered $1.2 million from insurance proceeds and currently expects recovery of the remaining $1.7 million loss.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

          Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and the Company intends that such forward-looking statements be subject to the safe harbors created by this law. You generally can identify these statements by our use of forward-looking words such as "plans," "estimates," "believes," "expects," "may," "will," "should" or "anticipates" or the negative or other variations of such terms or comparable terminology, or by discussion of the strategy that involves risks and uncertainties. We often use these types of statements when discussing our plans and strategies, our anticipation of revenues from the markets for our services and products, our anticipated capital expenditures, operations support systems or change in regulatory requirements and other statements contained in this report regarding matters that are not historical facts.

          We caution you that these forward-looking statements are only predictions and estimates regarding future events and circumstances. All forward-looking statements included in this document are based on information available to us on the date hereof and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

          Our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business, you should carefully consider various factors that might cause actual results to differ materially from stated expectations. Please see the " Factors Affecting Our Business Prospects and Operating Results" below and the various risks outlined in our filings with the Securities and Exchange Commission from time-to-time.

Overview

          We provide smart antenna systems and embedded solutions to wireless network operators facing capacity constraints in the wireless communications industry. From inception in January 1995 through December 31, 1997, our operating activities related primarily to conducting research and development, building market awareness, recruiting management and technical personnel and building an operating infrastructure. Shipment for commercial sale of our initial SpotLight system began late in the fourth quarter of 1997 and the Company first recognized revenues for the sale of our SpotLight system in the first quarter of 1998. Since the beginning of 1998, our operating activities have been focused on increasing sales and new product development. Since inception, the Company has incurred significant losses and as of June 30, 2001, had an accumulated deficit of $215.2 million.

          Our revenues are derived primarily from sales of our SpotLight systems, which includes the sale of hardware and the licensing of software, and from related installation and optimization services. We believe that substantially all of our revenues in the near and medium term will be derived from sales of our SpotLight systems. In the second quarter of 2001, we extended an agreement with Verizon Wireless to continue supplying Verizon with SpotLight systems.

          In addition to sales of our Spotlight systems, we intend to offer embedded smart antenna solutions to wireless equipment manufacturers that we believe will enhance wireless voice and data capacity. In the first quarter of 2001, we entered into an agreement with Samsung, a leading manufacturer of wireless infrastructure, to jointly develop a commercial base station that will incorporate our patented embedded smart antenna technology.

Results of Operations - For the Three Months and the Six Months Ended June 30, 2001 and 2000

Revenues:

          Net revenue for the second quarter of 2001 decreased 27% to $8.5 million from $11.6 million for the second quarter of 2000. Net revenue for the six months ended June 30, 2001 decreased 3% to $20.1 million from $20.8 million. The decrease was primarily due to a general slowdown in the U.S. economy and telecom spending and the delay of $5.9 million of GSM shipments as a result of the destruction by fire of our Taiwan manufacturing facility. Our two largest customers in the second quarter of 2001 were Verizon Wireless and Alltel Communications, which accounted for 40% and 26% of our revenues, respectively. International sales of our systems for the three and six months ended June 30, 2001 accounted for 30% and 50%, respectively, of total revenues.

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Gross Profit (Loss):

          Gross profit for the second quarter of 2001 decreased $7.8 million to a loss of $4.3 million from a gross profit of $3.5 million in the second quarter of 2000. Gross profit for the six months ended June 30, 2001 decreased $8.7 million to a loss of $3.1 million, from a gross profit of $5.6 million for the six months ended June 30, 2000. The decrease in gross margin is primarily due to changes in product mix from 2000 to 2001. In addition, we recorded $5.4 million in inventory reserves for excess and obsolete inventory and product enhancements.

Research and Development:

          Research and development expense was $10.3 million for the second quarter in 2001, an increase of 63% from $6.3 million over the comparable period in 2000. Research and development expense increased 57% to $19.9 million for the six months ended June 30, 2001 from $12.7 million during the comparable period in 2000. The increase in research and development expense was primarily due to continuing development and testing of SpotLight 2200 CDMA and SpotLight GSM systems, and development of our embedded product. In addition, we recognized additional research and development expenses of $1.6 million and $3.8 million in the amortization of deferred stock compensation related to our acquisition of Adaptive Telecom, Inc. in the three and six month periods ended June 30, 2001, respectively.

Sales and Marketing:

          Sales and marketing expense remained consistent at $2.5 million for the three months ended June 30, 2001 and 2000. Sales and marketing expense increased 20% to $5.9 million for the six months ended June 30, 2001 from $4.9 million in the same period in 2000. The increase was primarily due to staffing realignments and the offering of additional support services to customers in 2001.

General and Administrative:

          Our general and administrative expenses consist primarily of salaries and benefits, fees for professional services, deferred compensation, rent and general office expenses. General and administrative expenses for the three months ended June 30, 2001 were $2.5 million, an increase of 56% from $1.6 million for the three months ended June 30, 2000. General and administrative expenses for the six months ended June 30, 2001 were $7.0 million, an increase of 141% from $2.9 million for the six months ended June 30, 2000. The increase was primarily due to additional staffing, professional services and an additional $1.9 million in amortization of deferred stock compensation from the acquisition of Adaptive Telecom, Inc.

Amortization of Intangibles and Goodwill:

          We recorded $4.5 million and $9.4 million in the three and six months ended June 30, 2001 for the amortization of intangibles and goodwill related to the acquisition of Adaptive Telecom, Inc. in September of 2000.

Other Income:

          Our total other income, net amounted to income of $94,000 in the three months ended June 30, 2001 compared to $664,000 in the three months ended June 30, 2000. The decrease is the result of lower return on investments and lower cash investments.

Liquidity and Capital Resources

          For the six months ended June 30, 2001, we used net cash in operating activities of $32.3 million compared to $16.5 million for the same period in 2000. For the six months ended June 30, 2001, our operating activities included uses of cash to fund our net loss of $45.0 million, increased inventory of $4.5 million (excluding the sale of certain assets to Viasystems), decreased accounts payable and accrued liabilities of $3.0 million and an increase of $1.0 million in prepaids and other noncurrent assets. We partially offset cash uses with a decrease of $3.7 million in accounts receivable, proceeds from insurance recoveries of $1.2 million and non-cash charges to depreciation and amortization of $11.1 million and stock compensation expenses of $5.2 million.

          Our net cash provided by investing activities for the six months ended June 30, 2001 was $6.4 million as

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compared to net cash used in the six months ended June 30, 2000 of $174,000. Pursuant to the manufacturing outsourcing agreement with Viasystems, we received approximately $8.0 million for payment of fixed assets and inventory. Net cash used in investing activities was primarily for the purchase of testing equipment, leasehold improvements, and customer support equipment to support our research and development, our customers, and our Taiwan manufacturing efforts.

          Our net cash provided by financing activities for the six months ended June 30, 2001 was $10.1 million compared to net cash provided in the six months ended June 30, 2000 of $57.9 million. For the six months ended June 30, 2001, we received approximately $10.0 million pursuant to the issuance of 3,562,929 shares of common stock to Acqua Wellington North American Equities Fund Ltd. We received approximately $1.4 million and issued 452,859 shares of common stock under our stock option and employee stock purchase plans.

          As of June 30, 2001, we had $22.3 million in cash and cash equivalents. We also had a revolving line of credit of $10.0 million with Imperial Bank. At June 30, 2001, $3.3 million was outstanding related to the issuance of standby letters of credit for facilities and equipment.

          We believe that current capital resources are adequate to fund our operations for the next twelve months. We may be required to raise additional capital, which may not be available to us on acceptable terms. Any inability to obtain needed financing by us could have a material adverse effect on our business and operating results.

Long-Lived Assets

We continually evaluate revenues and costs related to our long-lived assets, principally goodwill, from our third quarter 2000 acquisition of Adaptive Telecom. The impact of current market conditions may, in the future, erode the value of long-lived assets and could result in an impairment charge.

Recent Accounting Pronouncements

In June 2001 the Financial Accounting Standards Board approved Statement of Financial Accounting Standard (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of interest method of accounting for business combinations initiated after June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below is carrying value. The adoption of SFAS No. 142 will result in our discontinuation of amortization of goodwill; however, we will be required to test goodwill for impairment under the new standard beginning in the first quarter of 2002, which could have an adverse effe ct on the future results of operations if an impairment occurs. We are in the process of evaluating the financial statement impact of adoption of SFAS No. 142.

Factors Affecting Our Business Prospects and Operating Results

Limited Operating History

          We have a limited operating history which makes it difficult for you to evaluate our business and your investment. We were incorporated in 1995 and were in the development stage until late 1997, when we commenced shipment for commercial sale of our first SpotLight smart antenna system. We therefore have a limited operating history upon which an investor may evaluate our operations and future prospects. The revenue and profit potential of our business is unproven and our limited operating history makes our future operating results difficult to predict. Because our smart antenna systems and embedded solutions were introduced relatively recently, we are unable to predict with any degree of certainty whether our smart antenna systems will achieve widespread market acceptance. In view of our limited operating history, an investment in our common stock must be considered in light of the risks and uncertainties that may be encountered by early stage co mpanies in the wireless communications equipment market. In addition, period-to-period comparisons of operating results may not be meaningful and operating results from prior periods may not be indicative of future performance.

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Concentration of Customers

          Due to the highly concentrated nature of the wireless industry and the industry consolidation, we depend on a limited number of wireless network operators for substantially all of our revenues. The loss of a customer or a delay in an order from a customer could impair our operating results. We believe that the number of potential customers for future systems will be limited. In the second quarter of 2001, three customers accounted for 91% of our total revenues. Failure by us to capture a significant percentage of the wireless network operators as customers could cause our operating results to be significantly less than anticipated and lead to a decline in our stock price. Moreover, due to this customer concentration, any loss or reduced demand from our customers could cause our sales to fall significantly.

Complex and Lengthy Sales Cycle

          Because our contracts with new customers are subject to satisfying performance criteria, the timing of purchases is difficult to predict, and as a result, our revenue is unpredictable. We believe that the purchase of our SpotLight systems and embedded solutions is typically a strategic decision that requires approval at senior levels of customers' organizations, significant technical evaluation and a substantial commitment of customers' personnel, financial and other resources. Our contracts with new customers typically contain conditional acceptance provisions for the initial system sales, and we delay recognition of revenue until all conditions are satisfied, which causes our sales cycle to last up to 18 months and to vary substantially from customer to customer. This variability makes predicting our revenues difficult. Typically, performance of our systems must be accepted in an initial cell site or cluster of cell sites in a field trial pri or to completing any additional sales to a particular wireless network operator. This makes the sales process associated with the purchase of our systems complex, lengthy and subject to a number of significant risks. We may incur substantial expenses and expend significant management and personnel resources in the process of a field trial. If we do not satisfy conditions in these contracts or if satisfaction of these conditions were delayed for any reason, revenues in any particular period could fall significantly below our expectations.

Uncertainties Related to Market Acceptance

          We believe that substantially all of our revenues in the foreseeable future will be derived from sales of our SpotLight systems. If our SpotLight systems fail to achieve broad market acceptance among our customers and potential customers, our revenues could fall below our and analysts' expectations which could cause our stock price to decline. In light of the relatively recent introduction of our SpotLight systems, in particular our SpotLight GSM system and the rapidly evolving nature of the wireless communications industry, we cannot predict with any degree of assurance whether our current or future smart antenna systems will achieve broad market acceptance. We must demonstrate that our systems and embedded solutions provide a cost-effective spectrum management solution that expands wireless network operators' capacity within each operator's unique network configuration and specifications. If our smart antenna systems do not achieve widespread acceptance with wireless network operators, we will be unable to increase our revenues as expected.

          In the first quarter of 2001, we signed our first royalty-bearing license agreement with Samsung to jointly develop a commercial base station, incorporating our embedded smart antenna technology for 2.5G and 3G CDMA networks. Failure of our embedded smart antenna solutions either to successfully integrate with next generation base station equipment or to significantly enhance wireless voice and data capacity could significantly reduce demand for these solutions. Given the rapidly evolving nature of the wireless communications industry, we cannot predict whether our embedded smart antenna solutions will achieve broad market acceptance. Our future growth is dependent in part upon the acceptance and success of our embedded smart antenna solutions. If our embedded smart antenna solutions do not achieve widespread acceptance with wireless network operators, our prospects for future growth will be adversely affected.

Delays in System Installation

          We typically install our systems for customers at cell sites and commission them for commercial operation. Timely installation and commissioning of our systems are affected by a variety of factors not within our control. For example, customers may need to obtain zoning approvals for a new cell site building and tower before we may begin our installation process. With existing sites, if a customer chooses to upgrade to our high gain antennas, permits may also be required to place the antennas on the tower. In addition, the customer is responsible for preparing the cell site

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for our installation, including any electrical, air conditioning or tower cabling requirements. Customers often experience delays in obtaining the requisite permits and preparing the sites, which delay our ability to install and commission the systems. Several of our supply agreements provide that, in the event that the customer purchases installation and optimization services from us, we will invoice the services fees and a portion of the systems price upon completion of the services. Consequently, if installation and commissioning are delayed, payment from the customer will be delayed.

          In addition, as a result of our adoption of a change to our revenue recognition policy (see note 3 to our financial statements), we will defer revenues for that portion of the revenue derived from that system until the services are completed. These delays could contribute to fluctuations in our revenues from quarter to quarter and negatively affect our cash flow and business operations. Moreover, delays in installation may contribute to delays in obtaining new sales orders from customers as customers' inventory of uninstalled Spotlight systems increase. A significant reduction in order activity from customers could harm our business and operating results.

The destruction by fire of our GSM product manufacturing facility in Taiwan resulted in the loss of GSM product-related revenue in the second quarter 2001 and may impair our ability to generate GSM-related revenue during the remainder of the year which could materially affect our results of operations.

Our GSM-compatible systems were manufactured in our facilities in Taipei, Taiwan. On May 12, 2001, our manufacturing facilities and sales and services office in Taiwan were destroyed by fire. Consequently, we are in the process of relocating our Taiwan facilities and will be required to expend significant additional financial and management resources to restore our manufacturing processes. In addition, our insurance may not be adequate to cover the property and business income losses incurred. We were not able to manufacture and ship GSM-compatible systems to our customers during the second quarter and may be subject to cancellation of orders by our customers. To the extent that we are not able to purchase needed components, or obtain adequate financing to restore our manufacturing operations in Taiwan, we may not be able to provide GSM products to our customers and generate GSM product-related revenue during the remainder of the year. If this occurs, our business and future growth will be significantly affected, our results of operations will be negatively affected, and our stock price may decline.

International Market Risks

          Our substantial sales of our SpotLight systems and embedded solutions in international markets subject us to various risks and costs which may harm our business. We anticipate that international sales of our SpotLight and embedded systems in Asia, Latin America and other international markets will continue to account for a significant portion of our revenues for the foreseeable future. Risks and associated costs inherent in our international business activities include:

          w      difficulties obtaining foreign regulatory approval or U.S. export licenses for our smart antenna systems and embedded solutions and technologies;

          w      unexpected changes in regulatory requirements relating to the telecommunications industry;

          w      greater difficulties collecting delinquent or unpaid accounts;

          w      lack of suitable export financing for our SpotLight systems;

          w      dependence upon independent sales representatives and other indirect channels of distribution of our SpotLight systems and embedded solutions;

          w      political and economic instability in the regions where we sell our SpotLight systems and embedded solutions;

          w      enforceability of contracts with foreign customers and distributors governed by foreign laws; and

          w      lack of experienced technical personnel familiar with our products in foreign markets.

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Item 3. Quantitative and Qualitative Disclosure of Market Risk

Interest Rate Risk

          We do not use derivative financial instruments in our investment portfolio. We invest in high quality marketable securities, primarily U.S. Government obligations and corporate obligations with maturities of less than three months. Such securities are subject to interest rate risk and will rise and fall in value if market interest rates change, however, we do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is not material.

Foreign Currency Risk

          Currently our export sales are denominated in U.S. Dollars. The continued development of our international operations will result in an increased market risk relative to foreign currencies. At this time, we do not believe there will be material risks related to fluctuations in foreign exchange rates.

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PART II. Other Information

Item 1.          Legal Proceedings

                      None.

Item 2.          Changes in Securities and Use of Proceeds

(d)                  Use of Proceeds from Sale of Registered Securities

          We completed an initial public offering of our common stock on April 25, 2000. Net proceeds from the offering amounted to $58.9 million. As of June 30, 2001, we have used approximately $2.5 million for acquisition related expenses and $54.3 million for working capital expenditures and $2.1 million for equipment purchases to fund our research and development activities. To date, we believe that we have used the offering proceeds in a manner consistent with the use of proceeds described in the registration statement. As of June 30, 2001, there are no remaining offering proceeds.

Item 4.          Submission of Matters to a Vote of Security Holders

(a)                   The Registrant held its Annual Meeting of Stockholders on Thursday, June 21, 2001.

(b)                   The stockholders elected eight directors at the meeting: Robert H. Hunsberger, Bandel L. Carano, Bruce C. Edwards, David R. Hathaway, Scot B. Jarvis, Douglas O. Reudink, Jennifer Gill Roberts and David A. Twyver. There are no additional directors whose term of office as a director continued after the meeting.

(c)                   At the meeting, stockholders (1) elected eight directors of the Company; and (2) ratified the selection of Arthur Andersen LLP, independent public accountants, as auditors for the Company for the year ending December 31, 2001.

The votes cast for, against, or withheld, as well as the number of abstention and broker non-votes for each nominee for office as a director were as follows:

NOMINEE	FOR	AGAINST	WITHHELD	ABSTENTIONS	BROKER NON-VOTES
Robert H. Hunsberger	32,188,116	0	1,700,269	0	0
Bandel L. Carano	33,855,690	0	32,695	0	0
Bruce C. Edwards	33,855,161	0	33,224	0	0
David R. Hathaway	33,855,690	0	32,695	0	0
Scot B. Jarvis	33,855,690	0	32,695	0	0
Douglas O. Reudink	33,865,833	0	22,552	0	0
Jennifer Gill Roberts	33,855,299	0	33,086	0	0
David A. Twyver	33,857,349	0	31,036	0	0

The votes cast for, against, or withheld, as well as the number of abstentions and broker non-votes for ratification of Arthur Andersen LLP, as auditors for the Company for the year ending December 31, 2001 were as follows:

	FOR	AGAINST	WITHHELD	ABSTENTIONS	BROKER NON-VOTES
Ratification of Arthur Andersen LLP as auditors for the Company for the year ending December 31, 2001	33,832,315	23,131	0	32,939	0

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Item 6.           Exhibits and Reports on Form 8-K

(a)                   Exhibit Number

3.1*	Certificate of Incorporation of the Registrant.
3.2*	Bylaws of the Registrant.
4.1*	Form of Stock Certificate.

                     ____________

*      Previously filed as an exhibit to Registrant's registration statement on Form S-1, File No. 333-30568, originally filed with the Commission on February 17, 2000, as subsequently amended, and incorporated herein by reference.

(b)                   Reports on Form 8-K

                       1.              Report on Form 8-K, as filed with the SEC on May 16, 2001, announcing the fire in our Taiwan facilities.

                       2.              Report on Form 8-K, as filed with the SEC on June 26, 2001, reporting the private placement of common stock to Acqua Wellington North America Equities Fund Ltd.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:          August 10, 2001	METAWAVE COMMUNICATIONS CORPORATION
	/s/ Stuart W. Fuhlendorf Stuart W. Fuhlendorf Chief Financial Officer (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number

3.1*	Certificate of Incorporation of the Registrant.
3.2*	Bylaws of the Registrant.
4.1*	Form of Stock Certificate.

                      ____________

*      Previously filed as an exhibit to Registrant's registration statement on Form S-1, File No. 333-30568, originally filed with the Commission on February 17, 2000, as subsequently amended, and incorporated herein by reference.

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