10-K/A

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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
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                                  FORM 10-K/A
                               AMENDMENT NO. 1 TO

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                                            
          For the Fiscal Year Ended                        Commission file number
              December 31, 1999                                   0-19903



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                                 METRICOM, INC.
             (Exact name of Registrant as specified in its charter)

                                            
                   DELAWARE                                      77-0294597
       (State or other jurisdiction of               (IRS Employer Identification No.)
        incorporation or organization)



                980 UNIVERSITY AVENUE, LOS GATOS, CA 95032-2375
          (Address of principal executive offices, including zip code)

                                 (408) 399-8200
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:
                    COMMON STOCK, $.001 PAR VALUE PER SHARE

     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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     The approximate aggregate market value of the Common Stock held by
non-affiliates of the Registrant, based upon the last sale price of the Common
Stock reported on the Nasdaq National Market on March 1, 2000 was
$1,626,983,000. Shares of Common Stock held by persons who hold more than 5% of
the outstanding shares of Common Stock and shares held by officers and directors
of the registrant have been excluded because such persons may be deemed to be
affiliates. This determination is not necessarily conclusive.

     The number of shares of Common Stock outstanding as of March 1, 2000 was
30,590,903.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the Metricom, Inc. Proxy Statement relating to the 2000
Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by
reference into Part III of this Form 10-K.

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                      EXPLANATORY NOTE TO AMENDMENT NO. 1

     Amendment No. 1 makes the following changes to Item 1 of this Form 10-K:
(i) to revise the first sentence of the first paragraph of "Overview;" (ii) to
add the number of users of our service as of September 30, 2000; (iii) to add a
description of the second phase of our deployment plan to the fourth paragraph
of "Overview" and the second paragraph of "Our Strategy;" (iv) to revise and
update the risk factors throughout; and (v) to change the references from "MCI
Worldcom" to "Worldcom" throughout. Except as otherwise stated herein, all
information contained in this Report on Form 10-K was current as of the date of
filing of the original Report on March 24, 2000 and has not been updated by
Amendment No. 1.

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

     This document contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that are based on our current expectations about our
company and our industry. We use words such as "plan," "expect," "intend,"
"believe," "anticipate," "estimate" and other similar expressions to identify
some forward-looking statements, but not all forward-looking statements include
these words. Some of these forward-looking statements relate to the timing and
coverage of our planned network deployment, the launch of our high-speed
service, our market opportunities, our strategy, our anticipated revenues from
WorldCom, our ability to enter into agreements with new channel partners, our
competitive position, our management's discussion and analysis of our financial
condition and results of operations and the timing and extent of our funding
needs. All of our forward-looking statements involve risks and uncertainties.
Our actual results may differ significantly from our expectations and from the
results expressed in or implied by these forward-looking statements. The section
captioned "Risk Factors" appearing in this Annual Report on Form 10-K describes
those factors that we currently consider material and that could cause these
differences. We urge you to consider these cautionary statements carefully in
evaluating our forward-looking statements. Except as required by law, we
undertake no obligation to publicly update any forward-looking statements to
reflect subsequent events and circumstances.

                                     PART I

ITEM 1 -- BUSINESS.

     Metricom, Inc. was incorporated in California in December 1985 and
reincorporated in Delaware in April 1992. Unless the context otherwise requires,
references in this Form 10-K to "we," "us," "Metricom" or the "Company" refer to
Metricom, Inc. and its subsidiaries. Our principal executive offices are located
at 980 University Avenue, Los Gatos, California 95032-2375, and our telephone
number is (408) 399-8200.

OVERVIEW

     We are a leading provider of mobile wireless data access to corporate
networks and the Internet, based on the data rates provided to users of our
service. We began offering our commercial service, marketed under the Ricochet
brand name, in September 1995. Ricochet service is now available in the San
Francisco Bay Area, in the Seattle and Washington D.C. metropolitan areas; parts
of Los Angeles and New York; and in certain airports and corporate and
university campuses. Ricochet's customers include individuals, corporations,
educational institutions and federal, state and local governments. As of
September 30, 2000, there were approximately 25,900 Ricochet subscribers. Our
current networks use unlicensed spectrum and provide end users with speeds
comparable to commonly used wired modems and, to our knowledge, faster than
other mobile wireless wide area data communications networks.

     During 1999, while we continued to operate our existing Ricochet service,
we have focused our efforts on designing and developing our new high-speed
service. We plan to launch our new high-speed service, marketed under the
Ricochet brand name, during the late summer of 2000. We have designed our new
service to meet the needs of the growing number of professionals who require
full access to their corporate networks and the Internet while away from the
office. Our service will provide these mobile professionals with higher

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speed access to data than any other mobile wireless technology commercially
available today. Our service will also appeal to consumers who desire high-speed
mobile access to the Internet. Our technology enables users to replicate
wirelessly the look and feel of their desktop computers, providing them with
features customarily associated with working on a desktop computer at the
office. Simply by connecting a wireless modem to a laptop computer or other
portable electronic device, our users can access their corporate networks and
the Internet whenever they want and wherever they are within our service areas,
just as they would with a wired modem. Our users pay only a flat fee for our
service, unlike many other remote access services.

     In November 1999, WorldCom, Inc., and Vulcan Ventures Incorporated, the
private investment vehicle of Microsoft Corporation co-founder Paul Allen, each
purchased shares of our preferred stock for $300 million in cash, providing us
with funds to commence the deployment of our high-speed network. In addition,
WorldCom has entered into an agreement with us to sell subscriptions to our
service and has agreed to pay us at least $388 million in revenue over the five
years following the launch of our service, subject to the timely deployment of
our network, our ability to meet agreed performance standards and our ability to
attract a significant number of subscribers through other channel partners. This
relationship provides us with immediate access to a large and sophisticated
sales force that has experience selling products and services to businesses and
consumers in our target market.

     We plan to deploy our high-speed network in three phases. We plan to launch
our high-speed service during the late summer of 2000, and we expect that our
initial service areas will cover a total population of approximately 62 million.
In the second phase, we plan to expand our coverage to additional markets and,
at the end of the second phase, we expect our network to cover a cumulative
population of approximately 80 million. After the third phase of our deployment,
which we plan to complete by the end of the summer of 2001, we expect our
service areas to cover a cumulative population of at least 100 million. As of
September 30, 2000, there were 25,900 users of our service.

     When we launch our service, we plan to use channel partners to sell
subscriptions to our service, bill our users and provide the first level of
customer support. Currently, we have entered into an agreement with one channel
partner, WorldCom. We intend to co-brand our service with WorldCom at our
expense. We believe that co-branding our service with WorldCom, together with
our own independent promotional activities, will help us significantly increase
user awareness of our brand and will make us a more attractive service for other
potential channel partners. We are seeking to enter into agreements with other
channel partners that, like WorldCom, have experience selling products and
services to businesses and consumers in our target market. Potential channel
partners include local telephone companies, wireless carriers, digital
subscriber line or other high-speed Internet access providers, laptop computer
and other portable electronic device manufacturers and system integrators or
networking consulting firms that recommend large-scale purchases of access
services such as ours to their customers.

     In February 2000, we completed concurrent public offerings of 5,750,000
shares of our common stock and $300 million aggregate principal amount of our
13% senior notes due 2010, together with warrants to purchase an aggregate of
1,425,000 shares of our common stock at an initial exercise price of $87.00 per
share. The estimated aggregate available net proceeds of these offerings was
approximately $692 million, after deducting underwriting discounts and
commissions and estimated offering expenses, and after establishing the required
interest reserve to secure the first four interest payments on the notes.

                                  RISK FACTORS

     An investment in our securities involves a high degree of risk. The risks
and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently deem
immaterial also may impair our business operations. If any of the following
risks actually occurs, our business could be harmed substantially and our stock
price could decline.

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                         RISKS RELATED TO OUR BUSINESS

     We have refocused our business on a new service for which consumer demand
     is uncertain and which we have limited experience operating.

     We have only recently placed our new high-speed network into commercial
operation and we cannot reliably project potential demand for our high-speed
service, including whether there will be sufficient demand at the prices we need
to be profitable. We cannot reliably predict demand because the market for
mobile wireless data access services is in the early stages of development and
critical issues concerning wireless communications and data access, including
security, reliability, cost, regulatory issues, ease of use and quality of
service, remain unresolved and are likely to affect the demand for our
high-speed service. In addition, unlike with our prior service, we are not
selling our high-speed service directly to users. Instead, we have implemented a
business strategy that relies on channel partners to sell our new service to
customers.

     The success of our business ultimately will depend upon the acceptance of
our high-speed service by users who subscribe to our service through our channel
partners. Because we are offering a service for which there is only a limited
market today, we bear the risk that our channel partners will not generate
sufficient revenue for us to recoup the substantial expenditures we will make to
deploy and commercially launch our network. Moreover, if the user base for our
high-speed service does not expand at the rate required to support the planned
deployment of our network, our revenue and business will suffer, and we may be
unable to complete our national deployment. In addition, competition to provide
wireless data access services of the type we offer could result in a high
turnover rate among our users, which could have an adverse effect on our
business and results of operations.

     We must deploy our high-speed network in a limited time in order to compete
     effectively and attract users. We may be unable to attract users and
     compete with other data access providers if we do not rapidly deploy our
     high-speed network.

     Competitive factors require that we deploy our high-speed network rapidly.
If we are unable to meet our aggressive deployment schedule, we may be unable to
attract users and compete with other data access providers. We plan to deploy
our high-speed network in major metropolitan markets throughout the U.S. at a
rate that we believe has never been attempted. We believe we must introduce our
service in a limited amount of time because of increasing competition from other
data access providers that are developing competing or similar services.

     We have experienced delays in deployment in some markets.

     We have encountered delays in the deployment of our high-speed network in
some markets due to municipality approvals and utility agreement negotiations.
If we continue to experience delays in any markets or are required to reduce the
number of markets in which we launch operations or if we are unable to meet
continuing deployment needs, such as continuing to deploy network radios and
wired access points to maintain performance levels, our business will suffer and
the trading prices for our securities could decline, perhaps substantially. We
initially planned to launch our high-speed service in 12 markets during the late
summer of 2000. By the end of the summer of 2000, we had deployed our service in
nine markets. Although we had planned to launch our service in Chicago and Los
Angeles as part of our initial launch phase, we did not launch in these markets
during that phase due to delays in obtaining zoning approvals and negotiating
utility agreements. In addition, in one market, New York City, we have not
deployed our service in all areas of the market because of delays in obtaining
necessary local regulatory clearances. In Washington, D.C. and Seattle, two of
our initial launch markets, access is available only at 28.8 kilobits per second
as we continue construction of the network infrastructure for our high-speed
service.

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     There are numerous contingencies involved in deploying our network, some of
     which are outside of our control. Unfavorable or untimely resolution of
     these contingencies could lead to further delays in our deployment in some
     markets.

     In order to complete our network and continue to offer our high-speed
service to users in our targeted metropolitan markets, we must successfully
achieve a number of regulatory, design and implementation objectives. We may not
be able to meet these objectives on a timely basis or at the cost that we have
assumed, or at all. Deployment of our high-speed network involves various risks
and contingencies, many of which are not within our control, including:

     - delays or refusals by local governments or other third parties to enter
       into the agreements we need to deploy our network, such as in the
       Chicago, Los Angeles and New York markets;

     - inability of third parties on whom we depend to meet delivery schedules;

     - failure of our network to perform as expected;

     - hardware reliability and performance problems;

     - failure to receive, or loss of, necessary Federal Communications
       Commission certification; and

     - changes in existing laws and regulations.

     In addition, as we transition to our high-speed service in markets like New
York and San Francisco where our 28.8 kilobits per second service is in use,
users of our new high-speed service may experience difficulty in receiving and
maintaining our higher speed service and may occasionally be routed to the 28.8
service. As we complete our network, we will be implementing system
modifications that should eliminate these high-speed service interruptions. If
we are not able to minimize or eliminate these disruptions, our ability to
attract users of our high-speed service in these markets could be severely
affected and our business could be harmed.

     Our success depends, in part, on our ability and the ability of our channel
     partners to market our service.

     We expect that a substantial marketing effort will be necessary to
stimulate demand for our high-speed service. As we launch our high-speed
network, we expect that our channel partners will be marketing our service to
their customers and other potential users of our service. We also are
undertaking a marketing plan to attract users to our service. We cannot be
certain that these marketing efforts will be successful and attract the users
that we will need to sustain our growth, business and operations. If we or our
channel partners are unable to market our high-speed service successfully, or at
all, our ability to attract users will be adversely affected and our business
will be harmed.

     We depend substantially on third parties to deploy our high-speed network
     on a timely and cost-effective basis.

     We depend heavily on third parties to meet our deployment schedule. If any
of these third parties has difficulty performing, or is unable to perform, its
obligations in accordance with our schedule and projected costs, the deployment
of our high-speed network could be delayed and we could be forced to incur
substantial unanticipated costs.

     We need to obtain rights-of-way from local municipalities, public utilities
     and other governmental entities to locate our poletop radios.

     The development, expansion and operation of our network depend to a
significant degree on our ability to obtain and maintain rights-of-way for the
location of our poletop radios from local municipalities, public utilities or
other local government entities. We have faced delays and may face future delays
or rejections in attempting to obtain the approvals and agreements necessary to
deploy our network and commercially launch our service. For example, in the
Chicago, Los Angeles and New York markets, variations in local regulations,
including zoning and franchise fee regulations, have delayed our obtaining
agreements we need in order to install our poletop radios. If these site
agreements are not executed in a timely manner and on commercially

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reasonable terms, or at all, we will be required to seek alternative sites, such
as commercial buildings, residential dwellings or similar structures, from which
to deploy network radios. Deploying a large area in this manner could be
time-consuming and significantly more expensive than installing poletop radios
on street lights and may be restricted or prohibited by one or more
municipalities.

     We need to lease space on rooftops or towers from third parties to install
     our wired access points.

     The deployment of our service also depends on our ability to lease space
for our wired access points on building rooftops or on transmission towers owned
by third parties, and there is substantial competition from a variety of
communications companies for these sites. We employ third parties to locate
appropriate sites and negotiate leases on our behalf. If these third parties are
unable to identify and negotiate these leases on terms favorable or acceptable
to us, the deployment of our network will be impaired. The rate at which we are
acquiring these leases has been slower and the cost of acquiring these leases
has been higher than we anticipated. Consequently, we must commit more time,
effort and capital resources to acquiring these leases in order to meet our
deployment plans.

     We depend on third-party suppliers to deliver key components of our
     network.

     We depend on sole or limited source suppliers for many of the principal
components of our network, including our network radios and wired access points.
Some of our suppliers have experienced shipment delays, either as a result of
capacity limitations at their production facilities or because they were unable
to obtain raw materials or parts necessary for the network components they
manufacture. Some of these supply shortages are ongoing. If we continue to
experience these or future supply problems and are unable to develop alternative
sources of supply quickly and on a cost-effective basis, our ability to obtain
and install the equipment we need to implement our service will be impaired.

     We depend on third-party suppliers to provide circuits necessary to deploy
     our networks.

     We depend on third-party suppliers to provide data communications circuits
required to deploy our network. To date, we have experienced some delays in
obtaining data communications circuits from vendors. These delays have
negatively impacted both the commercial launch dates and the size of coverage
areas of some of the markets we have launched thus far, as well as some markets
that are currently under construction. If we do not obtain data communications
circuits on a timely basis, we may be required to delay commercial launches of
future markets, launch markets with smaller than optimal coverage areas, or
both.

     We use contractors to install and construct our network.

     We have outsourced the physical construction of our high-speed network to a
small number of contractors and our reliance on these contractors reduces our
control over deployment schedules, quality assurance and costs. The failure of
these contractors to complete the installation of our network on a timely,
cost-effective basis could delay the deployment of our network, which would
damage our business and prospects. We rely on these third parties, among other
things, to install our poletop radios and wired access points, deliver and
install circuits at our wired access points and network interface facilities,
establish and maintain our connection to corporate networks and the Internet and
provide radio frequency engineering. The successful and timely deployment of our
network by these parties will be subject to numerous factors, including the
supply of labor, materials and equipment, as well as prevailing weather
conditions.

     We may rely heavily on one channel partner, WorldCom, to provide a
     substantial portion of the subscription sales and customer support critical
     to our success.

     We have agreements with five channel partners, one of which is WorldCom.
WorldCom has not commenced the active sale of our service to customers. If
WorldCom does not sell our service as effectively as anticipated or if WorldCom
terminates its agreement with us, now or in the future, it could disrupt our
operations, adversely affect our sales and harm our competitive position and our
business. Although WorldCom is only one of several channel partners, we may be
heavily dependent on WorldCom to sell

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subscriptions to our service because it is our largest channel partner and is
the only one with national brand name recognition. Our agreement with WorldCom
is non-exclusive, allowing it to market and sell the services of our
competitors, and WorldCom may terminate the agreement without penalty if we
breach our material obligations under the agreement. We believe that the extent
to which WorldCom devotes resources to marketing and selling our service will
substantially affect the development of our user base. We cannot predict whether
WorldCom will sell our service effectively or, even if it does, whether it will
decide to support future competing technologies in preference to ours.

     WorldCom may reduce or cancel its obligations to us if we fail to meet
     performance thresholds.

     If we do not satisfy specified performance targets under our WorldCom
agreement, WorldCom could reduce or terminate its payment obligations or suspend
or terminate any sales and marketing services we receive under our agreement
with WorldCom, which would impair the growth of our user base and adversely
affect our business and results of operations. Although WorldCom has agreed to
pay us at least $388 million in revenue over the five years following the launch
of our service, our agreement with WorldCom provides that if our deployment
schedule is delayed or if we fail to meet deployment schedule deadlines or fail
to comply with quality-of-service standards relating to data transmission
performance, network availability, coverage and latency, ease of use and size of
modems, all as specified in the agreement, WorldCom may delay or reduce its
minimum payments to us or, in the case of a deployment delay in excess of 12
months, may terminate the contract. We currently are assessing the impact that
the deployment delays we have experienced thus far may have on our minimum
revenue commitment from WorldCom. Because the WorldCom revenue amounts represent
minimum commitments, the ultimate impact, if any, of our deployment delays on
total revenues from WorldCom cannot be predicted. In addition, in the event
that, in any agreement year, subscribers provided by WorldCom represent more
than a specified percentage of our total subscribers, then WorldCom's guaranteed
revenue commitment for that agreement year could be reduced. If we fail to
correct any deficiency for sustained periods of time, WorldCom may suspend its
obligations to us or terminate the agreement.

     We must enter into agreements with channel partners to sell our service to
     users and provisions in our agreement with WorldCom and our standard
     channel partner agreement could deter potential channel partners from
     entering into agreements with us.

     We are seeking to enter into non-exclusive agreements with other channel
partners to sell our service to users. If we are unable to establish additional
agreements with appropriate channel partners at the rate needed to keep pace
with the growth of our network, or at all, the growth of our customer base and
revenues will be reduced. Our agreement with WorldCom contains provisions that
may deter other potential channel partners from entering into agreements with us
or limit the number of potential users to which our service is marketed. For
example, our agreement with WorldCom contains a "most favored nation" clause,
which assures WorldCom no less favorable terms than we grant any other channel
partner. The agreement also restricts us and other channel partners from
marketing our service to three specified entities to which WorldCom may seek to
resell our service. In addition, our standard agreement with channel partners
requires them to offer our service at a flat rate that each channel partner will
determine. This provision could allow a single channel partner to undercut our
other channel partners, which could deter potential channel partners from
entering into agreements with us.

     The success of our service depends, in part, on our ability and the ability
     of our channel partners to provide adequate customer support.

     As we launch our high-speed network, we are relying on our channel partners
to provide the initial level of customer support, which we will supplement with
higher level technical support. We cannot be certain that either we or the users
of our service will be satisfied with the performance of any channel partner
with which we enter into an agreement. If we or our channel partners are unable
to provide adequate customer service, our ability to retain users could be
adversely affected and our reputation and business could be harmed.

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     We will require significant additional capital in the future to fund the
     continuing development, deployment and marketing of our high-speed network
     and service.

     Based on our current projections, we believe that, in addition to the funds
currently on hand, we will require additional cash resources of approximately
$500 million to enable us to complete the three-phase deployment of our network,
as well as for other general corporate purposes, including the payment of
interest and dividends on outstanding securities. Based on our current
projections, we believe our cash, cash equivalents and unrestricted investments
of approximately $714 million as of September 30, 2000, will be sufficient to
fund the uncompleted portion of the first two phases of our network deployment.
We will need additional funds to complete the third phase of our network
deployment, and the funds we may actually require to complete any phase of the
deployment may vary materially from our estimates. For example, we could incur
unanticipated costs or be required to alter our plans to respond to changes in
competition or other market conditions, which could require us to raise
additional capital sooner than we expect. We also could require additional funds
if we decide to depart from our current business plan or if we experience
unforeseen delays, regulatory changes, cost overruns or other unanticipated
expenses. In addition, we could require additional funds if we elect to pursue
possible acquisitions of complementary businesses or technologies, or acquire
licensed spectrum or license, acquire or invest in new products or technologies,
none of which is provided for in our current budget.

     Any of the foregoing events could require us to raise additional capital
through the sale of equity securities or the incurrence of additional
indebtedness in private or public financings. We cannot assure you that
additional financing will be available on terms favorable to us, if at all. In
addition, Vulcan Ventures' control position and WorldCom's large investment in
us may deter investors who otherwise might have provided financing to us.
Furthermore, neither Vulcan Ventures nor WorldCom is obligated to provide us
with additional funds. If we are unable to secure additional financing, we may
be required to delay or abandon our expansion plans, which could limit or
prevent the implementation of our business strategy. Moreover, the sale of
additional equity or equity-linked securities could be dilutive to holders of
our common stock warrants and other securities.

     We expect to continue to generate losses as we continue to deploy, develop
     and market our network and service.

     We have a history of losses and expect to incur additional losses in the
future. If we are unable to achieve or sustain profitability or positive cash
flow from operating activities, we may be unable to develop our network or
conduct our business effectively or competitively. Expenditures associated with
developing our high-speed service have contributed substantially to our
cumulative net losses of approximately $469 million as of September 30, 2000. We
expect to incur significant operating losses and to generate negative cash flow
from operating activities during the next several years while we continue to
develop and deploy our network, market our high-speed service and build our user
base. We cannot assure you that we will be able to achieve or sustain
profitability.

     Our quarterly operating results are likely to fluctuate significantly,
     particularly in light of the uncertain demand for our service.

     As we continue to deploy our new high-speed service in additional markets,
our operating results are likely to fluctuate significantly. As a result, it is
likely that in some future quarters our operating results will be below the
expectations of securities analysts and investors, which could cause the trading
prices of our securities to decline, perhaps substantially.

     We are unable to forecast our revenues with certainty because of the
unknown demand for our high-speed service and the emerging nature of the mobile
wireless data access industry. Our revenues could fall short of our expectations
if we experience delays in building out our network or entering into agreements
with additional channel partners. We have limited experience marketing our new
service or operating the high-speed network through which the service is
provided. This lack of experience could cause us to inaccurately estimate the
demand for our new high-speed service, which would adversely affect our results
of operations.

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Our operating results may fluctuate as a result of the factors described below
and elsewhere in these "Risk Factors," including:

     - unanticipated costs of building our network;

     - delays in the introduction of our service into new markets;

     - changes in the rate of market acceptance of our high-speed service;

     - new offerings of, and pricing strategies for, competitive services;

     - changes in the regulatory environment; and

     - general economic conditions, as well as economic conditions specific to
       the data access markets.

     We rely on a limited number of suppliers to provide the modems through
     which our users access our service and therefore, if our modem supply was
     reduced or interrupted our business would be harmed. Also, our business
     could be disrupted and we could incur substantial costs if our modem
     suppliers do not provide enough modems to meet the demand for our service
     or if there is not enough demand for our service to meet our suppliers'
     minimum commitments.

     We depend on a limited number of third-party manufacturers to develop,
assemble and manufacture our modems. If any of our modem suppliers were to
experience financial, operational, production or quality assurance difficulties,
allocate resources to others in lieu of us or experience a catastrophic event
that results in a reduction or interruption in supply of modems, our business
would be impaired. In addition, if these manufacturers are not able to keep pace
with production schedules, our operations will be disrupted.

     We may need to arrange for an additional supply of modems to meet forecast
demand for subsequent periods. If we cannot secure arrangements for the
manufacture of additional modems beyond the initial period, our channel partners
may be unable to secure new subscribers to our service, which would harm our
competitive position and our business. Further, if our channel partners sell
more subscriptions than we anticipate or if we decide to accelerate deployment
of our high-speed network, our presently anticipated supplies may prove
inadequate. We cannot assure you that, if any of these events occurs, modems
from alternate suppliers will be available at favorable prices, if at all.
Additionally, under agreements with our existing modem supplier and three new
modem suppliers, we have committed to purchase a minimum number of units in the
first year of deliveries and to reimburse these suppliers for a portion of their
development costs. Consequently, if consumer demand for our service is less than
we currently anticipate, we could owe a substantial amount, up to approximately
$100 million in the aggregate, to these modem suppliers.

     Our manufacturers may experience shortages of supply of components for our
     poletop, network radios, modems or other products, which could involve
     substantial cost and delay and reduce availability of our service.

     Some of the component parts that our manufacturers use in our products,
including our modems and network radios, are available only from sole or limited
source vendors. For example, in early 2000, an industry-wide component shortage
caused delays to the production of our poletop and network radios assembled
under contract by Sanmina Corporation, which resulted in delays to our network
deployment. If our manufacturers are unable to obtain sufficient components, we
may need to reconfigure our modems or radios, which could involve substantial
cost and delay and limit availability of our modems or radios necessary for the
deployment of our network. This could further delay our deployment, which would
reduce the availability of our service to users and harm our business. Our
manufacturers' reliance on sole or limited source vendors involves risks,
including the possibility of a shortage of key component parts and reduced
control over delivery schedules, manufacturing capability, quality and costs. In
addition, some key component parts require long delivery times. If the global
supply shortage continues, or if our other manufacturers are unable to obtain
components, we may experience further delays and may not be able to timely
deploy our network, which could have an adverse effect on our channel partners'
ability to market our service.

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     We depend on a network infrastructure largely maintained by third parties
     and subject to disruption by events outside our control.

     Our success will depend upon the adequacy, reliability and security of the
networks used to carry data between our network and corporate networks and the
Internet. If there is any failure of the Internet backbone, our network
interface facilities or any other link in the delivery chain, whether from
operational disruption, natural disaster or otherwise, our service could be
interrupted and our business and results of operations could be adversely
affected. Because the networks used to carry the data are owned or controlled by
third parties, we have no control over their quality and maintenance. Currently,
we have agreements with UUNet, a subsidiary of WorldCom, and others to support
the exchange of traffic between our wired access points, our network interface
facilities, the telecommunications infrastructure and corporate networks and the
Internet. Our operations also depend on our ability to avoid damages from fires,
earthquakes, floods, power losses, communications failures, network software
flaws, transmission cable cuts and similar events. The occurrence of any of
these events could disrupt our service and harm our business.

     The data access market in which we operate is highly competitive and
     includes a number of companies that have more resources and brand name
     recognition than we do, which may affect our ability to attract and
     maintain users of our service.

     Competition in the market for data access and communications services is
intense, and increasing competition may force us to reduce prices, which would
result in reduced gross margins and cause us to lose market share, any of which
could harm the growth of our business and our results of operations. A number of
privately and publicly held communications and data access companies, such as
Qualcomm, Inc. and Sprint Corp., have developed or are developing new wireless
and wired communications and data access services and products using
technologies that may compete with ours. Some of these services have operated
for many years and are already broadly deployed in major markets and
well-recognized. Many of these companies have significantly greater resources,
more established brand names and larger customer bases than we do. In addition,
several companies in various other industries, such as the satellite
communications industry, are expected to enter the market for high-speed data
access in the future. Further, we may face competition from Internet service
providers that could offer Internet, online or data access services at prices
lower than those offered by our channel partners, which could limit our ability
to increase our user base and cause us to obtain lower than anticipated selling
prices or incur additional selling, marketing and product development expenses.

     The data access market is constantly evolving, with faster and more
     effective products introduced regularly. We must continually develop and
     implement new products and services that keep pace with technological
     advances. If we do not, our products may become non-competitive or
     obsolete, impairing our ability to compete for customers.

     The market for data access and communications services is characterized by
rapidly changing technology and evolving industry standards in both the wireless
and wireline industries as customers demand greater speed and increased access
and mobility. If we do not develop new technologies or systems in a timely
manner upon the introduction of alternative technologies, our products and
services may become non-competitive or obsolete and we may lose users to
competing service providers. Our success will depend to a substantial degree on
our ability to develop and introduce, in a timely and cost-effective manner,
enhancements to our high-speed service and new products that meet changing user
requirements and evolving industry standards. For example, wired data access
technologies, such as digital subscriber lines, may provide faster data rates
than our high-speed network and this may affect user perceptions as to the
attractiveness of our wireless service. Increased data rates also may result in
the widespread development and acceptance of applications that require a higher
data transfer rate than our high-speed service provides.

     We may not effectively manage our growth into new geographic markets, which
     could impede our ability to expand our business and deploy our nationwide
     network.

     Our plans call for us to expand into 46 markets over a relatively short
period of time, requiring us to manage a number of operations in geographically
dispersed locations with which we have little or no prior
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experience. If we are unable to manage effectively our expected rapid growth and
development, or if we experience difficulties in managing the deployment of our
network, such as the delays in deployment we have experienced related to local
regulatory approvals, our business, results of operations, reputation and
prospects for growth could be harmed. As we deploy our network, we will have to
manage the design, deployment, installation, maintenance and support of a
nationwide mobile wireless data access network, as well as the coordination and
support of our channel partners.

     In addition, management of our growth will require, among other things:

     - continued development of our financial and management controls and
       management information systems, including our fixed asset management and
       billing systems;

     - accurate assessment of potential markets;

     - stringent cost controls;

     - increased marketing activities; and

     - retention of qualified personnel and training of personnel and third
       parties on whom we depend to deploy and maintain our service.

     We will need to offer our products at competitive prices and, to realize
     this objective, we must achieve cost reductions for our products and
     components.

     If we are to become profitable, our products and components must be
manufactured in large quantities at competitive cost and quality. If we do not
achieve significant product and component cost reductions, our competitive
position and our ability to achieve profitability could be impaired. We are
currently working with several companies to develop low-cost personal computer
card modems, as well as smaller and lower cost external modems. If we are unable
to develop these modems at a low cost, we may be unable to achieve the cost
structure we anticipate in our business plan. Even if we achieve low-cost
production, we must have adequate lead times and production capacity to meet
user demand for our service in order to increase revenues and achieve
profitability.

     We may be unable to adequately protect our proprietary rights or to obtain
     adequate rights to use proprietary information related to the technology
     used in our products.

     We rely on a combination of patent, copyright, trademark and trade secret
protection laws and non-disclosure agreements to establish and protect our
proprietary rights. If these protections do not adequately protect our
proprietary rights, we could lose valuable assets or become involved in costly
litigation. Our patents may not preclude competitors from developing equivalent
or superior products and technology. We also have pending patent applications
relating to our technology. We cannot assure you that patents will issue from
any pending applications or, if patents do issue, that claims allowed will be
sufficiently broad to protect our technology. Our trademarks may also be
challenged, and we may be precluded from using trademarks that users identify
with our service, thus frustrating the ability of our channel partners to market
our service. We also rely upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain our competitive
position. Others may independently develop equivalent proprietary information or
otherwise gain access to or disclose our information. We cannot assure you that
the confidentiality agreements upon which we rely will provide meaningful
protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of confidential information or prevent our trade
secrets from otherwise becoming known to or independently discovered by our
competitors.

     Intellectual property infringement claims against us could be costly and
time consuming to defend and could result in the loss of valuable assets. Our
commercial success may also depend in part on our not infringing the proprietary
rights of others or not breaching technology licenses that cover technology we
use in our products. If claims are made, even if they are not meritorious,
costly litigation could result, which could divert management attention,
preclude sales of affected products or services and reduce resources.
Third-party patents may require us to develop alternative technology or to alter
our products or processes, obtain licenses

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or cease some of our activities. If these licenses are required, we may be
unable to obtain them on commercially favorable terms, if at all. If we are
unable to obtain licenses to any technology required to effectively deploy or
market our products and service, our business could be harmed.

     We are subject to telecommunications industry regulations and are required
     to obtain regulatory approvals and abide by regulatory restrictions that
     affect how we operate our business. Changes to the regulatory scheme or our
     ability to obtain approvals or comply with regulations could adversely
     affect the nature and extent of the service we offer.

     Many aspects of our products and service are subject to regulation at the
federal, state and local levels. From time to time, the regulatory entities that
have jurisdiction over our business adopt new or modified regulations or take
other actions as a result of their own regulatory processes or as directed by
other governmental bodies. This changing regulatory environment could adversely
affect the nature and extent of the service we are able to offer.

     On the federal level, the FCC regulates our license-free equipment and
operations, as well as the licensed operations and equipment that we deploy as
part of our network. We may not be able to secure the necessary FCC approvals
for the equipment that we intend to deploy, and the approval process could
result in delays or additional costs. In the frequency bands where we operate on
a license-free basis, the FCC requires that we not cause harmful interference to
licensed users in the band. In our licensed frequencies, we are subject to an
FCC requirement that we not cause interference to certain services operating in
nearby bands. Satisfying these requirements could involve substantial time and
expense and, if we fail to satisfy them, could lead us to curtail our operations
in the affected locations.

     In the license-free spectrum, we operate on a co-equal basis with other
license-free users and must accept any interference present in the bands. Even
in our exclusive, licensed frequency bands, our operations may be subject to
interference. Excessive harmful interference in either the licensed or
license-free frequency bands could discourage users from subscribing to or
retaining our service, which would harm our reputation, affect our competitive
position, and impair our business and results of operations.

     We may desire or, as a result of changes in regulations, be required to
seek to operate in other license-free or licensed frequency bands. We may not be
able to obtain appropriate licensed or unlicensed spectrum on commercially
acceptable terms, if at all. In addition, redesigning our products to operate in
other frequency bands could be expensive and time-consuming, and may not result
in commercially viable products.

     On the state and local levels, some jurisdictions may attempt to impose
additional regulatory requirements, including regulating the terms and
conditions of our service. This regulation could hinder or limit the flexibility
that we have to respond to changes in the markets we serve, thus adversely
affecting our business and results of operations.

     Our success depends on our retention of key personnel and our ability to
     attract additional key employees.

     We believe our success will depend largely on our ability to attract and
retain highly skilled engineering and managerial personnel. If we are unable to
retain our management and engineering staff or if we fail to attract additional
key personnel, we may have difficulty implementing our business plan, which
would adversely affect our ability to expand our business. The industry in which
we operate is characterized by intense competition for these personnel and a
high level of employee mobility. Many of our key employees hold stock options
that are vested or may be fully vested before we achieve significant revenues or
profitability. We intend to grant additional options and provide other forms of
incentive compensation to attract and retain our key personnel, but we cannot
guarantee these efforts will be successful.

     We may not be able to expand into foreign markets if we are unable to
     locate international partners. If we do expand overseas, we will become
     subject to risks associated with doing business internationally.

     We are currently at the early stages of evaluating international expansion
opportunities and, to date, we have not generated any revenues outside the
United States. Any international expansion plans we pursue could

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fail if we are unable to locate qualified local suppliers and other third
parties to deploy our network or if we cannot establish agreements with channel
partners to promote our service in foreign markets. In addition, deployment of
our network and expansion of our service internationally could subject us to
burdens of complying with a variety of foreign laws and trade standards,
particularly regulatory requirements affecting wireless data and Internet access
services, complexities related to obtaining agreements from foreign
municipalities and third parties to deploy our network, foreign taxes and
tariffs, as well as financial risks, such as those related to foreign currency
fluctuations. In addition, there is greater uncertainty regarding protection and
enforcement of intellectual property rights in certain foreign countries and we
may not be able to adequately protect our intellectual property rights. If we
expand internationally, we also will be subject to general geopolitical risks,
such as political and economic instability and changes in diplomatic and trade
relationships. The risks associated with international expansion could adversely
affect our ability to expand our business.

                     RISKS RELATED TO OUR CAPITAL STRUCTURE

     Our principal stockholders can control or may be able to exert substantial
     influence over us, and we may experience significant conflicts of interest
     with them.

     After assuming conversion of all of our outstanding preferred into common
stock, Vulcan Ventures would hold approximately 43% of our common stock and
WorldCom would hold approximately 33% of our common stock, based on capital
stock outstanding on September 30, 2000. In addition, as holders of our
preferred stock, Vulcan Ventures and WorldCom each has the right to elect one
director. Vulcan Ventures, by reason of its large common stock holdings, will
continue to have the ability to control most matters submitted to a vote of our
stockholders, including significant corporate transactions and the election of a
majority of our board of directors. Moreover, in light of WorldCom's substantial
preferred stock holdings and right to elect one director, WorldCom may be able
to substantially influence actions we take.

     Conflicts of interest may arise as a consequence of the positions of
control and influence of Vulcan Ventures and WorldCom. For example, conflicts of
interest may arise when Vulcan Ventures or WorldCom is faced with decisions that
could have different implications for us, on the one hand, as compared with
Vulcan Ventures or WorldCom or their various affiliates, on the other hand.
These decisions may relate to matters such as the following:

     - corporate opportunities that we or Vulcan Ventures or WorldCom, or any of
       their affiliates, could pursue;

     - our strategic direction;

     - offers to acquire us;

     - potential acquisitions by us of other businesses;

     - contractual relationships between us and Vulcan Ventures or WorldCom, or
       any of their affiliates;

     - network deployment priorities;

     - businesses that compete or potentially compete with us;

     - the issuance or disposition of our securities; and

     - the election of new or additional directors or officers.

     In particular, WorldCom is one of our channel partners and has discretion
to determine the extent of the marketing resources it devotes to help develop
our user base. WorldCom can terminate its agreement with us without penalty if
we breach our material obligations under the agreement and fail to cure that
breach. Although one of our agreements with Vulcan Ventures contains measures
designed for the protection of our public stockholders with respect to Vulcan
Ventures, such as requiring approval of three directors not affiliated

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with Vulcan Ventures for certain matters involving Vulcan Ventures, these
stockholder protection measures may not be effective in any particular case.

     Concentration of our ownership by Vulcan Ventures and WorldCom could deter,
     delay or prevent change of control or other transactions that could be
     beneficial to our stockholders.

     The concentration of our ownership by Vulcan Ventures and WorldCom, as well
as other rights of Vulcan Ventures and WorldCom, could deter, delay or prevent
third parties, particularly other data access or communications companies, from
investing in us, reselling our service, or initiating or completing a potential
merger with us, a tender offer for our shares, a proxy contest or other
transaction intended to change control or management. These transactions could
involve premium prices or other benefits to our stockholders. Concentration of
ownership could also depress the market price of our common stock or otherwise
adversely affect stockholders, or deter potential channel partners from entering
into agreements with us.

     Future sales of our common stock may cause our stock price to decline.

     If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could decline, possibly
significantly. As of October 31, 2000, we had 30,777,392 shares of common stock
outstanding, all of which are freely tradable in the public market, subject in
some cases to volume limitations and manner of sale restrictions imposed by Rule
144 under the Securities Act. In addition to our outstanding common stock,
Vulcan Ventures and WorldCom each owns 30 million shares of our preferred stock,
each of which is convertible into one share of common stock automatically upon
transfer to an unaffiliated transferee. The shares of common stock issuable upon
conversion of the preferred stock owned by Vulcan Ventures and WorldCom became
eligible for sale in the public market, subject to volume limitations and manner
of sale restrictions imposed by Rule 144, on November 15, 2000. The shares of
Series A2 preferred are convertible into shares of common stock at any time. The
shares of Series A1 preferred become convertible into shares of common stock
beginning May 2002. Furthermore, subject to certain exceptions, Vulcan Ventures
and WorldCom, together with any person holding at least 500,000 shares of
preferred stock, or common stock issued upon conversion thereof, transferred by
either of them, are entitled to require us to use our best efforts to register
their shares for resale under the Securities Act.

     The market price of our stock has been, and may continue to be, highly
     volatile, which could subject us to litigation.

     The market price of our common stock, along with the market prices of
securities of many other companies engaged in emerging industries, has been
highly volatile. Announcements we or others make could have a significant impact
on the market price of our securities. These announcements may include:

     - technological innovations, such as faster data access speeds or new
       commercial services by us or our competitors;

     - comments made by securities analysts, including changes in securities
       analysts' estimates of our financial performance or the outlook for other
       data access providers;

     - delays in deployment of our high-speed network or launch of our
       high-speed service;

     - quarterly fluctuations in our revenues and financial results;

     - regulatory developments in both the U.S., with regard to the FCC or local
       authorities in particular markets we are seeking to enter, and foreign
       countries;

     - developments concerning proprietary rights, including patents;

     - litigation matters;

     - general market conditions; or

     - changes in key personnel.

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     The stock market has from time to time, and particularly recently,
experienced extreme price and volume fluctuations that have particularly
affected the market prices for stocks of companies such as ours. These
fluctuations have often been unrelated to the operating performance of these
companies. These broad market fluctuations may adversely affect the market price
of our common stock. In the past, following periods of volatility in the market
price of a company's stock, securities class action litigation has been
initiated against the issuing company. This type of litigation could result in
substantial cost and a diversion of management's attention and resources, which
could have an adverse effect on our revenues and earnings. Any adverse
determination in this type of litigation could also subject us to significant
liabilities.

     We have a substantial amount of debt, which could adversely affect our
     business, financial condition and results of operations.

     As a result of our February 2000 issuance of 13% senior notes due 2010, we
have substantial indebtedness. This large amount of indebtedness could adversely
affect our business, financial condition and results of operations by
potentially:

     - making it more difficult for us to satisfy our obligations under the
       notes or other indebtedness and, if we fail to comply with the
       requirements of the indebtedness, resulting in an event of default;

     - requiring us to dedicate a substantial portion of our cash flow from
       operations to required payments on indebtedness, thereby reducing the
       availability of cash flow for working capital, capital expenditures and
       other general corporate purposes;

     - limiting our ability to obtain additional financing in the future for
       working capital, capital expenditures and other general corporate
       purposes;

     - limiting our flexibility in planning for, or reacting to, changes in our
       business and the industry in which we operate;

     - detracting from our ability to successfully withstand a downturn in our
       business or the economy generally; and

     - placing us at a competitive disadvantage against other less leveraged
       competitors.

     We had approximately $243.5 million of long-term indebtedness outstanding
at September 30, 2000 that will accrete to an aggregate principal amount at
maturity of $300.0 million. We will need to raise more capital to finance our
expansion and continued network deployment, which may be in the form of
substantial additional indebtedness.

     The indenture and the supplemental indentures governing the notes permit us
to incur additional debt to fund the development, construction, expansion or
operation of, or acquisition of assets used in or the majority of the voting
stock of, communications and data access businesses and up to $275 million under
one or more credit facilities. We can also incur additional indebtedness based
on our financial performance and the amount of equity capital that we raise in
the future. If we incur debt in addition to the notes, the related risks could
intensify.

     We may not be able to generate sufficient cash flow to meet our expected
     debt service obligations.

     Our future cash flow may be insufficient to meet our payment obligations
under our outstanding senior notes when those payments become due. If we are
unable to generate sufficient cash flow to satisfy our debt obligations or to
refinance our indebtedness on commercially reasonable terms, there could be an
adverse effect on our ability to operate our business as well as on our
financial condition and results of operations. Our ability to generate cash flow
from operations to make scheduled payments on our debt obligations as they
become due will depend on our future financial performance, which will be
affected by a range of economic, competitive and business factors, many of which
are outside our control.

     If we do not generate sufficient cash flow from operations to satisfy our
debt obligations, we may have to undertake alternative financing plans, such as
refinancing or restructuring our debt, selling assets, reducing or

                                       14
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delaying capital investments or seeking to raise additional capital. We cannot
assure you that any refinancing would be possible, that any assets could be sold
or, if sold, of the timing of the sales and the amount of proceeds realized from
those sales or that additional financing could be obtained on acceptable terms,
if at all.

     The terms of our outstanding senior notes impose restrictions on us and on
     our ability to take actions such as incurring additional indebtedness or
     making investments. These restrictions may affect our ability to
     successfully operate our business.

     We are restricted by the terms of our outstanding senior notes from taking
various actions, such as incurring additional indebtedness, paying dividends,
repurchasing junior indebtedness, making investments, entering into transactions
with affiliates, merging or consolidating with other entities and selling all or
substantially all of our assets. These restrictions could also limit our ability
to obtain future financing, make needed capital expenditures, withstand a future
downturn in our business or the economy in general or otherwise conduct
corporate activities. We may also be prevented from taking advantage of business
opportunities that arise because of the limitations imposed on us by the
restrictive covenants under the indenture and supplemental indentures. A breach
of any of these provisions will result in a default under the indenture and
supplemental indentures governing the senior notes and could result in a default
under agreements relating to other indebtedness that we may have in the future
that would allow those lenders to declare that indebtedness immediately due and
payable. If we were unable to pay those amounts because we did not have
sufficient cash on hand or were unable to obtain alternative financing on
acceptable terms, the lenders could initiate a bankruptcy or liquidation
proceeding or proceed against any assets that serve as collateral to secure that
indebtedness. We cannot assure you that our assets would be sufficient to repay
in full that amount and the amounts due under the notes. In addition, upon the
occurrence of certain events specified in the notes, including in connection
with certain types of changes in control, we will be required to make an offer
to purchase all the outstanding notes at a premium, in which case we may not
have sufficient funds to pay for all the notes that are tendered, which also
would constitute an event of default.

                    OUR SOLUTION AND COMPETITIVE ADVANTAGES

     Our new high-speed service, which we expect to launch during the late
summer of 2000, will provide users with secure and reliable high-speed mobile
access to corporate networks and the Internet for a flat fee, regardless of the
level of usage. We believe our competitive strengths effectively address the
growing demand for high-speed mobile wireless data access through the following
combination of benefits:

     HIGHER SPEED ACCESS TO DATA THAN ANY OTHER REMOTE MOBILE WIRELESS
TECHNOLOGY COMMERCIALLY AVAILABLE TODAY. When we launch our high-speed service,
expected during the late summer of 2000, we believe our network will provide
higher effective data transfer rates than any other remote mobile wireless data
access service commercially available today. We will provide users with an
average downstream data transfer rate greater than 128 kilobits per second,
which is faster than today's high-speed integrated service digital network, or
ISDN, telephone lines. Our high-speed service will provide users with an average
upstream data transfer rate of more than 50 kilobits per second, which is faster
than the average data transmission rate of 33 kilobits per second typical of
commonly available "56k" wired modems.

     LOOK AND FEEL OF A DESKTOP COMPUTER. Our target users are mobile workers
who require full access to corporate resources from remote locations. Because of
our fast data transfer speeds, we believe that a user working on a laptop
computer connected to our network will perceive a substantial advantage over any
other remote mobile wireless data access technology commercially available
today. Moreover, we will offer mobile workers the ability to connect to their
corporate networks and the Internet from any place within our service area,
without the inconvenience of having first to locate a telephone modem dataport
to establish a remote, and generally slower, connection to e-mail, databases and
file and facsimile transmission servers. Furthermore, we have designed our
service for laptop computers and other portable electronic devices with
relatively large screen areas and relatively large storage capacities to enable
our users to better emulate the look, feel and functionality of their desktop
computers. By contrast, although data-enabled wireless telephones

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may offer a convenient means of engaging in simple tasks, such as checking stock
prices or sports scores, they are not suitable for displaying data-rich graphics
or creating and editing documents, functions frequently performed at desktop
computers. Accordingly, we believe that we offer a service that is complementary
to, rather than competitive with, data-enabled wireless telephones.

     PACKET-SWITCHED TECHNOLOGY. We believe that data networks, such as ours,
that utilize packet-switched technology offer a number of advantages over
circuit-switched networks. In a packet-switched network, data is transmitted in
discrete units called packets, rather than in a continuous stream, as with a
telephone modem using a circuit-switched telephone line. The network software
sends each discrete packet through the network via a uniquely selected path,
with the software reassembling the packets into their proper order when they
arrive at their destination. By allowing multiple users to share our network
capacity, this technology can reduce network congestion and virtually eliminate
busy signals. In addition, because our network does not require a dedicated
connection between modems at each end of a circuit, users utilize our network
capacity only when the network actually transmits data packets. A
circuit-switched network, in contrast, requires a dedicated connection between
modems at each end of a circuit, thus limiting network capacity to the number of
circuits available and modems installed. Moreover, in a circuit-switched
network, once the user establishes a connection, neither the modem nor the
circuit in use is available to other users even when data is not being
transmitted. Because of these factors, busy signals occur in circuit-switched
networks when the number of users exceeds the number of connections available.
Further, many circuit-switched networks will "time out" a connection after the
user has been connected for a specified time in order to create capacity for
other users. Because our network uses packet-switched technology, our users can
remain online indefinitely. In addition, the equipment required to construct our
network is less expensive than circuit-switched technology employed by
traditional wireless carriers.

     SECURITY AND RELIABILITY. In addition to the reliability benefits that
result from using packet-switched technology, our network's use of
frequency-hopping, spread spectrum technology, combined with optional
encryption, makes unauthorized interception of data packets extremely difficult
and provides greater security than is generally available from other wired and
wireless data communications services. Our very low equipment failure rate of
only 0.2% contributes to the reliability of our service. Moreover, if a network
radio is busy or not functioning properly, our network routes data along a
different path to its destination within the network, minimizing apparent
network disruption or reduced data transfer rates to our users. By providing
secure and reliable access to corporate networks, our service should appeal to
many organizations with mobile workforces.

     ACCESS TO MCI WORLDCOM'S LARGE AND SOPHISTICATED SALES FORCE. Under our
agreement with WorldCom, WorldCom has agreed to market and sell subscriptions to
our high-speed service. This relationship provides us with the immediate benefit
of support from a large and sophisticated sales force that has experience
selling products and services to businesses and consumers in our target market.
Moreover, WorldCom has indicated its intent to market and sell our high-speed
service through multiple sales channels that have substantial experience with
the needs of network and Internet users and users of other mobile access
technologies. In addition, WorldCom has committed to provide customer support to
the users of our service.

     SCALABLE AND COST-EFFECTIVE NETWORK. Our network architecture will allow us
to react quickly to expand our network to respond to positive consumer demand
for our service. We can increase network coverage and capacity and reduce system
congestion quickly and inexpensively by installing additional network or wired
access point radios in areas of high use. Moreover, our network relies primarily
on unlicensed radio frequency spectrum that we are able to use without paying
any license fee or other similar acquisition cost.

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                                  OUR STRATEGY

     Our objective is to be the leading provider of high-speed mobile wireless
data access to users of laptop computers and other portable electronic devices.
The key elements of our strategy are as follows:

     RAPIDLY DEPLOY A NATIONAL NETWORK. We intend to deploy our network in three
phases. We plan to launch our high-speed service during the late summer of 2000,
and we expect that our initial service areas will cover a total population of
approximately 62 million. In the second phase, we plan to expand our coverage to
additional markets and, at the end of the second phase, we expect our network
will cover a cumulative population of approximately 80 million. After the third
phase of our deployment, which we plan to complete by the end of the summer of
2001, we expect our network to cover a cumulative population of at least 100
million in the U.S. As of September 30, 2000, there were 25,900 users of our
service. Understanding that time-to-market is a critical competitive advantage,
we have already obtained a substantial portion of the approvals for municipal
rights-of-way necessary to meet our network deployment objectives for 2000.

     TARGET MOBILE PROFESSIONALS. Our advertising and marketing will focus on
mobile professionals, particularly those who already use laptop computers or
other portable electronic devices, and other people and businesses that are
likely to require mobile access to information. Mobile workers, such as
salespeople, consultants, lawyers and accountants, often require the flexibility
to work outside of their offices and desire to maintain access to corporate
networks and the Internet.

     CAPITALIZE ON THE DISTRIBUTION STRENGTH OF A SELECT GROUP OF CHANNEL
PARTNERS. We intend to increase the number of users of our service through sales
efforts by WorldCom and other potential channel partners. We do not intend to
sell our high-speed service or provide customer support directly to users.
Instead, we will rely on our channel partners, which we expect will be
organizations like WorldCom with significant marketing and customer support
experience, to generate demand for our service. These partners will market and
sell subscriptions to our service to their customers on a co-branded basis. In
selecting channel partners, we will focus on organizations with experience
selling products and services to businesses and consumers in our target market.
Potential channel partners include local telephone companies, wireless carriers,
digital subscriber line or other high-speed Internet access providers, laptop
computer and other portable electronic device manufacturers and system
integrators or networking consulting firms that recommend large-scale purchases
of access services such as ours to their customers. We currently are in
discussions with a number of potential channel partners, with a goal of entering
into agreements with additional channel partners in mid-2000.

     BUILD EQUITY IN THE RICOCHET BRAND. We intend to promote the Ricochet brand
aggressively, seeking to gain widespread business and consumer recognition of
our brand, thereby building significant commercial value for our company. Our
brand awareness and brand identity strategy will focus on the mobile access
benefits of our high-speed network, with the objective of making the Ricochet
brand synonymous with speed, reliability and security. We plan to promote the
Ricochet brand through co-branding arrangements that will require our channel
partners to display the Ricochet name and logo in addition to their own in
promotional and other materials they use to offer our service, and to display
our name on the Ricochet modem. We also intend to engage in corporate
promotional activity, including advertising in traditional media and on the
Internet, designed to increase business and consumer awareness of the Ricochet
brand and our service. We expect to spend over $50 million on sales and
marketing efforts in 2000 and substantially more in 2001.

     MAINTAIN NETWORK PERFORMANCE AND COST ADVANTAGES. We intend to continue our
commitment to research and development so that we can continue to offer our
users faster data transmission rates on a more cost-effective basis than
competing remote mobile wireless data access services. We believe our core
technologies -- and particularly our utilization of packet-switched
communications and unlicensed portions of the radio frequency spectrum -- will
enable us to maintain performance and cost advantages over competing services in
the future, as technological advancements increase the standard for data
transmission speeds and network performance. Outsourcing some business functions
is a key part of our strategy to maintain network performance and cost
advantages for our users. We have contracted with several companies to fulfill
our manufacturing and network deployment needs, and we plan to continue to
utilize other
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companies to perform these functions in the future. The functions that we have
outsourced include manufacturing network radios designed by us, manufacturing
the modems used by our users, acquiring municipal rights-of-way and other
similar rights necessary to deploy our network, physically installing our
network equipment and provisioning the circuits required for our network to
connect to the Internet or other corporate networks. We believe that, by
outsourcing these functions to organizations for which they are core
competencies, we can free our own resources to concentrate on developing
positive recognition of the Ricochet brand, recruiting and managing channel
partners, managing our network and advancing our core technologies to enhance
our network's performance and cost-effectiveness in the future.

     PURSUE INTERNATIONAL OPPORTUNITIES. To date, we have concentrated almost
exclusively on domestic opportunities and have engaged in only limited
exploration of international opportunities. However, we intend to pursue
opportunities to offer service based on our technologies in markets outside the
U.S. We believe that the advantages of our core technologies, and particularly
the relatively low deployment cost of our network, should enable us to provide a
service that is attractive to customers in other countries that have large
populations of knowledge workers. We plan to place greater emphasis on these
opportunities after we have launched our domestic high-speed service and are
satisfied with its performance.

OUR NETWORK AND TECHNOLOGY

     When we launch our high-speed network, users will be able to connect to our
network through wireless modems attached to laptop computers or other portable
electronic devices. In the future, we also expect that users will be able to
connect to our network through personal computer card modems and eventually
through advanced integrated circuits built-in to end-user devices. Our
high-speed network architecture consists of four basic elements:

     - compact, inexpensive network radios, called poletop radios, which we
       deploy on streetlights, utility poles and building rooftops in a
       geographical mesh pattern and which communicate with our users' laptop
       computers or other portable electronic devices through wireless modems;

     - wired access points, which we deploy on building rooftops or other
       locations, many of which also serve as the sites for existing cellular or
       other wireless base stations and which connect our poletop radios with
       one of our network interface facilities via high-speed dedicated wired
       connections;

     - network interface facilities, which aggregate traffic to and from all
       wired access points in a market and provide connections to the Internet
       and other networks; and

     - our network operations centers, which provide central management of our
       entire network.

     Our network utilizes a hardware and software platform based on spread
spectrum, frequency-hopping, packet-switched digital radio technology. In a
packet-switched network such as ours and the Internet, data are communicated in
discrete units, called packets, rather than in a continuous stream. With
frequency-hopping radios such as our poletop and wired access point radios, the
radios communicate with each other on multiple frequencies, or channels. Each
radio changes the channel on which it is communicating frequently in a pattern
that is known to the surrounding radios but difficult for outside parties to
predict. This unpredictability results in a high level of security by making
interception of data by unauthorized users difficult. It also provides high
network reliability, because if a radio encounters interference on any given
channel, it automatically switches to another channel. We will incorporate an
optional encryption capability for users desiring an additional level of
security.

     Poletop radios are the primary component of our hardware platform, and we
deploy them in a geographically dispersed pattern referred to as "mesh"
architecture. Our mesh network architecture and proprietary technology for
routing data packets across the network enable us to move the data packets along
a number of alternative paths, thus allowing packets to be routed around busy or
non-functioning radios. We believe that our mesh architecture provides
advantages over the more typical network topology, known as the star topology,
in which all communications are required to pass through one or more central
base stations, or hubs. In a star topology system, congestion and impaired
signal communications resulting from weak signal strength must generally be
addressed by installing another hub, typically a costly and time-consuming
process.
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With our network, we can reduce system congestion and increase network coverage
and capacity by installing one or more relatively inexpensive poletop or wired
access point radios where needed.

     Upstream data transmitted from a user's wireless modem travels through one
or more poletop radios wirelessly to a wired access point, from which the data
is routed over high-speed dedicated wired connections to a network interface
facility, where we connect our network directly to the Internet or another
network, which in turn delivers the data packet to its destination. Downstream
data travels to the user along a similar return route. We typically install our
poletop radios at an average density of five radios per square mile and we
generally install a wired access point approximately every 11.5 square miles. We
have designed our network so that a data packet transmitted by a user typically
requires no more than one or two transmissions, if any, from one poletop radio
to another before reaching a wired access point. Each wired access point is
connected by high-speed dedicated wired connections to one of our network
interface facilities. Each network interface facility aggregates traffic to and
from all wired access points in a market and connects to the Internet and other
networks. Currently, we have agreements with UUNet, a subsidiary of WorldCom,
and others to support the exchange of traffic between our wired access points,
our network interface facilities, the telecommunications infrastructure and
corporate networks and the Internet.

     Our network's performance will be monitored and controlled by our network
operations center located in Houston, Texas. We have recently opened an
additional network operations center in Plano, Texas. Even though we intend to
have each of the two network operations centers monitor and control only fifty
percent of our network, each center will have the capability to monitor and
control our entire network.

     Our network will operate in the unlicensed 900 megahertz and 2.4 gigahertz
frequency bands of spectrum. We also will operate in the 2.3 gigahertz frequency
band pursuant to licenses purchased from the FCC in 1997. These licenses permit
us to use the 2.3 gigahertz band in the Northeastern, Central and Western United
States Regional Economic Areas, and in the St. Louis, Missouri, Portland, Oregon
and Seattle, Washington Major Economic Areas. This licensed spectrum provides us
with the ability to transmit at higher power in those regions and thus attain
greater network coverage with fewer wired access points. In areas not covered by
our licensed spectrum, we can achieve the same coverage results by deploying
additional wired access points. We will use the 900 megahertz band primarily for
transmissions to and from a user's modem to a poletop radio and from a poletop
radio to a network radio or wired access point, and the 2.4 gigahertz band
primarily for communication between network radios and between poletop radios
and wired access points. Wired access points that use the 900 megahertz band and
the 2.4 gigahertz band are referred to as industrial, scientific and medical
band wired access points, called ISM WAPs. Wired access points that use the 2.3
gigahertz band are referred to as wireless communication service wired access
points, or WCS WAPs. We intend to use the 2.3 gigahertz band only for downstream
(toward the subscriber) traffic from wired access points to poletop radios and
only where we have licenses to use 2.3 gigahertz spectrum and when we cannot
route the downstream traffic to the user in one radio hop using the 2.4
gigahertz band. We do not currently intend to use the 2.3 gigahertz band for
upstream traffic.

     Finally, we also provide a traditional dial-in service to enable users
travelling outside our service areas to access their corporate networks or the
Internet through standard telephone modems.

NETWORK DEPLOYMENT

     We plan to deploy our high-speed network in three phases. We have chosen to
deploy our network in areas based on numerous criteria, including the number of
laptop computers, population density, Internet usage and other factors. The
planned deployment of our network is set forth in the table below. We may,
however, modify our deployment plans based on our initial experience with our
high-speed service or other factors, such as our relative success in obtaining
agreements necessary to deploy our network.

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                          RICOCHET NETWORK DEPLOYMENT



                                                                PHASE I           PHASE II
                                                           -----------------   ---------------
                                                                         
METROPOLITAN MARKETS.....................................  Atlanta             Baltimore
                                                           Chicago             Boston
                                                           Dallas/Fort Worth   Denver
                                                           Houston             Detroit
                                                           Los Angeles         Kansas City
                                                           New York City       Miami
                                                           Philadelphia        Minneapolis
                                                           Phoenix             St. Louis
                                                           San Diego           Salt Lake City
                                                           San Francisco
                                                           Seattle
                                                           Washington, D.C.
EXPECTED LAUNCH DATE.....................................  Late Summer 2000    Early 2001
CUMULATIVE COVERED
     POPULATION AFTER COMPLETION.........................  62 million          80 million


     The deployment process for our network involves:

     - obtaining agreements permitting us to deploy our poletop radios and wired
       access points, which include:

      - agreements with municipalities, known as right-of-way use agreements,
        which grant us the right to enter and utilize a municipal right-of-way
        to deploy our poletop radios, the right to attach our poletop radios to
        municipally owned property, if any, in the public way and the right to
        attach our poletop radios to third-party owned property in the public
        way, such as utility property;

      - pole attachment agreements with utility companies or municipalities
        governing the use of utility poles for the deployment of our poletop
        radios;'

      - supply agreements with utility companies governing the supply of
        electricity to our poletop radios; and

      - lease agreements with the owners of buildings or radio towers governing
        the lease of space for the deployment of our wired access points;

     - designing the network configuration;

     - to the extent necessary, acquiring zoning and construction approvals to
       build or locate wired access points on radio towers or building rooftops;
       and

     - acquiring, installing and testing the network.

     Once we have obtained the necessary agreements and approvals, we expect to
be able to install and test the network infrastructure in a market in two to
three months. As of February 29, 2000, we have obtained right-of-way approvals
covering approximately 80% of the population included in the first phase of the
deployment of our network.

     We install most of our poletop radios on street light arms or distribution
poles owned by electric utilities, municipalities or other local government
entities. In addition, we are required to enter into agreements with
municipalities as owners of the rights-of-way in which street lights and
distribution poles are located and supply agreements with providers of
electricity to power our radios. Typically, the right-of-way agreements have
terms of five to 10 years with three five-year renewal options. Many agreements
require us to pay an annual right-of-way use fee, sometimes referred to as a
franchise fee, to the municipality or other governmental agency that controls
the right-of-way. Currently, these franchise fees, where permitted, typically
average about 5% of the adjusted gross revenues collected from subscribers with
billing addresses located in the municipality covered by the right-of-way
agreement. The electrical supply agreements for our poletop radios typically
have a term of 10 years and require us to pay an annual fee for electricity,
which is determined by tariff, if appropriate, or by a private rate agreement
and typically averages $25 for our poletop radios. In

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addition, we are typically required to pay an annual fee of about $60 for the
use of each street light or other pole to which a poletop radio has been
directly attached.

     In the event we are unable to negotiate site agreements in a timely manner
and on commercially reasonable terms or at all, we will seek to obtain sites to
deploy radios on commercial buildings or similar structures. While deploying a
large area in this manner could be significantly more expensive than installing
radios on street lights, we did use this technique on a limited basis in
connection with the deployment of our original service to reduce the delays
experienced in the deployment process.

     We are sometimes required to obtain zoning approvals from local
municipalities or other governmental entities to build or locate wired access
points on radio towers or building rooftops. Zoning restrictions may impose
limitations on the amount of electrical load on a rooftop, radio frequency
emissions or aesthetic characteristics of our network radios. The zoning process
and length of time involved in obtaining approval varies from city to city. We
also must negotiate leases for our wired access points, which can take a
substantial amount of time. The rate at which we are acquiring these leases has
been slower and the cost has been higher than we anticipated. Consequently, we
must commit more time, effort and capital resources to acquiring these leases in
order to meet our deployment plans.

     We have entered into several agreements regarding the deployment of our
network interface facilities. These agreements have been negotiated with private
carriers housing large telecommunications facilities. These agreements typically
have five-year terms.

     In October 1999, we entered into agreements with Wireless Facilities, Inc.,
General Dynamics Worldwide Telecommunications Systems and Whalen & Company to
provide us with expertise and personnel to assist us with the deployment of our
network. Wireless Facilities has agreed to assist us with radio frequency
engineering related to the physical deployment of the wired access point
components of our network. All three companies will be responsible for many of
the tasks involved in the deployment of our network wired access points,
including assisting us with acquiring sites for our wired access points,
obtaining necessary zoning approvals, network architectural and engineering
management, construction management and the installation of wired access point
services.

     Our aggressive deployment schedule is critical to the success of our
business and involves a number of risks. See "Risk Factors -- We must deploy our
high-speed network in a limited time in order to compete effectively," "-- We
depend substantially on third parties to deploy our high-speed network on a
timely and cost-effective basis," "-- We depend on third parties to develop,
assemble and manufacture the modems through which our users access our service"
and "-- One of our manufacturers is experiencing shortages in the supply of
components for our poletop and network radios and our other manufacturers may
experience shortages of supply of components for our modems or other products,
which could involve substantial cost and delay and reduce availability of our
service."

MARKETING, SALES AND CUSTOMER SUPPORT

     Unless we sign new channel partners by the time we launch our new
high-speed service, expected during the late summer of 2000, our service will be
available exclusively through our channel partner, WorldCom. WorldCom will
market and sell subscriptions to our service and will bill and provide the
initial level of customer support for users. We intend to capitalize on the
distribution strength, customer support expertise and experience of WorldCom and
any other channel partners we may have in selling multiple services, such as
long-distance, mobile voice or Internet services, to organizations and
individuals. We do not plan to sell subscriptions or provide customer support
directly to users. Instead, we will sell subscriptions to, and receive payment
from, channel partners on a wholesale basis at flat monthly rates.

     Under our agreement with WorldCom, WorldCom has agreed to pay us a
per-subscriber fee, subject to an agreed minimum revenue level of at least $388
million over the five years following the launch of our service, assuming that
we deploy our network on a timely basis and meet quality-of-service and network
performance standards. However, in the event that, in any agreement year,
WorldCom's sales efforts result in fewer subscribers than WorldCom has agreed
contractually to provide, but subscribers provided by WorldCom

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and its authorized resellers nevertheless represent more than a threshold
percentage of our total users, then WorldCom will pay us only the greater of a
per-subscriber rate for each of its users or the subscription fees we receive
from all of our other channel partners, which could be substantially less than
the minimum revenues we currently expect from WorldCom. Accordingly, our ability
to achieve the minimum revenue levels we expect from our agreement with WorldCom
may depend on our ability to enter into channel agreements with one or more
large channel partners that can successfully sell subscriptions to our service
so that subscribers provided by WorldCom and its resellers represent less than
the threshold percentage of our total users. Further, if our deployment schedule
is delayed or if we fail to meet deployment schedule deadlines or fail to comply
with quality-of-service standards relating to data transmission performance,
network availability, coverage and latency, ease of use and size of modems, all
as specified in our agreement, WorldCom may delay or reduce its minimum payments
to us or, in the case of a deployment delay in excess of 12 months, may
terminate the contract. If we fail to correct any deficiency for sustained
periods of time, WorldCom may suspend its obligations to us under the agreement
or terminate the agreement. Additionally, under this agreement, we have the
right, at our expense, to co-brand our service with WorldCom. With our consent,
WorldCom has agreed to display the Ricochet name and logo in all of the
promotional and other materials it will use to offer our service to subscribers
and to provide us with a six-month rolling forecast of projected new
subscribers. In addition, we have agreed to provide sales support to WorldCom's
direct sales team. This agreement also contains a "most favored nation" clause,
which assures WorldCom no less favorable terms than we grant any other channel
partner. The agreement also precludes us and any other channel partners that we
may have from marketing our service to three specified entities with which
WorldCom may enter into reselling arrangements. Our agreement with WorldCom can
be canceled by either party upon 30 days written notice in the event the other
party has failed to fulfill its material obligations under the agreement.
WorldCom and its affiliates are not prevented under the agreement from
supporting competing technologies.

     We anticipate entering into other non-exclusive agreements containing
similar terms with other channel partners, focusing on organizations that have
demonstrated skills and experience selling products and services to businesses
and consumers in our target market. We are currently in discussions with a
number of potential channel partners and are seeking to establish relationships
with additional channel partners during the second quarter of 2000. Our ability
to achieve commercial success will depend upon the ability of our channel
partners to sell subscriptions effectively and to support the users of our
service.

     When we launch our high-speed service, we intend to rely on our channel
partners to provide all first level customer support to the users of our
service. This level of support requires our channel partners to receive and
attempt to fulfill a subscriber's request for customer support. Typically, the
provider of this level of customer support would handle all non-network related
questions, such as those regarding features of our service, installation or
formatting, how the service works or billing questions. We intend to provide all
second and third level customer support to the users of our service. Second
level customer support would include responding to network-related questions,
directed to us by our channel partners' customer support personnel, not by the
subscriber directly. Third level customer support would include repairing or
modifying our network in response to customer problems. We intend to provide
this second and third level support 24 hours a day, seven days a week.

     In addition to promoting the Ricochet brand through co-branding
arrangements with our channel partners, we intend to aggressively promote the
Ricochet brand independently. We have recently developed a new Ricochet logo and
brand identity focusing on the mobile benefits of our high-speed service, with
the objective of making the Ricochet brand synonymous with speed, reliability
and security. We have hired an advertising firm, Kirshenbaum Bond & Partners
West, Inc., and plan to conduct market tests in the second quarter of 2000 and
begin an aggressive marketing campaign in the third quarter of 2000. We intend
to engage in corporate promotional activity, including advertising in
traditional media and on the Internet, designed to increase consumer awareness
of the Ricochet brand and our service. We plan to spend more than $50 million on
sales and marketing efforts in 2000 and substantially more in 2001.

     Although we have substantially curtailed our marketing and sales activities
with respect to our current Ricochet service, that service continues to be
available directly to subscribers through our web site, inbound

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telesales and one reseller. Backlog for Ricochet product and service orders at
December 31, 1999 and 1998 was not material.

     We provide customer support to our current Ricochet subscribers Monday
through Saturday through an inbound toll-free customer service line. When we
have launched our high-speed service in metropolitan markets in which these
subscribers are located, we plan to sell these subscriptions to one or more of
our channel partners.

COMPETITION

     We face intense competition in the market for mobile wireless data access
services targeted at users of laptop computers and other portable electronic
devices. The mobile wireless data access market has received increased attention
in recent years, and a number of companies have developed or are developing
mobile wireless data access services and products using competing technologies.
In addition, a large number of companies in diverse industries are expected to
enter the market in the future. We believe the principal factors on which
companies compete in this market are effective data transmission rate,
reliability, network coverage, ease of use and price. Except for our currently
limited network coverage, we believe our existing Ricochet service compares
favorably to available alternatives with respect to these competitive factors.
We believe our high-speed service will compare favorably to available
alternatives with respect to all of these competitive factors when our network
has been deployed in sufficient metropolitan markets to cover a cumulative
population of at least 100 million, as contemplated by our current deployment
plan. However, the pace of innovation in the wireless communications industry is
rapid, and we cannot be sure that our service will achieve or maintain
competitiveness with available alternatives in the future.

     Our current and anticipated future competitors can be categorized based on
the types of communications networks they use to transmit data. These networks
include: terrestrial networks that are dedicated to data communications;
terrestrial networks designed for cellular telephone service or personal
communications services, or PCS; satellite communications networks; and
traditional communications networks using wired fixed-point access, as well as
future enhancements of other wireless technologies.

     SERVICES UTILIZING DEDICATED DATA COMMUNICATIONS NETWORKS. Two companies
currently offer their subscribers general mobile data access services like ours
utilizing terrestrial networks dedicated to data communications that have been
operating for many years and are broadly deployed in major metropolitan markets.
BellSouth Wireless Data LP offers a service utilizing a network formerly
operated under the name RAM Mobile Data, and American Mobile Satellite
Corporation offers a service utilizing the ARDIS network. In addition to these
general services, 3Com Corporation in 1999 began offering mobile data access
services to users of its Palm VII personal digital assistant utilizing the RAM
network. Further, two-way paging companies have begun to offer limited
information access services, such as headline news and stock quotes. Based on
published reports, we believe the effective data transmission rates available to
customers of these services are limited to approximately eight kilobits per
second. This limitation constrains the ability of users of these services to
engage in relatively data-intensive applications, such as web browsing, file
transfers and exchanging e-mail involving graphical or other large attachments.
For example, web access for users of the Palm VII product is limited to those
web sites that support the "web clipping" software application provided with the
Palm VII device. This application permits a Palm VII user to download selected
portions of the information available on participating Web sites but does not
permit full access to the participating sites or any access to non-participating
sites.

     We believe our high-speed service will be complementary to relatively
low-speed services, such as those utilizing the RAM and ARDIS networks, and that
many users of wireless data access services will find it valuable to have access
to both types of service. Lower-speed services are ideally suited for providing
rapid access to limited amounts of data, such as stock quotes, while a
higher-speed service such as Ricochet is required for effective access to larger
amounts of data, such as full web browsing or transmitting e-mail with
attachments.

     SERVICES UTILIZING CELLULAR TELEPHONE AND PCS NETWORKS. Many
telecommunications companies that operate terrestrial networks designed to
provide cellular telephone or PCS services
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are offering or have announced plans to offer their customers data
communications services utilizing those networks. Subscribers to these services
can transmit and receive data using a variety of electronic devices, including
conventional mobile telephones functioning as modems and connected to laptop
computers or other portable electronic devices, as well as newer mobile
telephones with built-in Internet browsing capabilities. These services are or
will be based on a number of different communications technologies that vary by
network, including cellular digital packet data, or CDPD; code division multiple
access, or CDMA; time division multiple access, or TDMA; and global system for
mobile communications, or GSM.

     Cellular telephone and PCS networks have the advantage of being widely
deployed in major metropolitan markets and elsewhere, which enables network
operators to offer services that are widely available geographically. To date,
however, based on published reports, we believe the effective data transmission
rates available to customers of these services have been limited to an average
data transmission rate approximately 10 kilobits per second. For this reason,
these services are subject to the same limitations as the services based on
existing dedicated data communications networks. In addition, the providers of
cellular telephone and PCS services have available only a finite amount of
licensed radio spectrum and must allocate this spectrum among the various voice
and data communications services they elect to make available to their
subscribers. The amount of spectrum these service providers will allocate to
data communications services is uncertain.

     SERVICES UTILIZING SATELLITE COMMUNICATIONS NETWORKS. Many companies offer
one-way and two-way paging or other data communications services utilizing
satellite communications networks alone or in conjunction with terrestrial
networks. In addition, Iridium LLC in 1998 began offering voice and paging
services on a global basis utilizing its proprietary network of low earth
orbiting, or LEO, satellites. Based on published reports, we believe the average
data transmission rates offered by these systems are five kilobits per second or
less. Due to the power and other requirements associated with transmitting data
from the earth to an orbiting satellite and the difficulty of transmitting data
directly between a satellite and a user working with a small, mobile device
inside a building, we believe it will not be practicable in the foreseeable
future for satellite system operators to offer commercial two-way mobile data
access service at a competitive price.

     SERVICES UTILIZING WIRED FIXED-POINT ACCESS. Although not providing
wireless mobility, wired fixed-point access to traditional communications
networks offers virtually universal geographic coverage and very high potential
data transmission rates. For example, commonly available "56k" wired modems that
can be used to access the Internet through the public telephone network offer
users average effective downstream data transmission rates of up to
approximately 40 kilobits per second. In recent years, fixed-point network
connections have been made available at an increasing number of locations
frequented by visitors using laptop computers or other portable electronic
devices. These locations include airports and other transportation hubs, hotels,
business office conference rooms, government buildings, and eating and other
retail establishments. If this trend toward increasing availability of
fixed-point access to traditional communications networks continues, the
mobility offered by wireless services such as ours could become less important
to users, which would negatively affect our business. This could be true at
current effective data transmission rates and would be particularly true if the
effective data transmission rates available through fixed-point connections were
to increase significantly. This could happen if, for example, it became easy for
users at a wide range of commonly-visited locations to gain access to and
communicate using services based on digital subscriber line, or DSL, technology.
DSL technology enables service providers to offer users effective data
transmission rates of 384 kilobits per second and higher.

     FUTURE ENHANCEMENT OF OTHER WIRELESS TECHNOLOGIES. In addition to Metricom,
many other companies are aggressively seeking to develop or enhance the
capabilities of their wireless communications technologies with the objective of
providing increasingly high-speed wireless data access services. For example, it
is widely believed that over the next several years there will be a worldwide
evolution of cellular telephone and PCS networks -- whether currently based on
GSM, TDMA or CDMA technology -- toward "third generation," or 3G, technologies.
These 3G networks, utilizing approaches known as wideband CDMA, or WCDMA, and
CDMA2000-3xRTT, are predicted to allow theoretical peak data transmission rates
of 384 kilobits per second and average data transmission rates of 128 kilobits
per second in many mobile applications and up to 2 megabits per second in some
other applications in limited areas. We
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believe the commercialization of some of these emerging technologies will
require access to radio spectrum that has not been allocated to date by the FCC.

     Prior to deployment of 3G network infrastructure, many networks are
anticipated to evolve through intermediate stages involving escalating data
transmission rates, including approaches known as high-speed circuit switched
data, or HSCSD; general packet radio service, or GPRS; enhanced data rates for
GSM evolution, or EDGE; and CDMA2000-1xRTT. In addition, QUALCOMM Incorporated
has developed a CDMA variant known as high data rate, or HDR, which it claims
will provide effective data transmission rates comparable to 3G networks and
will be commercially deployed as early as 2001. HDR requires the carrier to
dedicate a separate channel to data transmission, which could require the
carrier to carry fewer voice channels.

     Based on published information about the way multiple users are expected to
share the available data and voice communications capacity of networks based on
these technologies, we believe our technology is better designed to provide
users with high effective data transmission rates in typical mobile data access
applications at a lower cost per bit delivered. Further, we are pursuing various
improvements in our data transmission speeds in an attempt to retain our current
speed advantages.

     In addition to services based on terrestrial networks, Teledesic LLC has
announced plans to offer, beginning in 2004, a very high-speed wireless
"Internet-in-the-sky" service utilizing a proprietary network of LEO satellites.
However, Teledesic has stated that handheld mobile service will not be available
with this network. Moreover, Teledesic's laptop-sized terminals with large
antennae, although transportable, are fixed-point devices that are unlikely to
provide service inside buildings. For that reason, we do not believe the
Teledesic service is intended to meet the wireless data access needs of mobile
professionals.

     If network equipment based on 3G or other technologies were to succeed in
cost-effectively providing users with higher effective data transmission rates
than those available with our service or if Teledesic or others were to provide
a satellite-based service with increased mobility or higher speeds, our business
could be seriously harmed. Many of our present and future competitors have
greater financial, marketing, technical and management resources than we have,
and it is possible that our competitors will succeed in developing new
technologies, products and services that achieve broader market acceptance or
that render our high-speed service noncompetitive. Information on third-party
systems under development that we have described in this Form 10K is based on
available information and may be incomplete or inaccurate and is subject to
change.

RESEARCH AND DEVELOPMENT

     We intend to maintain a technology leadership position by continuing to
invest heavily in research and development of our networking products to reduce
the cost of our system components, to increase speed and performance of our
services, to develop additional applications for our services and to continue to
improve and upgrade our network and service to meet the emerging demands for
mobile data access services. As of December 31, 1999, we had 60 design and radio
frequency engineers, with 56 of those engineers in research and development and
four in operations. Research and development expense was approximately $35.7
million, $27.3 million and $13.2 million in 1999, 1998 and 1997, respectively.
Because the markets in which we participate and intend to participate are
characterized by rapid technological change, we expect that for the foreseeable
future, we will be required to make significant investments of resources in
research and development. See "Risk Factors -- We operate in an industry with
rapidly changing technology, and our success will depend on our ability to
develop products and services that keep pace with technological advancements."

MANUFACTURING

     We currently outsource all manufacturing of our subscriber modems and
network components. The proprietary external modem that our current Ricochet
subscribers use is manufactured by Alps Electric (USA), Inc. We have entered
into a two-year agreement with Alps to custom manufacture external modems to be
used in our high-speed service. We have committed to Alps to purchase a minimum
of 47,700 units in 2000. We anticipate receiving the first delivery of modems
under this agreement in the second quarter of 2000.

                                       25
   27

We have recently entered into a two-year agreement with NatSteel Electronics,
Ltd. for the purchase of additional modems.

     We intend to develop a low-cost (less than $250) personal computer card
modem for use with our high-speed service. We have recently entered into
two-year agreements with Sierra Wireless and Novatel to custom develop and
manufacture personal computer card modems for our high-speed service. We have
committed to purchase a minimum of 150,000 units from each of these suppliers in
the first year of deliveries and to reimburse these suppliers for a portion of
their development costs. We anticipate receiving the first delivery of modems
under these agreements by early 2001. Further, under these agreements, we have
agreed to license to Sierra Wireless and Novatel our technology to build other
modems or devices. We will receive royalty payments for any devices
incorporating our technology that Sierra Wireless and Novatel sell to third
parties.

     We will need to arrange for additional modems to meet forecast demand for
subsequent periods. If we cannot secure arrangements for the manufacture of
additional modems beyond the initial period, users would be unable to subscribe
to our service, which would harm our business. If any of our modem suppliers
were to experience financial, operational, production or quality assurance
difficulties, allocate resources to others in lieu of us or experience a
catastrophic event that results in a reduction or interruption in supply of
modems, our business would be impaired. In addition, if our channel partner
sells more subscriptions than we anticipate or if we decide to accelerate
deployment of our high-speed network, presently anticipated modem supplies may
prove inadequate. If any of the foregoing events occurs, we cannot assure you
that we will be able to obtain the modems we require from alternate suppliers at
favorable prices, or at all.

     In July 1999, we entered into a two-year agreement with Sanmina Corporation
to custom manufacture the poletop radios and network radios installed at our
wired access points. Sanmina made the first delivery of radios under this
agreement in November 1999. We will require more than 130,000 poletop radios and
36,000 ethernet radios to complete all three phases of our network deployment as
planned. In January 2000, we reported that we have been affected by
industry-wide component shortages, causing delays to production of these radios.
See "Risk Factors -- One of our manufacturers is experiencing shortages of
supply of components for our poletop and network radios and our other
manufacturers may experience shortages of supply of components for our modems or
other products, which could involve substantial cost and delay and reduce
availability of our service."

     If we are to become profitable, our products and components must continue
to be manufactured in large commercial quantities at competitive cost and
quality. As a result, we will be required to achieve significant product and
component cost reductions. We are currently working with several companies to
develop efficient, low-cost personal computer card modems; smaller, lower cost
external modems; and micro integrated circuits that can be built-in to end-user
devices. If we are unable to develop these modems at a low cost, we may be
unable to achieve the cost structure we anticipate in our business plan. Even if
we achieve low-cost production, we must have adequate lead times and production
capacity to meet user demand for our service if we are to increase revenues and
achieve profitability. If we do not achieve product and component cost
reductions, our competitive position and our ability to achieve profitability
could be impaired.

     Some of the component parts that our manufacturers use in our products,
including our modems and poletop and network radios, are available only from
sole or limited source vendors. Our manufacturers' reliance on these sole or
limited source vendors involves risks, including the possibility of a shortage
of key component parts and reduced control over delivery schedules,
manufacturing capability, quality and costs.

     In addition, some key component parts require long delivery times. We have
in the past experienced, and are currently experiencing, delays because key
component parts have been unavailable from suppliers. If we were unable to
obtain components, we may need to reconfigure our modems or radios, which could
involve substantial cost and delay and reduce availability of our modems or
radios necessary for the deployment of our network. This could delay our
deployment, which would reduce the availability of our service to users.

                                       26
   28

PATENTS, PROPRIETARY RIGHTS AND LICENSES

     We rely on a combination of patent, copyright, trademark and trade secret
protection laws and non-disclosure agreements to establish and protect our
proprietary rights. We have been issued 28 patents in the U.S., and patents
corresponding to some of our domestic patents have been granted in five foreign
countries. Further patents are pending in the U.S. and foreign countries. Our
patents expire in various years ranging from 2009 to 2016. We cannot assure you
that patents will issue from any pending applications or, if patents do issue,
that claims allowed will be sufficiently broad to protect our technology. We
also own 16 U.S. trademark registrations and have registered trademarks in at
least 20 foreign countries. Any of our current or future patents or trademarks
may be challenged, invalidated, circumvented or rendered unenforceable, and the
rights granted under the patents and trademarks may not provide significant
proprietary protection or commercial advantage to us. Moreover, our patents may
not preclude competitors from developing equivalent or superior products and
technology.

     We also rely upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain our competitive
position. Others may independently develop equivalent proprietary information or
otherwise gain access to or disclose our information. It is our policy to
require our employees, some contractors, consultants, directors and parties to
collaborative agreements to execute confidentiality agreements upon the
commencement of such relationships with us. However, we cannot assure you that
these agreements will provide meaningful protection of our trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such
information. In addition, our trade secrets could otherwise become known or be
independently discovered by our competitors.

     Our commercial success may also depend in part on our not infringing the
proprietary rights of others or not breaching technology licenses that cover
technology we use in our products. Third-party patents may require us to develop
alternative technology or to alter our products or processes, obtain licenses or
cease some of our activities. If any such licenses are required, we may be
unable to obtain these licenses on commercially favorable terms, if at all. Our
inability to obtain licenses to any technology that we may require to
effectively deploy or market our products and services could have an adverse
effect on our business. We may have to resort to potentially costly litigation
to enforce any patents issued or licensed to us or to determine the scope and
validity of third-party proprietary rights.

GOVERNMENT REGULATION OF COMMUNICATIONS ACTIVITIES

     FEDERAL REGULATION. Many aspects of the telecommunications industry are
subject to various regulations at the federal, state and local levels. This
regulatory environment, which is subject to constant change, directly affects
the breadth and quality of services we are able to offer, as well as the rates
for, and terms and conditions of, those services. Any of the regulatory entities
that have jurisdiction over our business may adopt regulations or take other
actions as a result of its own regulatory process or as directed by legislation,
the courts or executive directive, which could have an adverse affect on our
business.

     The FCC regulates non-governmental use of the electromagnetic spectrum in
the U.S., including the license-free frequency bands currently used by our radio
products and the licensed bands on which we are proposing commercial operations
in the near future. Operations are subject to specific FCC rules for particular
services. Part 15 of the FCC's rules governs operations in license-free
frequency bands, so-called because transmitters may be operated in these bands
without a license. The rules require that only FCC-approved equipment may be
operated. We also have licenses for, and will operate in, a licensed band, the
Wireless Communications Service, or WCS, governed by Part 27 of the FCC's rules.
FCC-approved equipment is also necessary for operation in this frequency band.
We design our products to conform with, and be approved under, applicable FCC
rules. We cannot assure you that we will be able to secure the necessary FCC
approvals for the equipment that we intend to deploy in 2000 and thereafter. The
need to obtain these approvals could result in delays or additional costs.

     In the license-free frequency bands, there are also various other uses by
industrial, scientific and medical equipment, the U.S. government, amateur radio
services and other licensed services. These other uses are governed by different
rule provisions, and they have priority over the license-free operation of our
products.
                                       27
   29

Under applicable FCC rules, our products must not cause harmful interference to
any authorized equipment operating in the band, and must accept interference
from all authorized equipment operating in the band. If we are unable to
eliminate harmful interference caused by our products through technical or other
means or if interference to our service caused by others causes the performance
of our service to be unattractive to users, we or our users could be required to
cease operations in the band in the affected locations. Additionally, while we
design our equipment to operate in the presence of other users, in the event the
license-free bands become unacceptably crowded, our business could be adversely
affected.

     We intend to operate in the WCS frequency band pursuant to licenses we
purchased at an FCC spectrum auction. These licenses authorize the provision of
service only in the Northeastern, Central and Western United States Regional
Economic Areas, and in the St. Louis, Missouri, Portland Oregon and Seattle,
Washington Major Economic Areas. While we believe we can obtain authority to
operate WCS facilities in additional geographic areas, we cannot assure you that
we will obtain such authorization. The WCS licenses have certain conditions
associated with them. For example, we are required to provide protection for
users of Wireless Cable and Instructional Television Fixed services in areas
where we are providing WCS. While we believe we can provide the requisite
protection, we cannot assure you that we can provide this protection in a
technically or economically feasible manner. In addition, the WCS licenses, like
all FCC licenses, are subject to subsequent Acts of Congress and international
treaties and agreements to which the U.S. is a signatory. There are currently
negotiations underway between the U.S. and Mexico concerning the use of WCS
spectrum by Mexico to provide a satellite service for Mexican citizens. If
Mexico provides this satellite service, certain areas in the U.S. where we hold
WCS licenses could receive harmful interference from the satellite signal. While
we will attempt to mitigate harmful interference to our WCS operations, the
operation of our WCS facilities at particular locations could be adversely
affected by Mexican satellite operations, which could have an adverse effect on
our business, financial condition or operating results.

     On an ongoing basis, the FCC proposes and issues new policies, rules and
amendments to existing rules that affect our business. We closely monitor the
FCC's activities and, when appropriate, actively participate in policy and
rulemaking proceedings. We are currently monitoring and participating in
selected proceedings at the FCC that could potentially have an adverse impact on
our business. For example, the FCC has issued a Notice of Proposed Rulemaking
encouraging the further use of radio frequency lighting devices in one of the
license-free frequency bands. While these industrial, scientific and medical
devices would be accorded a higher priority than our use of the band, we have
argued that the FCC must limit the high-powered emissions from radio frequency
lighting devices in the band so that these devices and license-free devices can
co-exist in the band as intended by the FCC.

     Changes in the regulations affecting our operations by the FCC, including
changes in the allocation or availability of frequency spectrum, could require
or prompt us to move to another of the license-free bands or to obtain the right
to operate in additional licensed spectrum. Redesigning products to operate in
other frequency bands could be expensive and time consuming, and we cannot
assure you that redesign would result in commercially viable products. In
addition, we cannot assure you that, if needed, we could obtain appropriate
licensed or unlicensed spectrum on commercially acceptable terms, if at all.

     STATE AND LOCAL REGULATION. We often require the siting of our network
radios and wired access points on public rights-of-way and other public
property. Due to state and local right-of-way, zoning and franchising issues, we
are not always able to place our radios in the most desirable locations, on an
optimal schedule or in the most cost-effective manner. It is possible that state
and local processes associated with radio location will harm our business.

     As a result of amendments to the Communications Act of 1934, some states
may attempt to regulate us with respect to the terms and conditions of service
offerings. While we believe that state regulations, if any, will be minimal,
these regulations, if enacted, could harm our business.

UTILINET BUSINESS

     Our UtiliNet business provides customer-owned wireless data communications
for industrial control and monitoring primarily in the electric utility, waste
water and natural gas industries. Our UtiliNet operations
                                       28
   30

share the same facilities and labor resources with our other operations. We
develop and manufacture UtiliNet products and sell them both to resellers and to
end-users, which are typically utility companies. We had backlog of
approximately $1.5 million and $0.5 million of UtiliNet product orders as of
December 31, 1999 and 1998, respectively. Substantially all of the orders in
backlog are expected to be shipped in 2000. Historically, a significant portion
of our revenues has been generated from sales of UtiliNet products. In February
2000, in order to focus our operations on deployment of our high-speed network,
we entered into an agreement to license our UtiliNet technology to Schlumberger
Resources Management Services, Inc. The agreement grants Schlumberger Resources
the exclusive right to design, manufacture and sell UtiliNet products in return
for license and royalty fees. We do not expect UtiliNet to be a significant
source of revenues in the future. For additional segment information, see "Part
II. Item 8. Financial Statements and Supplementary Financial Data -- Note 12 of
Notes to Consolidated Financial Statements."

EMPLOYEES

     As of December 31, 1999, we employed approximately 438 people, all of whom
were based in the U.S. Of our employees, 208 were in network operations and
deployment and network real estate and customer support, 70 were in research and
development, 74 were in administration, 42 were in sales and marketing and 44
were in manufacturing. The number of employees included in research and
development reflects a combination of engineers, technicians and designers. We
are highly dependent on some members of our management and engineering staff,
the loss of the services of one or more of whom may impede the achievement of
our development, deployment and commercialization of our products and services.
With the exception of our chief executive officer, none of these individuals has
an employment contract with us. None of our employees is represented by a labor
union. We have not experienced any work stoppage and consider our relations with
our employees to be good.

EXECUTIVE OFFICERS

     The names, ages and positions held by executive officers are as follows:



            NAME              AGE                            POSITION
            ----              ---                            --------
                               
Timothy A. Dreisbach........  50     President, Chief Executive Officer and Chairman of the
                                     Board of Directors
Dale W. Marquart............  41     General Counsel, Senior Vice President of Administration
                                     and Secretary
Robert W. Mott..............  40     Senior Vice President of Engineering
Robert H. Schellman.........  49     Senior Vice President of Network Operations and Services
James E. Wall...............  52     Chief Financial Officer
John G. Wernke..............  41     Senior Vice President of Sales and Marketing


     Timothy A. Dreisbach has served as our President and Chief Executive
Officer and one of our directors since May 1998 and was named Chairman in
February 2000. From January 1997 through January 1998, Mr. Dreisbach served as
President and Chief Executive Officer of Premenos Technology Corporation, an
electronic commerce software company that merged with Harbinger Corp. in
December 1997. From April 1992 to December 1996, Mr. Dreisbach served as Senior
Vice President, North American Sales and Service, for Boole & Babbage Inc., an
enterprise management software company.

     Dale W. Marquart has served as our General Counsel, Senior Vice President
of Administration and Secretary since June 1998. Prior to joining us, he served
as General Counsel and Vice President of International Sales at Premenos
Technology Corporation, an electronic commerce software company from June 1997
to June 1998. Previously, Mr. Marquart served as the Senior Director of Business
Development and Field Operations at Boole & Babbage, an enterprise management
software company, from April 1993 to June 1997.

     Robert W. Mott has served as our Senior Vice President of Engineering from
August 1998 until December 1998, when he became Senior Vice President of
Engineering and Manufacturing. Prior to joining

                                       29
   31

us, he was the Vice President of Engineering for CSI ZeitNet, a subsidiary of
Cabletron Systems, a network equipment company, from February 1997 to August
1998. Previously, Mr. Mott was a Manager with Pittiglio Rabin Todd & McGrath, a
technology consulting company, from January 1996 to February 1997 and from April
1992 to March 1995; and Vice President of Engineering of KENETECH Windpower, a
utility-grade wind turbine company, from April 1995 to January 1996. Mr. Mott
has also held positions with KPMG Consulting, Booz-Allen & Hamilton, Inc.
Consulting, as well as Hughes Aircraft Company.

     Robert H. Schellman has served as our Senior Vice President of Network
Operations and Services since July 1999. Prior to joining us, Mr. Schellman was
a Vice President of Operations of Telocity, Inc., a company that provides DSL
and high-speed Internet services, from August 1998 to July 1999. Previously, Mr.
Schellman was a Director for UUNET/WorldCom, a telecommunications company, from
May 1996 to July 1998; a Division Chief for the Department of the Army from
September 1994 to May 1996; General Manager of Sandwell, Inc.'s DATAP Systems
Division, a software and systems integration company, from September 1987 to
August 1994; a Senior Manager at Sprint Corp. from May 1984 to September 1987;
and a Manager at MCI Telecommunications from August 1981 to May 1984.

     James E. Wall has served as our Chief Financial Officer since August 1999.
Prior to joining us, Mr. Wall served as Treasurer and Controller for AirTouch
Communications, a multinational wireless telecommunications company, from
September 1995 to August 1999. Previously, Mr. Wall served as Corporate Vice
President and Treasurer for ICN Pharmaceuticals, Inc., a multinational
pharmaceutical research, manufacturing and marketing company, from June 1994 to
June 1995, and held senior executive positions for Ultramar Corporation, a
multinational petroleum exploration, production, refining, marketing and
shipping company, including Chief Financial Officer for Ultramar PLC Group
international exploration and production subsidiaries and Vice President and
Treasurer for Ultramar Corporation, from September 1976 to August 1993. Mr. Wall
began his career with the Internal Revenue Service and is also a certified
public accountant in the State of California.

     John G. Wernke has served as our Senior Vice President of Sales and
Marketing since August 1998. Prior to joining us, Mr. Wernke was the Vice
President of Enterprise Product Marketing for Harbinger Corporation, a
business-to-business electronic commerce company, from March 1997 to August
1998. Previously, Mr. Wernke served as a Product Marketing Manager for
OpenVision Technologies, Inc., a supplier of client/server systems management
solutions, from September 1993 to March 1997.

ITEM 2 -- PROPERTIES.

     The largest part of our operations and headquarters, including all of our
UtiliNet operations, are located in approximately 75,400 square-feet of leased
office, manufacturing and warehouse space located in Los Gatos, California. The
leases on this space expire on various dates from 2001 to 2004. In November
1999, we entered into a 10-year agreement to lease approximately 145,000 square
feet of office space in San Jose, California, beginning in June 2000. We lease
two facilities for our network operations centers: a 17,000 square-foot facility
in Houston, Texas under a lease that expires in 2001, and a 24,000 square foot
facility in Plano, Texas under a lease that expires in 2004. We also lease small
offices and warehouse space in seventeen other metropolitan areas in the United
States. We believe this space, along with additional regional offices in areas
where we plan to deploy our networks, will be adequate to provide the office
space that will be required for increases in our planned business activity over
the next year.

ITEM 3 -- LEGAL PROCEEDINGS.

     We are not a party to any material legal proceedings.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Subsequent to our Annual Meeting of Stockholders held on October 15, 1999,
there were no matters submitted to a vote of security holders in the fourth
quarter of 1999. The voting results from the Annual Meeting of Stockholders were
included in our Quarterly Report on Form 10-Q for the quarter ended September
30, 1999.
                                       30
   32

                                    PART II

ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common stock is quoted on the Nasdaq National Market under the symbol
"MCOM." The following table shows the intraday high and low sale prices per
share of our common stock as reported on the Nasdaq National Market for the
periods indicated:



                                                               HIGH       LOW
                                                              -------    ------
                                                                   
FISCAL YEAR 1998
First Quarter...............................................  $ 13.25    $ 8.19
Second Quarter..............................................    12.63      8.25
Third Quarter...............................................    10.50      4.78
Fourth Quarter..............................................     8.75      3.00
FISCAL YEAR 1999
First Quarter...............................................  $  9.44    $ 5.00
Second Quarter..............................................    20.19      6.50
Third Quarter...............................................    56.50     19.38
Fourth Quarter..............................................   104.50     21.88


     On March 1, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $75.88 per share. As of March 1, 2000, there were 405
holders of record of our common stock.

     DIVIDEND POLICY. The holders of the 60,000,000 shares of our outstanding
preferred stock, which were originally issued on November 15, 1999, have the
right to receive cumulative dividends payable, at our option, in cash or
additional shares of preferred stock, at the annual rate of $.65 per share,
until November 15, 2002. To date we have paid, and expect to continue to pay the
dividends in cash. We have not declared or paid any cash dividends on our common
stock. Other than the payment of dividends on the shares of preferred stock, we
currently intend to retain any future earnings to finance the growth and
development of our business, and we do not intend to pay any cash dividends on
our common stock in the foreseeable future. Moreover, the terms of our
outstanding preferred stock and the covenants contained in the senior notes
issued in February 2000 restrict our ability to pay cash dividends on our common
stock. Subject to these restrictions, future dividends, if any, will be
determined by our board of directors.

RECENT SALES OF UNREGISTERED SECURITIES

     On November 15, 1999, we completed the sale of 30,000,000 shares of Series
A1 preferred stock to WorldCom, Inc. at a price of $10 per share and 30,000,000
shares of Series A2 preferred stock to Vulcan Ventures Incorporated at a price
of $10 per share, both of which were below $11.06, the per share closing price
of our common stock on the date immediately prior to our execution of the
preferred stock purchase agreement. The aggregate placement agent fee was
approximately $27 million. The shares were sold pursuant to the exemption from
registration under the Securities Act of 1933 provided by Regulation D
promulgated thereunder. The purchasers made representations with respect to
their intentions to acquire the securities for investment purposes only and not
with a view toward distribution, their status as "accredited investors" within
the meaning of Regulation D and their sophistication and business experience.
The purchasers also represented that they had received and reviewed all
information they deemed relevant in making informed decisions to purchase the
shares. Appropriate legends were affixed to the stock certificates issued.

     The Series A1 preferred stock becomes convertible into common stock at the
rate of 25% every six months, commencing two and one-half years after the
initial issuance of the shares, except in the event of a change in control of
Metricom or a major acquisition by Metricom, in which event the shares become
convertible at the option of the holder. The Series A2 preferred stock is fully
convertible at the option of the holder. Both series of preferred shares are
automatically converted into common stock in the event of any transfer of the
shares other than to WorldCom, Vulcan or one of their affiliates. Each preferred
share is convertible into one share of common stock, subject to adjustment for
stock splits, stock dividends, reclassifications, certain reorganizations,
mergers, sales of assets and the like.

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ITEM 6 -- SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE
          DATA)



                                                            YEAR ENDED DECEMBER 31,
                                             -----------------------------------------------------
                                               1999        1998       1997       1996       1995
                                             ---------   --------   --------   --------   --------
                                                                           
STATEMENT OF OPERATIONS DATA:
Revenues:
Service revenues...........................  $  10,088   $  8,419   $  6,642   $  2,158   $    789
Product revenues...........................      8,437      7,440      6,797      4,996      4,995
                                             ---------   --------   --------   --------   --------
          Total revenues...................     18,525     15,859     13,439      7,154      5,784
                                             ---------   --------   --------   --------   --------
Costs and expenses:
Cost of service revenues...................     21,319     28,310     27,866     14,334      8,192
Provision for network replacement..........         --     14,392         --         --         --
Cost of product revenues...................      6,014      5,050      4,558      2,528      3,134
Research and development...................     35,681     27,313     13,212     13,920     10,627
Selling, general and administrative........     20,737     22,934     21,189     17,724     11,715
Provision for Overall Wireless.............         --         --      3,611         --         --
                                             ---------   --------   --------   --------   --------
          Total costs and expenses.........     83,751     97,999     70,436     48,506     33,668
                                             ---------   --------   --------   --------   --------
Loss from operations.......................    (65,226)   (82,140)   (56,997)   (41,352)   (27,884)
Interest expense...........................     (5,884)    (3,939)    (4,151)    (1,310)        --
Interest income............................      4,818      1,915      1,820      3,317      4,363
                                             ---------   --------   --------   --------   --------
Net loss...................................  $ (66,292)  $(84,164)  $(59,328)  $(39,345)  $(23,521)
Preferred stock dividends..................    (38,234)        --         --         --         --
                                             ---------   --------   --------   --------   --------
Net loss attributable to common
  stockholders.............................  $(104,526)  $(84,164)  $(59,328)  $(39,345)  $(23,521)
Basic and diluted net loss attributable to
  common stockholders per share............  $   (5.13)  $  (4.63)  $  (4.35)  $  (2.93)  $  (1.79)
                                             =========   ========   ========   ========   ========
Weighted average shares outstanding........     20,375     18,195     13,641     13,413     13,140




                                                               AS OF DECEMBER 31,
                                               ---------------------------------------------------
                                                 1999       1998       1997       1996      1995
                                               --------   --------   --------   --------   -------
                                                                            
BALANCE SHEET DATA:
Cash and investments.........................  $499,341   $ 19,141   $ 14,474   $ 65,221   $64,415
Working capital..............................   478,618      9,396      6,980     57,738    46,771
Property and equipment.......................    48,515     42,345     40,301     33,606    17,717
Total assets.................................   546,647     34,466     51,103    101,799    86,076
Long-term debt...............................       385     55,098     45,000     45,000        --
Stockholders' equity (deficit)...............   (54,200)   (42,259)   (13,817)    43,306    80,374


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ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     OVERVIEW. We currently derive substantially all of our revenues from
subscriptions paid to us by users of our current Ricochet service, which we
offer in a limited number of markets, and from the sale of customer-owned
networks and related products to companies primarily engaged in utility
businesses. Since 1998, we have concentrated our efforts primarily on completing
the development and testing of the technology necessary to deliver our
high-speed service, acquiring rights-of-way and other rights necessary for us to
deploy our high-speed network, establishing manufacturing relationships for
network components and wireless modems and supporting the subscribers to our
current Ricochet service. After we launch our high-speed service, planned to
occur during the late summer of 2000, we expect to derive substantially all of
our revenues from subscription fees paid to us by channel partners, which will
resell our service directly to their customers. In connection with the launch of
our high-speed service, we expect to sell our existing subscriber accounts to
one or more of our channel partners, and we will curtail our business operations
related to our current Ricochet service. As we deploy our high-speed network and
launch our high-speed service, we expect our operating expenses to increase
significantly from historical levels and to exceed revenues for the foreseeable
future. We expect to generate substantial net losses to common stockholders for
the foreseeable future.

     Historically, we have generated a significant portion of our revenues from
sales of customer-owned networks and related products, known as UtiliNet, to
utility companies. In February 2000, in order to focus our operations on
deployment of our high-speed network, we entered into an agreement to license
our UtiliNet technology to Schlumberger Resources Management Services, Inc. The
agreement grants Schlumberger Resources the exclusive right to design,
manufacture and sell UtiliNet products in return for license and royalty fees.
We do not expect UtiliNet to be a significant source of revenues in the future.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain
operational data as a percentage of total revenues:



                                                                  YEAR ENDED DECEMBER 31,
                                                                  ------------------------
                                                                  1999      1998      1997
                                                                  ----      ----      ----
                                                                             
REVENUES:
Service revenues............................................        54%       53%       49%
Product revenues............................................        46%       47%       51%
                                                                  ----      ----      ----
          Total revenues....................................       100%      100%      100%
COSTS AND EXPENSES:
Cost of service revenues....................................       115%      179%      207%
Provision for network replacement...........................        --        91%       --
Cost of product revenues....................................        32%       32%       34%
Research and development....................................       193%      172%       98%
Selling, general and administrative.........................       112%      145%      158%
Provision for Overall Wireless..............................        --        --        27%
                                                                  ----      ----      ----
          Total costs and expenses..........................       452%      618%      524%
                                                                  ----      ----      ----
Loss from operations........................................      (352)%    (518)%    (424)%
Interest expense............................................       (32)%     (25)%     (31)%
Interest income, net........................................        26%       12%       14%
                                                                  ----      ----      ----
Net loss....................................................      (358)%    (531)%    (441)%
Preferred dividends.........................................      (206)%      --        --
                                                                  ----      ----      ----
Net loss attributable to common stockholders................      (564)%    (531)%    (441)%
                                                                  ====      ====      ====


                                       33
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YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998

     Currently, we derive revenues from the sale of our services and products.
We derive service revenues from Ricochet subscriber fees, Ricochet modem rentals
and UtiliNet customer support fees, and we recognize these revenues ratably over
the service period. We derive product revenues from the sale of UtiliNet
products and Ricochet modems, and we recognize these revenues upon shipment.
Total revenues increased to $18.5 million in 1999 from $15.9 million in 1998,
primarily due to an increase in service revenues. Service revenues increased to
$10.1 million in 1999 from $8.4 million in 1998, reflecting an increase in
Ricochet service revenues to $9.1 million in 1999 from $7.5 million in 1998.
This increase was primarily attributable to higher aggregate subscriber fees
resulting from an approximate 15% increase in the number of Ricochet subscribers
in 1999. Product revenues increased to $8.4 million in 1999 from $7.4 million in
1998, principally as a result of increased shipments of UtiliNet products. This
increase was offset in part by a decline in Ricochet product revenues to $3.0
million in 1999 from $3.3 million in 1998, reflecting reductions in shipments of
Ricochet modems in the second half of 1999 compared with the second half of
1998. A significant portion of UtiliNet product revenues was derived from sales
to Southern California Edison, which accounted for 13% and 10% of total product
revenues in 1999 and 1998, respectively. UtiliNet revenues in total increased to
$6.5 million in 1999 from $5.1 million in 1998 as a result of increased
shipments of UtiliNet products. We expect UtiliNet revenues to decline
significantly in the future as a result of our focus on the launch of our
high-speed service.

     In the future, in connection with the launch of our high-speed service, we
expect to sell our existing subscriber accounts to one or more of our channel
partners, and we will curtail our business operations related to our current
Ricochet service. We expect to derive substantially all of our future revenues
from subscription fees paid to us by channel partners. We anticipate that our
channel partners will pay us subscription fees based on flat rates for each user
they enroll for our service. We will require each of our channel partners to
charge its subscribers a flat rate for use of our service, although each channel
partner will set the particular rate it charges its customers.

     We currently have one channel partner relationship. In June 1999, WorldCom
entered into an agreement with us to sell our high-speed service to its
customers. Under that agreement, WorldCom has agreed to pay us a per-subscriber
fee, subject to an agreed minimum revenue level of at least $388 million over
the five years following the launch of our service, assuming that our deployment
schedule is not delayed, that we place our network into service on schedule and
that we meet quality-of-service and network performance standards. Subject to
these limitations, we currently expect WorldCom to pay us the following minimum
amounts during the first five years after we launch our service:

                                                           
First year..................................................  $  5.6 million
Second year.................................................    40.6 million
Third year..................................................    83.6 million
Fourth year.................................................   117.4 million
Fifth year..................................................   141.0 million



     Notwithstanding the foregoing, if WorldCom's sales efforts result in fewer
subscribers than WorldCom has agreed contractually to provide, but the number of
subscribers provided by WorldCom and its authorized resellers nevertheless
represent more than a specified percentage of our total users, WorldCom will pay
us only the greater of a per-subscriber rate for each of its subscribers or the
subscription fees we receive from all of our other channel partners, which could
be substantially less than the minimum revenues we currently expect from
WorldCom. Accordingly, our ability to achieve the minimum revenue levels we
expect from our agreement with WorldCom may depend on our ability to enter into
channel agreements with one or more large channel partners that can successfully
sell subscriptions to our service so that subscribers provided by WorldCom and
its resellers represent less than the threshold percentage of our total users.
In addition, if our deployment schedule is delayed or if we fail to meet
deployment schedule deadlines or fail to comply with quality-of-service
standards relating to data transmission performance, network availability,
coverage and latency, ease of use and size of modems, all as specified in our
agreement, WorldCom may delay or reduce its minimum payments to us or, in the
case of a deployment delay in excess of 12 months, may terminate the contract.

                                       34
   36

     COST OF SERVICE REVENUES. Cost of service revenues consists primarily of
network operations costs, real estate management costs and depreciation expense
on network equipment. Network operations costs include the costs associated with
the field managers, engineers and technicians who operate and maintain our
high-speed network, as well as the costs associated with field offices we
maintain, including our network operations centers. Network operations costs
also include the telecommunications costs we incur to transmit data between our
wired access points and network interface facilities and the Internet. Real
estate management costs include the costs associated with the maintenance of
lease agreements for our poletop radios, wired access points and network
interface facilities and the ongoing rental payments for these sites. Real
estate management costs also consist of the internal and external labor costs
associated with maintaining right-of-way and other real estate-related
agreements in the markets where our network is currently deployed.

     Cost of service revenues was $21.3 million in 1999 compared with $28.3
million in 1998. The decrease in 1999 was primarily due to reduced depreciation
expense on network equipment resulting from our 1998 write-down of Ricochet
network equipment to fair value. In the fourth quarter of 1998, as a result of
our plans to replace the current Ricochet networks with new, higher speed
Ricochet equipment, we recorded a $14.4 million charge to write down the
carrying value of Ricochet network equipment to fair value.

     We expect our cost of service revenues to increase significantly and
rapidly as the scope of our operations increases through the deployment of our
high-speed network. At December 31, 1999, we had future minimum rental
commitments under network equipment lease agreements of approximately $2.7
million per year. Our current lease agreements represent only a small portion of
the lease agreements we will require to deploy our network. We expect rental
payments to increase significantly as we enter into additional leases in the
first half of 2000 and thereafter to support the widespread deployment of our
high-speed network.

     As we commercially launch our high-speed service in each market, we will
begin depreciating the network equipment and other capitalized costs associated
with building our network infrastructure. Our capitalized costs represent costs
incurred in designing the network, site acquisition, zoning, construction and
installation of equipment. We will depreciate our capitalized network costs over
a useful life of three to five years, depending on the particular asset being
depreciated. We expect our capitalized costs to increase significantly in 2000
and 2001 as we complete the deployment of our network. Accordingly, we expect
that depreciation expense will increase rapidly over the next several years.

     COST OF PRODUCT REVENUES. Cost of product revenues consists primarily of
the inventory and manufacturing costs associated with modem and UtiliNet product
sales. Cost of product revenues increased to $6.0 million in 1999 from $5.0
million in 1998. Ricochet cost of product revenues increased to $3.0 million in
1999 from $2.7 million in 1998. Ricochet cost of product revenues as a
percentage of Ricochet product revenues increased to 102% in 1999 from 84% in
1998. The increase over 1998 was primarily due to an increase in product
revenues derived from the sale of higher cost Ricochet SX modems at lower
average selling prices. We expect Ricochet cost of product revenues to increase
in 2000 as we sell modem inventory directly to WorldCom or other channel
partners for resale to new subscribers to our high-speed service. In subsequent
years, we anticipate that our channel partners may begin to purchase modems
directly from our licensed third-party manufacturers. UtiliNet cost of product
revenues increased to $3.0 million in 1999 from $2.3 million in 1998 as a result
of increased shipments of UtiliNet products. UtiliNet cost of product revenues
as a percentage of product revenues decreased slightly to 54% in 1999 from 55%
in 1998.

     RESEARCH AND DEVELOPMENT. Research and development costs include the costs
incurred to develop our network technology and subscriber modems, as well as to
obtain rights-of-way and related site agreements in markets where we plan to
offer service. Research and development expenses increased to $35.7 million in
1999 from $27.3 million in 1998. Substantially all of the increase in 1999 was
due to an increase in costs incurred in 1999 to obtain right-of-way and site
agreements in metropolitan areas we currently plan to offer service. The
remainder of the increase was due to costs incurred to deploy a high-speed
Ricochet test network in the first half of 1999. At December 31, 1999, we had
outstanding commitments of approximately $5.2 million to third parties
performing services associated with acquiring rights-of-way and related
interests in real estate in new markets, the substantial majority of which we
expect to spend in 2000. We plan to continue to spend a substantial amount on
the development of our networking products to reduce

                                       35
   37

the cost of our system components, increase the speed and performance of our
services, develop additional applications for our services and to continue to
improve and upgrade our network and service to address the emerging demands for
mobile data access. As a result, we expect that research and development costs
will continue to increase significantly in absolute dollars for the foreseeable
future.

     SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses include our corporate overhead and the costs associated with our
efforts to obtain and support our channel partners, promote the Ricochet brand
and our high-speed service, and develop and implement our marketing strategy for
our service and modems. Selling, general and administrative expenses decreased
to $20.7 million in 1999 from $22.9 million in 1998 primarily due to charges of
approximately $3.5 million in severance to employees terminated in the third and
fourth quarters of 1998. Partially offsetting this decrease was an increase in
marketing expenditures related to commercialization of our new high-speed
network. We expect selling, general and administrative costs to increase
significantly from historical levels as we implement our planned advertising
campaign related to the launch of the various phases of our high-speed service.
We expect to spend more than $50 million on sales and marketing efforts in 2000
and substantially more in 2001. We also expect to continue to expand our
corporate and administrative infrastructure to support our planned growth.

     INTEREST INCOME. Interest income increased to $4.8 million in 1999 from
$1.9 million in 1998 due to a significantly higher average balance of cash, cash
equivalents and investments in the last two months of 1999. As a result of the
November 1999 sale of our preferred stock for net proceeds of $573.2 million,
and the February 2000 sale of common stock, 13% senior notes due 2010 and
warrants to purchase common stock, we have substantial cash on hand. We expect
to use these cash resources to fund the deployment of our network and to fund
operating losses and working capital requirements through the first two phases
of our network deployment. Pending these uses, we will invest this cash in
high-quality, short-term, interest-bearing securities. Accordingly, we initially
expect to generate a substantial amount of interest income, although this
interest income will decline rapidly over time as we use this cash.

     INTEREST EXPENSE. Interest expense increased to $5.9 million in 1999 from
$3.9 million in 1998 due to the increase in debt outstanding from Vulcan through
the first ten months of 1999, as well as the amortization of approximately $1
million in debt issuance costs as a result of the call for redemption of our 8%
Convertible Subordinated Notes due 2003. As a result of our senior notes and
warrants offering in February 2000, we have approximately $300 million in
outstanding debt. The senior notes will require semi-annual cash interest
payments commencing August 15, 2000. We have deposited approximately $73.1
million of the net proceeds from the sale of the senior notes in a pledge
account to secure the first four interest payments on these securities. We will
record a substantial expense, a portion of which will be non-cash, for interest
on these obligations. If we incur additional debt in the future to fund our
expansion plans, our interest costs will increase.

     PREFERRED STOCK DIVIDENDS. In November 1999, we issued 60,000,000 shares of
preferred stock to Vulcan Ventures and WorldCom for gross proceeds of $600
million. Each share of preferred stock bears a cumulative dividend at the rate
of $.65 per year for the first three years after issuance, which we may pay in
cash or in additional shares of preferred stock. We currently expect to pay
dividends on the preferred stock in cash. Because the preferred stock sold to
Vulcan Ventures is immediately convertible into common stock at the holder's
option at a conversion price of $10.00 per share, which was below $11.06, the
per share closing price of our common stock on the date immediately prior to our
execution of the preferred stock purchase agreement, we recorded an additional
dividend of $31.8 million in the fourth quarter of 1999 to reflect the
beneficial conversion privilege associated with this series of preferred stock.
The preferred stock issued to WorldCom is also deemed to have been issued with a
beneficial conversion privilege. However, that series of preferred stock does
not begin to become convertible into common stock at the holder's option until
May 2002. As a result, we will amortize that discount, beginning in 1999, over
the 48-month period during which this series of preferred stock becomes
convertible into common stock at the holder's option.

                                       36
   38

Accordingly, for both series of preferred stock in the aggregate, we will record
preferred stock dividends in addition to our cash dividend on the preferred
stock as follows:

                                                           
1999........................................................  $33.2 million
2000........................................................   10.1 million
2001........................................................   10.1 million
2002........................................................    7.8 million
2003........................................................    2.6 million



     Both series of preferred stock will accrete at approximately $2.7 million
per year in total over the ten year period from the beginning aggregate net book
value of $573 million up to its aggregate face value of $600 million. This
accretion will be charged against retained earnings (accumulated deficit).

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

     REVENUES. Total revenues increased to $15.9 million in 1998 from $13.4
million in 1997 primarily due to increased shipments of Ricochet modems.
Ricochet product revenues totaled $3.3 million in 1998 compared with $1.7
million in 1997. Product revenues in total increased to $7.4 million in 1998
from $6.8 million in 1997. UtiliNet product revenues decreased to $4.1 million
in 1998 from $5.1 million in 1997 due to a decrease in shipments of UtiliNet
products. We derived a significant portion of UtiliNet product revenue from
Southern California Edison ("SCE"). Product revenues from SCE accounted for 10%
and 17% of total product revenues in 1998 and 1997, respectively. Service
revenues increased to $8.4 million in 1998 compared with $6.6 million in 1997.
This increase was due primarily to an increase in Ricochet subscribers of
approximately 36% in 1998. Ricochet service revenue increased to $7.5 million in
1998 from $6.6 million in 1997.

     COST OF REVENUES. Cost of service revenues increased to $28.3 million in
1998 from $27.8 million in 1997. This increase reflects an increase in costs
incurred to add Ricochet infrastructure and increase performance in commercial
service areas was partially offset by reductions in inventory costs associated
with a decrease in modems rented to customers in 1998. Cost of service revenues
is expected to increase significantly as a result of the continued operation of
Ricochet networks and planned future deployment of our high-speed service. Cost
of product revenues increased to $5.0 million in 1998 from $4.6 million in 1997.
Ricochet cost of product revenues as a percentage of Ricochet product revenues
decreased to 84% in 1998 from 130% in 1997 as a result of an increase in the
sale of modems in 1998 for which an obsolescence provision was established in
1997. UtiliNet cost of product revenues as a percentage of UtiliNet product
revenues increased to 55% in 1998 from 47% in 1997 as a result of higher
inventory procurement costs.

     PROVISION FOR NETWORK REPLACEMENT. In the fourth quarter of 1998, we
recorded a one-time charge of $14.4 million to write down the carrying value of
the Ricochet network equipment that is currently in operation in three
metropolitan areas. This charge was recorded as a result of our plans to replace
this equipment with our high-speed network equipment in the near future.

     RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$27.3 million in 1998 from $13.2 million in 1997. Approximately two-thirds of
the increase in 1998 was due to development of our high-speed network technology
and subscriber devices. The increase was also due in part to an increase in
costs incurred in 1998 to obtain right-of-way and site agreements in
metropolitan areas where we currently plan to offer service.

     SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $22.9 million in 1998 from $21.2 million in 1997 primarily
due to charges of approximately $3.5 million in severance to employees
terminated in the third and fourth quarters of 1998. Partially offsetting this
increase was a reduction of $2.3 million in costs associated with our reduced
Ricochet sales and marketing efforts in 1998 compared with 1997.

     INTEREST INCOME AND EXPENSE. Interest expense decreased to $3.9 million in
1998 from $4.2 million in 1997. Interest expense in 1997 included a one-time
charge for the interest paid against short-

                                       37
   39

term borrowings incurred to participate in the FCC auction in April 1997.
Interest income increased to $1.9 million in 1998 from $1.8 million in 1997
primarily due to a slightly higher average balance of cash, cash equivalents and
investments in 1998 as compared with 1997.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations and capital expenditures primarily through
the public and private sale of equity and debt securities. In 1996, we completed
a private placement of 8% Convertible Subordinated Notes due 2003 with net
proceeds of approximately $43.4 million. In January 1998, we completed a private
placement of common stock with Vulcan Ventures with net proceeds of
approximately $53.7 million. In November 1999, we completed a private placement
of redeemable convertible preferred stock with Vulcan Ventures and WorldCom with
net proceeds of approximately $573 million. In February 2000, we completed a
public offering of common stock with net proceeds of approximately $473 million
and a public offering of 13% senior notes due 2010 and warrants to purchase
common stock with available net proceeds of approximately $219 million, after
establishing the required reserve to secure the first four interest payments on
the notes.

     Since inception, we have devoted significant resources to the development,
deployment and commercialization of wireless network products and services. As a
result, as of December 31, 1999, we had incurred $338.0 million of cumulative
net losses. Our operations have required substantial capital investments for the
purchase of network equipment, modems and computer and office equipment. As of
December 31, 1999, we had cash, cash equivalents and investments of
approximately $499.3 million and working capital of approximately $478.6
million. Our accounts receivable increased to $2.4 million as of December 31,
1999 from $1.5 million at December 31, 1998 due to a higher Ricochet subscriber
base and an increase in UtiliNet product shipments in the fourth quarter of 1999
over the fourth quarter of 1998. Inventories decreased to $0.6 million in 1999
from $3.0 million in 1998 due primarily to shipments of current generation
Ricochet modems. Including network construction in progress, capital
expenditures were $33.1 million, $5.0 million and $10.6 million in 1999, 1998
and 1997, respectively. We expect that accounts receivable, inventories and
capital expenditures will significantly increase in the future as a result of
our ongoing deployment and commercialization of the high-speed network.

     Our principal uses of cash for the foreseeable future will be to fund the
deployment of our high-speed network, to fund operating losses and to pay
interest on our debt securities issued in February 2000, and dividends on our
preferred stock. Based on our current projections, we believe that, in addition
to the funds on hand at December 31, 1999, we will require additional cash
resources of approximately $1 billion to enable us to complete the three-phase
deployment of our network, as well as for the other purposes described above.
Approximately $692 million of these required resources, after deducting
underwriting discounts and commissions and estimated offering expenses, and
after establishing the required interest reserve to secure the first four
interest payments on the notes, were funded from the net proceeds of the
February 2000 common stock, notes and warrants offerings. Accordingly, based on
our current projections, we believe that our cash, cash equivalents and
short-term investments of approximately $499.3 million as of December 31, 1999,
together with the net proceeds from the common stock, notes and warrants
offerings in February 2000, will be sufficient to fund the first two phases of
our network deployment. We will need additional funds to complete the third
phase of our network deployment, and the funds we may actually require to
complete any phase of the deployment may vary materially from our estimates. In
addition, we could incur unanticipated costs or be required to alter our plans
in order to respond to changes in competitive or other market conditions, which
could require us to raise additional capital sooner than we expect. Further,
although it is not our current intention to do so, we may decide to use a
portion of our cash resources to acquire licensed spectrum or to license,
acquire or invest in new products, technologies or businesses that we consider
complementary to our business. We cannot assure you that the additional capital
we will require to complete the third phase of our network deployment or for
these other purposes will be available on commercially reasonable terms or at
all. If we are unable to secure additional financing as necessary, we may need
to delay or curtail our expansion plans. See "Risk Factors -- We will require
significant additional capital in the future to fund our continuing development,
deployment and marketing of our high-speed network and service" and "-- We have
a

                                       38
   40

substantial amount of debt, which could adversely affect our business, financial
condition and results of operations."

     Our current and future operations will require substantial capital
investments for the purchase of our network equipment, which consists primarily
of network radios, wired access points and network interface facilities.
Significant labor costs associated with deploying our network equipment include
design of the network, site acquisition, zoning, construction and installation
of equipment. In July 1999, we entered into an agreement with Sanmina
Corporation to manufacture our poletop radios and network radios installed at
wired access points. In October 1999, we entered into agreements with Wireless
Facilities, Inc., General Dynamics Worldwide Telecommunications Systems and
Whalen & Company to provide us with expertise and personnel to assist with the
deployment of our network. At December 31, 1999, we had outstanding commitments
to purchase approximately $219 million of network equipment and related labor
from these suppliers.

     Effective January 1, 1999, we changed our capitalization policy for network
equipment. In the construction of the first generation Ricochet network, costs
incurred for site acquisition and radio frequency engineering were expensed as
incurred due to the network's early stage of development. We believe that our
new high-speed network currently being deployed is no longer in the early stages
of development. Because site acquisition and radio frequency engineering are
integral steps in the design and construction of the high-speed network, these
costs are now being capitalized as part of the total cost of the assets. We
believe the changed policy is preferable. The effect of the change in accounting
principle in 1999 was to reduce the net loss available to common stockholders by
approximately $15.9 million or $0.78 per share in 1999. The effect was also to
reduce net loss by $1.3 million, or $0.10 per share in 1997 and to increase net
loss by $1.3 million, or $0.07 per share in 1998. There was no effect as of
January 1, 1999.

     We expect to incur significant expenditures to procure high-speed modems in
the future. We have agreed to purchase 47,700 modems from our current modem
supplier, Alps Electric (USA), Inc., in 2000, representing a commitment of
approximately $20 million. We have recently entered into a two-year agreement
with NatSteel Electronics, Ltd. for the purchase of additional modems. We have
also recently entered into agreements with Sierra Wireless and Novatel to
develop and manufacture custom personal computer card modems. We have agreed
with both Sierra Wireless and Novatel to purchase a minimum of 150,000 units in
the first year of deliveries from each, representing a total commitment of
approximately $68 million. We anticipate that deliveries from Alps will begin
during the second quarter of 2000 and deliveries from Sierra Wireless and
Novatel will begin in early 2001.

     In December 1999, we called our $45 million aggregate principal amount of
convertible notes due 2003 for redemption on January 10, 2000. As of December
31, 1999, $40.7 million of the Notes had been converted into approximately 2.8
million shares of common stock. As of the redemption date, all of the note
holders had converted their notes into shares of our common stock at a
conversion price of $14.55 per share. As a result of the conversion, we issued
an aggregate of 3,064,963 shares of our common stock to the former convertible
note holders.

     The preferred stock we issued to WorldCom and Vulcan Ventures in November
1999 carries a 6.5% dividend payable annually for three years and no dividend
thereafter. As a result, in December 1999, we paid to the preferred stockholders
cash dividends totaling $3.3 million, representing the pro rata portion of the
annual dividend accrued since the date of initial issuance of the shares. We
expect to pay cash dividends of approximately $39.0 million in both 2000 and
2001 and $35.7 million in 2002 on our preferred stock.

     As a result of our completion of our notes and warrants offering in
February 2000, we will have outstanding $300 million aggregate principal amount
of 13% senior notes due 2010, which will require semi-annual cash interest
payments of $19.5 million, commencing August 15, 2000. We have deposited
approximately $73.1 million of the net proceeds from the sale of the senior
notes in a pledge account to fund an interest reserve to secure the payment of
the first four semi-annual cash interest payments on these notes.

     In June 1995, Metricom Investments, Inc., our subsidiary, and PepData,
Inc., a subsidiary of Potomac Electric Power Company, formed Metricom DC, L.L.C.
to own and operate a Ricochet network in the Washington D.C. metropolitan area.
Metricom Investments contributed $1,000 and rights to use proprietary

                                       39
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technology employed by our Ricochet networks in exchange for an 80% interest in
Metricom DC. PepData committed to contributing up to $7.0 million in exchange
for a 20% interest in Metricom DC and certain preferential rights to available
cash distributions. As of December 31, 1998, PepData had contributed
approximately $5.9 million to the joint venture, $5.2 million of which is
reflected as a minority interest in the accompanying consolidated financial
statements at December 31, 1998. In November 1999, we paid $5.0 million to
PepData to acquire the minority interest of Metricom DC from PepData.

     YEAR 2000 COMPLIANCE. Many installed computer systems and software products
were programmed to accept only two digits in the date code field. As of January
1, 2000, it became necessary for these code fields to accept four digit entries
to distinguish years beginning with "19" from those beginning with "20." We have
assessed all of our internal computer systems and software products, tested
those systems and products and remedied any known problems. We have upgraded our
business and financial systems to a version that our vendors have certified to
be year 2000 compliant and also communicated with our key suppliers to assess
whether or not the products, services, networks and technologies of these
suppliers are year 2000 compliant. We have also completed an assessment of
whether our networks that depend upon third parties for telecommunications
services and power are year 2000 compliant. In the fourth quarter of 1999, we
completed our year 2000 assessment, testing and remediation efforts.

     Because we have not yet launched our high-speed service and because many
systems, whether or not they are information-technology systems, may contain
embedded technology, we cannot assure you that we have identified and remedied
all potential year 2000 problems that could arise in connection with our
high-speed service. We have a contingency plan for handling year 2000 problems
that were not detected and corrected prior to their occurrence, and we are
continuing to assess any exposure areas in order to determine what additional
steps are advisable. We are prepared to use backup systems and have developed
other alternative contingency plans for other critical functions where computer
systems are essential. To date, we have not experienced any material year 2000
problems. However, if all of our potential year 2000 problems were not properly
identified or if adequate assessment and remediation are not timely effected
with respect to any year 2000 problems, our business could be impaired
significantly. Moreover, any year 2000 compliance problem facing our customers
or third parties who provide our networks with telecommunications services and
power could also harm our business.

     NEW ACCOUNTING STANDARDS. In June 1998, FASB issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
hedging activities, and exposure definition. The pronouncement is effective for
fiscal years beginning after June 15, 2000. We believe the pronouncement will
not have a material effect on our financial statements.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements". SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. We will adopt
SAB 101 as required in the first quarter of 2000. We have not yet evaluated the
effect SAB 101 will have on our consolidated results of operations and financial
position.

ITEM 7A -- QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     Our exposure to financial market risk, including changes in interest rates
and marketable securities prices, relates primarily to our investment portfolio
and redeemable convertible preferred stock outstanding at December 31, 1999. Our
cash equivalents and short-term investments subject to interest rate risk are
primarily highly liquid corporate debt securities from high credit quality
issuers. We do not have any significant investments in foreign currencies and we
do not have any foreign exchange contracts or derivative instruments. The fair
value of our investment portfolio would not be significantly impacted by either
a 100 basis point increase or decrease in interest rates due primarily to the
fixed rate, short-term nature of our investment portfolio. In addition, the fair
value of our redeemable convertible preferred stock would not change materially
in the event of a 100 basis point increase or decrease in interest rates, due
primarily to the fixed and relatively short-term nature of its three-year 6.5%
coupon rate.

                                       40
   42

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                 METRICOM, INC.
                          CONSOLIDATED BALANCE SHEETS
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)



                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1999         1998
                                                              ---------    ---------
                                                                     
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 354,820    $  19,141
  Short-term investments....................................    144,521           --
  Accounts receivable, net..................................      2,387        1,450
  Inventories...............................................        586        3,046
  Prepaid expenses and other................................      3,116        1,522
                                                              ---------    ---------
          Total current assets..............................    505,430       25,159
  Property and equipment, net...............................     12,233        5,555
  Network construction in progress..........................     22,034           --
  Other assets, net.........................................      6,950        3,752
                                                              ---------    ---------
          Total assets......................................  $ 546,647    $  34,466
                                                              =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $   9,649    $   5,061
  Accrued liabilities.......................................     12,642       10,662
  Notes payable.............................................      4,521           40
                                                              ---------    ---------
          Total current liabilities.........................     26,812       15,763
                                                              ---------    ---------
Long-term debt..............................................        385       55,098
                                                              ---------    ---------
Other liabilities...........................................        321          680
                                                              ---------    ---------
Minority interest...........................................         --        5,184
                                                              ---------    ---------
Redeemable convertible preferred stock, $0.001 par value per
  share:
  Authorized -- 72,000,000 shares; issued and
     outstanding -- 60,000,000 shares in 1999...............    573,329           --
                                                              ---------    ---------
Commitments (Note 5)
Stockholders' equity (deficit):
  Preferred stock, $0.001 par value per share, 8,000,000
     shares authorized; no shares issued or outstanding.....         --           --
  Common stock, $0.001 par value per share:
  Authorized -- 150,000,000 shares; issued and
     outstanding -- 24,344,697 shares in 1999 and 18,793,055
     shares in 1998.........................................         25           19
  Additional paid-in capital................................    283,763      191,184
  Accumulated deficit.......................................   (337,988)    (233,462)
                                                              ---------    ---------
          Total stockholders' equity (deficit)..............    (54,200)     (42,259)
                                                              ---------    ---------
          Total liabilities and stockholders' equity
            (deficit).......................................  $ 546,647    $  34,466
                                                              =========    =========


The accompanying notes are an integral part of these consolidated statements

                                       41
   43

                                 METRICOM, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                 YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              1999         1998        1997
                                                            ---------    --------    --------
                                                                            
Revenues:
  Service revenues........................................  $  10,088    $  8,419    $  6,642
  Product revenues........................................      8,437       7,440       6,797
                                                            ---------    --------    --------
          Total revenues..................................     18,525      15,859      13,439
                                                            ---------    --------    --------
Costs and expenses:
  Cost of service revenues................................     21,319      28,310      27,866
  Provision for network replacement.......................         --      14,392          --
  Cost of product revenues................................      6,014       5,050       4,558
  Research and development................................     35,681      27,313      13,212
  Selling, general and administrative.....................     20,737      22,934      21,189
  Provision for Overall Wireless..........................         --          --       3,611
                                                            ---------    --------    --------
          Total costs and expenses........................     83,751      97,999      70,436
                                                            ---------    --------    --------
Loss from operations......................................    (65,226)    (82,140)    (56,997)
Interest expense..........................................     (5,884)     (3,939)     (4,151)
Interest income...........................................      4,818       1,915       1,820
                                                            ---------    --------    --------
Net loss..................................................    (66,292)    (84,164)    (59,328)
Preferred stock dividends.................................     38,234          --          --
                                                            ---------    --------    --------
Net loss attributable to common stockholders..............  $(104,526)   $(84,164)   $(59,328)
                                                            =========    ========    ========
Basic and diluted net loss attributable to common
  stockholders per share..................................  $   (5.13)   $  (4.63)   $  (4.35)
                                                            =========    ========    ========
Weighted average shares outstanding.......................     20,375      18,195      13,641
                                                            =========    ========    ========
Pro forma amounts assuming the new capitalization policy
  for network equipment is applied retroactively --
Net loss attributable to common stockholders..............  $(104,526)   $(85,456)   $(58,036)
                                                            =========    ========    ========
Basic and diluted net loss attributable to common
  stockholders per share..................................  $   (5.13)   $  (4.70)   $  (4.25)
                                                            =========    ========    ========
Weighted average shares outstanding.......................     20,375      18,195      13,641
                                                            =========    ========    ========


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

                                       42
   44

                                 METRICOM, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)



                                                                      UNREALIZED
                                    COMMON STOCK       ADDITIONAL      HOLDING
                                 -------------------    PAID-IN      GAIN/(LOSS)     ACCUMULATED
                                   SHARES     AMOUNT    CAPITAL     ON INVESTMENTS     DEFICIT      TOTAL
                                 ----------   ------   ----------   --------------   -----------   --------
                                                                                 
BALANCE, DECEMBER 31, 1996.....  13,555,445    $14      $133,298       $   (36)       $ (89,970)   $ 43,306
                                 ----------    ---      --------       -------        ---------    --------
Exercise of options to purchase
  common stock.................      98,386     --           674            --               --         674
Common stock issued to
  employees....................     165,445     --         1,494            --               --       1,494
Unrealized gain on
  investments..................          --     --            --            37               --          37
Net loss.......................          --     --            --            --          (59,328)    (59,328)
                                 ----------    ---      --------       -------        ---------    --------
BALANCE, DECEMBER 31, 1997.....  13,819,276    $14      $135,466       $     1        $(149,298)   $(13,817)
                                 ----------    ---      --------       -------        ---------    --------
Exercise of options to purchase
  common stock.................     187,053     --           911            --               --         911
Common stock issued to
  employees....................     136,726     --         1,094            --               --       1,094
Private placement of common
  stock........................   4,650,000      5        53,713        53,718               --          --
Net loss.......................          --     --            --            (1)         (84,164)    (84,165)
                                 ----------    ---      --------       -------        ---------    --------
BALANCE, DECEMBER 31, 1998.....  18,793,055    $19      $191,184       $    --        $(233,462)   $(42,259)
                                 ----------    ---      --------       -------        ---------    --------
Exercise of options to purchase
  common stock.................   2,537,677      3        18,109            --               --      18,112
Common stock issued to
  employees....................     100,156     --           622            --               --         622
Common stock issued upon the
  exercise of warrants.........     118,197     --            --            --               --          --
Conversion of 8% Convertible
  Subordinated Notes due 2003
  to common stock..............   2,795,612      3        40,693            --               --      40,696
Preferred dividends............          --     --        33,155            --          (38,234)     (5,079)
Net loss.......................          --     --            --            --          (66,292)    (66,292)
                                 ----------    ---      --------       -------        ---------    --------
BALANCE, DECEMBER 31, 1999.....  24,344,697    $25      $283,763       $    --        $(337,988)   $(54,200)
                                 ==========    ===      ========       =======        =========    ========


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

                                       43
   45

                                 METRICOM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)



                                                                 YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              1999         1998        1997
                                                            ---------    --------    --------
                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................  $ (66,292)   $(84,164)   $(59,328)
Adjustments to reconcile net loss to net cash used in
  operating activities --
Depreciation and amortization.............................      4,717       9,205       8,366
Loss on retirement of property and equipment..............      1,301          --          --
Provision for Overall Wireless............................         --          --       3,611
Gain on purchase of minority interest.....................       (184)         --          --
Provision for network replacement.........................         --      14,392          --
(Increase) decrease in accounts receivable, prepaid
  expenses and other current assets.......................     (2,531)        430         (93)
Decrease in inventories...................................      2,460       1,970       3,055
Increase (decrease) in accounts payable, accrued
  liabilities and other liabilities.......................      4,710       6,667      (1,350)
                                                            ---------    --------    --------
Net cash used in operating activities.....................    (55,819)    (51,500)    (45,739)
                                                            ---------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................    (11,085)     (4,994)    (10,584)
Network construction in progress..........................    (22,034)         --          --
Increase in other assets..................................     (4,249)       (226)     (3,580)
Purchase of short-term investments........................   (144,521)         --     (18,941)
Proceeds from the sale of short-term investments..........         --       4,390      64,263
                                                            ---------    --------    --------
Net cash provided by (used in) investing activities.......   (181,889)       (830)     31,158
                                                            ---------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock....................     18,734      56,549       2,168
Proceeds from issuance of preferred stock, net of issuance
  costs...................................................    573,000          --          --
Proceeds from issuance of notes payable and long-term
  debt....................................................     49,835      10,138       5,000
Reduction of notes payable and long-term debt.............    (59,932)     (5,000)         --
Payment of preferred dividends............................     (3,250)         --          --
Financing costs...........................................         --          --        (826)
(Purchase of) contribution from minority interest.........     (5,000)         --       2,777
                                                            ---------    --------    --------
Net cash provided by financing activities.................    573,387      61,687       9,119
                                                            ---------    --------    --------
Net increase (decrease) in cash and cash equivalents......    335,679       9,357      (5,462)
Cash and cash equivalents, beginning of year..............     19,141       9,784      15,246
                                                            ---------    --------    --------
Cash and cash equivalents, end of year....................  $ 354,820    $ 19,141    $  9,784
                                                            =========    ========    ========
Summary of non-cash transactions:
  Property and equipment acquired under capital lease.....        561          --          --
  Common stock issued upon conversion of long-term debt...     40,690          --          --
  Preferred dividends.....................................     34,984          --          --
  Transfer of property and equipment in exchange for R&D
     services.............................................         --          --         439
Cash paid during the year for:
  Interest................................................      5,339       3,657       3,603


The accompanying notes are an integral part of these consolidated statements.
                                       44
   46

                                 METRICOM, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION.

     Metricom, Inc. (the "Company") designs, develops and markets low cost, high
performance, easy to use, mobile wireless data access products and services. The
Company's primary service, Ricochet, provides subscriber-based, wireless data
communications for users of portable and desktop computers and hand-held
computing devices. Ricochet service is currently available in the San Francisco
Bay Area, in the Seattle and Washington, D.C. metropolitan areas, parts of Los
Angeles and New York City, and in a number of airports across the United States.
In 2000, the Company plans to launch its high-speed service in certain major
metropolitan areas throughout the United States. The Company's UtiliNet products
provide customer-owned wireless data communications for industrial control and
monitoring primarily in the electric utility, waste water and natural gas
industries. The Company's UtiliNet products are sold throughout the United
States.

     Since its inception, the Company has incurred significant operating losses.
These losses resulted primarily from expenditures associated with the
development, deployment and commercialization of the Company's wireless network
products and services. The Company expects to incur significant operating losses
and to generate negative cash flows from operating activities during the next
few years while it continues to develop and deploy networks and build its
customer base. The ability of the Company to achieve profitability will depend
upon the successful and timely deployment and marketing of its new high-speed
service in major metropolitan areas of the United States. The market for mobile
wireless data access services is in the early stages of development. As a
result, the Company cannot reliably project potential demand for its high-speed
service, particularly whether there will be sufficient demand at the volume and
prices needed for the Company to be profitable. In addition, the Company is
subject to additional risks, including the risks of developing technology,
competition from companies with substantially greater financial, technical,
marketing and management resources than the Company and potential changes in the
regulatory environment.

2. SIGNIFICANT ACCOUNTING POLICIES.

     CONSOLIDATION. The accompanying consolidated financial statements include
the accounts of the Company and all subsidiaries after elimination of
significant intercompany accounts and transactions. Certain amounts have been
restated from the previously reported balance to conform to the 1999
presentation.

     USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

     LIMITED NUMBER OF SUPPLIERS. In 1999, the Company purchased all of its
modems from one supplier. During 1999, the Company entered into contracts with
additional suppliers that will provide high-speed modems in the future.
Additional changes in suppliers could cause a delay in manufacturing and a
possible loss of sales, which would affect operating results adversely.

     CASH AND CASH EQUIVALENTS. For the purposes of the Statement of Cash Flows,
all highly liquid monetary instruments with an original maturity of 90 days or
less from the date of purchase are considered to be cash equivalents.

                                       45
   47

     INVENTORIES. Inventories are stated at the lower of cost (first-in,
first-out) or market and include purchased parts, labor and manufacturing
overhead. Inventories consisted of the following (in thousands):



                                                               DECEMBER 31,
                                                              --------------
                                                              1999     1998
                                                              ----    ------
                                                                
Raw materials and component parts...........................  $207    $  680
Work-in-process.............................................   139         3
Finished goods and consigned inventory......................   240     2,363
                                                              ----    ------
          Total.............................................  $586    $3,046
                                                              ====    ======


     PROPERTY AND EQUIPMENT. Property and equipment are stated at cost and are
depreciated using the straight-line method over the shorter of their estimated
useful lives of three to five years or the lease term. In 1998, a charge of
$14.4 million was recorded to write down the carrying value of Ricochet network
equipment to fair value. Ricochet network equipment includes poletop radios and
wired access points deployed, and raw materials, work-in-process and finished
goods not yet deployed. This provision for network replacement was recorded as a
result of the Company's plans to replace this equipment with its new high-speed
equipment in the near future. The fair market value was determined based on the
present value of estimated future cash flows.

     This charge is included in Accumulated Depreciation on the Consolidated
Balance Sheet at December 31, 1998. As of December 31, 1999 and 1998, network
equipment included approximately $900,000 and $1.3 million, respectively, of raw
materials, work-in-process and finished goods related to network equipment that
is manufactured by the Company for its Ricochet networks. Property and equipment
consisted of the following (in thousands):



                                                             DECEMBER 31,
                                                         --------------------
                                                           1999        1998
                                                         --------    --------
                                                               
Machinery and equipment................................  $ 21,264    $ 13,017
Network equipment......................................    22,256      22,752
Ricochet modems........................................     1,007       3,229
Furniture and fixtures.................................     2,453       1,964
Leasehold improvements.................................     1,535       1,383
                                                         --------    --------
                                                           48,515      42,345
Less -- Accumulated depreciation and amortization......   (36,282)    (36,790)
                                                         --------    --------
          Total........................................  $ 12,233    $  5,555
                                                         ========    ========


     ACCOUNTING CHANGE. Effective January 1, 1999, the Company changed its
capitalization policy for network equipment. In the construction of the first
generation Ricochet network, costs incurred for site acquisition and radio
frequency engineering were expensed as incurred due to the network's early stage
of development. The Company believes that its new high-speed network currently
being deployed is no longer in the early stages of development. Because site
acquisition and radio frequency engineering are integral steps in the design and
construction of the high-speed network, these costs are now being capitalized as
part of the total cost of the assets. Management believes the changed policy is
preferable. The effect of the change in accounting principle in 1999 was to
reduce the net loss available to common stockholders by approximately $15.9
million or $0.78 per share in 1999. The effect was also to reduce net loss by
$1.3 million, or $0.10 per share in 1997 and to increase net loss by $1.3
million, or $0.07 per share in 1998. There was no effect as of January 1, 1999.

     NETWORK CONSTRUCTION IN PROGRESS. In 1999, the Company began deployment of
its high-speed Ricochet networks in a number of markets in the United States. As
of December 31, 1999, the Company had incurred and capitalized $22.0 million of
deployment costs. Deployment costs include site acquisition, radio frequency
engineering, zoning and construction management. As commercial service is
launched in each market, the capitalized costs associated with the network
equipment assets in each market will be transferred to Property and Equipment
and depreciated over an estimated useful life of four years.

                                       46
   48

     ACCRUED LIABILITIES. Accrued liabilities consisted of the following (in
thousands):



                                                              DECEMBER 31,
                                                           ------------------
                                                            1999       1998
                                                           -------    -------
                                                                
Interest.................................................  $    --    $ 1,075
Employee stock purchase plan.............................      658        210
Deferred revenue.........................................    3,122      2,691
Payroll and related......................................    6,147      5,477
Royalties................................................      236        185
State and local taxes....................................      235        275
Warranty.................................................      256        256
Preferred dividends......................................    1,500         --
Other....................................................      488        493
                                                           -------    -------
          Total..........................................  $12,642    $10,662
                                                           =======    =======


     DEBT ISSUANCE COSTS. Debt issuance costs of approximately $1.0 million at
December 31, 1998 are included in other assets in the accompanying consolidated
balance sheet. In connection with the conversion of debt to equity (Note 7), the
Company amortized all remaining debt issuance costs in 1999. The amortization
expense is reflected as a component of interest expense.

     LICENSED SPECTRUM. In fiscal 1997, the Company paid $1.45 million for
licensed spectrum in the Wireless Communication Services auction. This spectrum
will be used by the Company's new high-speed Ricochet network. This amount is
included in other assets in the accompanying balance sheet and will be amortized
over its life commencing with commercial use.

     REVENUE RECOGNITION. Product revenues are recognized upon shipment. Service
revenues consist of subscriber fees and equipment rentals from Ricochet and fees
for UtiliNet customer support and are recognized ratably over the service
period. Cash received from customers in advance of providing services is
deferred and is included in accrued liabilities in the accompanying consolidated
balance sheets.

     RESEARCH AND DEVELOPMENT EXPENDITURES. Research and development
expenditures are charged to operations as incurred.

     NEW ACCOUNTING STANDARDS. In June 1998, FASB issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
hedging activities and exposure definition. The pronouncement is effective for
fiscal years beginning after June 15, 2000. The Company believes the
pronouncement will not have a material effect on its financial statements. In
December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements". SAB
101 provides guidance on applying generally accepted accounting principles to
revenue recognition issues in financial statements. The Company will adopt SAB
101 as required in the first quarter of 2000. Management has not yet evaluated
the effect SAB 101 will have on the Company's consolidated results of operations
and financial position.

3. INVESTMENTS.

     The Company's investments in securities are considered available-for-sale
and are recorded at their fair values as determined by quoted market prices with
any unrealized holding gains or losses classified as a separate component of
stockholders' equity. Upon sale of the investments, any previously unrealized
gains or losses are recognized in results of operations. As of December 31,
1999, the aggregate fair value equaled the cost basis of the Company's
investments. In 1998 and 1997, the difference between aggregate fair value and

                                       47
   49

cost basis was not material. The value of the Company's investments by major
security type is as follows (in thousands):



                                                             DECEMBER 31,
                                                          -------------------
                                                            1999       1998
                                                          --------    -------
                                                                
SECURITY TYPE
United States Treasury and Agencies.....................  $ 76,140    $    --
Corporate debt and money market.........................   423,201     15,408
                                                          --------    -------
          Total.........................................  $499,341    $15,408
                                                          ========    =======


     As of December 31, 1999, investments in obligations of the United States
Treasury and Agencies and corporate debt and money market securities had
maturities of 0 to 18 months. Approximately $354.8 million and $16.4 million of
the total investments as of December 31, 1999 and 1998, respectively, are
included in cash and cash equivalents.

     In June 1995, Metricom Investments, Inc. ("Metricom Investments"), a
subsidiary of the Company, and PepData, Inc. ("PepData"), a subsidiary of
Potomac Electric Power Company, formed Metricom DC, L.L.C. ("Metricom DC") to
own and operate a Ricochet network in the Washington D.C. metropolitan area.
Metricom Investments contributed $1,000 and rights to use proprietary technology
employed by the Company's Ricochet networks in exchange for an 80% interest in
Metricom DC. PepData committed to contributing up to $7.0 million in exchange
for a 20% interest in Metricom DC and certain preferential rights to available
cash distributions. As of September 30, 1999, PepData had contributed
approximately $6.0 million to the joint venture, $5.2 million of which is
reflected as a minority interest in the accompanying consolidated financial
statements. In November 1999, the Company paid $5.0 million to PepData to
acquire the minority interest of Metricom DC from PepData.

     In February 1996, the Company purchased an option to acquire Overall
Wireless Communications Corporation ("Overall Wireless"), a company that holds a
nationwide, wireless communications license in the 220 to 222 MHz frequency
band. The Company paid $700,000 for the option and agreed to loan Overall
Wireless up to $2.0 million for the construction of a system utilizing the
license, of which approximately $1.8 million had been loaned as of December 31,
1997. In January 1997, the Company paid $500,000 to extend the option from
January 1997 to July 1997. The option was subsequently extended to December 31,
2000 for no additional cash consideration. In June 1997, the Company recorded a
charge of $3.6 million to fully reserve its investment in Overall Wireless due
to uncertainties regarding its realization. In January 1998, Overall Wireless
canceled the option and the Company paid a termination fee of $1.8 million
through cancellation of the indebtedness of Overall Wireless.

4. SIGNIFICANT CUSTOMER.

     For the years ended December 31, 1999, 1998 and 1997, combined product and
service revenues from Southern California Edison accounted for 8%, 7% and 12%,
respectively, of total revenues. No other customers accounted for more than 10%
of revenues.

5. COMMITMENTS.

     The Company has entered into contracts with various suppliers in order to
deploy its new high-speed network. At December 31, 1999, the Company had
commitments to purchase network equipment and network design, construction and
related services totaling approximately $219 million, the substantial majority
of which the Company expects to spend in 2000. The Company also has entered into
contracts with high-speed modem suppliers. At December 31, 1999, the Company had
commitments to purchase modems totaling approximately $90 million, and expects
to take delivery of the modems under these agreements in 2000 and 2001.

     The Company leases various facilities and equipment under operating lease
agreements. Rent expense under these agreements for the years ended December 31,
1999, 1998 and 1997, was approximately

                                       48
   50

$1.6 million, $1.9 million and $1.8 million, respectively. The lease agreement
for the Company's current primary facility provides for escalating rent payments
over a 12-year term ending February 2004; however, rent expense is recognized
ratably over the lease term. As of December 31, 1999 and 1998, the Company had
accrued approximately $321,000 and $388,000, respectively, of deferred rental
payments under this agreement, which are included in other liabilities in the
accompanying consolidated balance sheets. In November 1999, the Company entered
into a 10-year agreement to lease approximately 145,000 square feet of office
space beginning in June 2000. Approximate future minimum rental payments under
operating lease agreements are as follows (in thousands):

                                                          
YEARS ENDING DECEMBER 31,
2000.......................................................  $ 4,079
2001.......................................................    5,379
2002.......................................................    5,013
2003.......................................................    5,086
2004.......................................................    4,569
Thereafter.................................................   25,304
                                                             -------
          Total............................................  $49,430
                                                             =======



     The Company has also entered into various agreements with electric
utilities, municipalities and building owners for the use of utility poles and
building rooftops on which network equipment is installed. Payment under
agreements for use of utility poles is generally contingent upon the number of
network radios installed during the year. Rent expense under these agreements
for the years ended December 31, 1999, 1998 and 1997 was approximately $2.7
million, $1.1 million and $1.1 million, respectively. Future minimum rental
payments under these agreements as of December 31, 1999 are approximately $2.7
million per year.

6. CAPITALIZED LEASES.

     The Company has leased equipment under various capital lease agreements. As
of December 31, 1999, the cost of the leased assets was $793,000 and the related
accumulated depreciation was $118,000. The weighted average interest rate on the
outstanding leases is 10.9%. The following is a schedule of future minimum
payments under the equipment leases together with the present value of the net
minimum lease payments at December 31, 1999:

                                                           
YEARS ENDING DECEMBER 31,
2000........................................................  $259
2001........................................................   169
2002........................................................    89
2003........................................................    89
2004........................................................    75
Thereafter..................................................    --
                                                              ----
Total net minimum lease payments............................   681
Less amount representing interest...........................   (79)
                                                              ----
Present value of net minimum lease payments.................   602
Less current portion........................................   217
                                                              ----
Long-term portion...........................................  $385
                                                              ====



7. LONG-TERM DEBT.

     In August 1996, the Company issued $45 million principal amount of
unsecured, 8% Convertible Subordinated Notes (the "Convertible Notes") due
September 15, 2003, with interest payments due semi-annually on March 15 and
September 15, commencing March 15, 1997. The Convertible Notes are convertible
into shares of the Company's common stock at a conversion price of $14.55 per
share, subject to adjustment in certain events. In December 1999, the Company
called for redemption of the Convertible Notes

                                       49
   51

on January 10, 2000. As of December 31, 1999, $40.7 million of the Convertible
Notes had been converted into approximately 2.8 million shares of common stock.
In January 2000, all remaining Convertible Notes were converted to common stock.
In October 1998 and June 1999, the Company entered into line of credit and loan
agreements, respectively, with Vulcan Ventures Incorporated, a significant
shareholder of the Company. A total of $60 million was drawn by the Company
against these loans with interest at the prime rate due quarterly on the
outstanding balances. All amounts outstanding under these agreements were paid
in full in November 1999.

     In February 2000, the Company, together with its wholly owned finance
subsidiary, Metricom Finance, Inc., as co-issuers and co-obligors, issued $300
million aggregate principal amount of 13% Senior Notes due 2010. Metricom
Finance has no independent assets or operations. The Company has fully and
unconditionally guaranteed the obligations of Metricom Finance, Inc. under the
notes. Interest on the notes will be payable on February 15 and August 15 of
each year, beginning August 15, 2000. The notes will mature on February 15,
2010. The notes were offered together with warrants to purchase 1,425,000 shares
of common stock of the Company at an initial exercise price of $87.00 per share.
Each warrant enables the holder to purchase 4.75 shares of common stock and is
exercisable on or after August 15, 2000. Each warrant was sold for $212.06 per
each associated $1,000 principal amount of notes, and each note was sold for
$787.94. The warrants will expire on February 15, 2010. Net proceeds to the
Company from the notes and warrants offering was approximately $291.8 million,
$73.1 million of which was deposited in a restricted pledge account to secure
the payment of the first four scheduled interest payments on the notes.

8. STOCKHOLDERS' EQUITY.

     In January 1998 the Company completed a private placement for the sale of
4,650,000 shares of common stock to Vulcan at $12.00 per share for net proceeds
of approximately $53.7 million.

     In February 2000, the Company issued 5,750,000 shares of common stock at
$87.00 per share in a public offering. Net proceeds to the Company were
approximately $473.2 million, after deducting underwriting discounts,
commissions and estimated offering expenses.

     REDEEMABLE CONVERTIBLE PREFERRED STOCK. In November 1999, the Company
issued and sold to WorldCom, Inc. 30 million shares of newly-designated Series
A1 preferred stock at a price of $10 per share, and the Company issued and sold
to Vulcan Ventures 30 million shares of newly-designated Series A2 preferred
stock at a price of $10 per share, for gross aggregate proceeds to the Company
of $600 million. Both series of preferred stock bear cumulative dividends at the
rate of 6.5% per annum for three years, payable in cash or additional shares of
preferred stock. In addition, each series has the right to elect one director to
the Company's Board of Directors, although voting rights otherwise will be
generally limited to specified matters. The preferred stock is subject to
mandatory redemption by the Company at the original issuance price in 10 years
following initial issuance and to redemption at the option of the holder upon
the occurrence of specified changes in control or major acquisitions. Both
series of preferred stock will accrete at approximately $2.7 million per year
over the ten year period from the beginning aggregate net book value of $573
million up to its redemption value of $600 million. This accretion will be
charged against retained earnings (accumulated deficit).

     Because the Series A2 preferred stock is immediately convertible into
common stock at the holder's option at a conversion price of $10.00 per share,
which was below $11.06, the per share closing price of the Company's common
stock on the date immediately prior to execution of the preferred stock purchase
agreement, the Company recorded an additional dividend of $31.8 million in the
fourth quarter of 1999 to reflect the beneficial conversion privilege associated
with this series of preferred stock. The Series A1 preferred stock was also
issued with a beneficial conversion privilege. However, Series A1 preferred
stock does not begin to become convertible into common stock at the holder's
option until May 2002. As a result, that discount will be amortized, beginning
in 1999, over the 48-month period during which this series of preferred stock
becomes convertible into common stock at the holder's option. Accordingly, for
both series of preferred

                                       50
   52

stock in the aggregate, preferred stock dividends in addition to cash dividends,
as discussed above, will be recorded on the preferred stock as follows:

                                                      
1999...................................................  $33.2 million
2000...................................................   10.1 million
2001...................................................   10.1 million
2002...................................................    7.8 million
2003...................................................    2.6 million



     COMMON STOCK WARRANTS. In September 1994, the Company issued warrants to
purchase 200,000 shares of common stock at $13.75 per share in exchange for
certain investment banking services. In June 1997, the Company repurchased
100,000 of these warrants for $1,000. The remaining warrants expired in
September 1998.

     In July 1997, the Company issued a warrant to purchase 150,000 shares of
common stock at $7.50 per share in exchange for certain strategic and financial
advisory services. In November 1999, 118,198 shares of common stock were issued
upon net exercise of the warrant.

     STOCK OPTIONS. In March 1988, the Company adopted the 1988 Stock Option
Plan. Under the plan, as amended, the Company is authorized to grant up to
4,119,500 incentive or non-qualified stock options to purchase shares of common
stock. Incentive stock options may be granted to employees at prices not lower
than the market value of the stock at the date of grant. Non-qualified stock
options may be granted to employees, officers, directors and consultants at
prices not lower than 85% of the market value of the stock at the date of the
grant. Options granted under the plan are exercisable as determined by the Board
of Directors and will expire no later than ten years from the date of grant.
Options generally vest 25% after the first year and ratably over the following
three years. In August 1997, the Board of Directors approved the replacement of
each outstanding option held by non-officer employees with a per share exercise
price of $7.00 or greater, upon the request of the optionee, with a stock option
having an exercise price of $4.53 per share and certain delayed exercise
provisions. Options to purchase a total of 1,423,650 shares with exercise prices
ranging from $7.81 to $19.63 per share were replaced. In September 1997, the
Board of Directors approved the replacement of each outstanding option held by
executive officers with a per share exercise price of $11.00 or greater, upon
the request of the optionee, with a stock option having an exercise price of
$6.75 per share and certain delayed exercise provisions. Options to purchase a
total of 568,000 shares with exercise prices ranging from $11.88 to $13.50 per
share were replaced. In 1998, options to purchase 501,857 shares expired without
exercise. In 1999, 243,109 shares expired without exercise.

     In February 1993, the Company adopted the 1993 Non-Employee Directors'
Stock Option Plan. Under the plan, as amended, the Company is authorized to
grant up to 575,000 non-qualified stock options to purchase shares of common
stock at the market value at the date of grant. Options granted under the plan
are exercisable in three equal annual installments commencing one year from the
date of grant and will expire no later than 10 years from the date of grant.

     In May 1997, the Company adopted the 1997 Equity Incentive Plan. Under the
plan, as amended, the Company is authorized to grant up to 2,275,000 incentive
stock options, non-qualified stock options, restricted stock purchase awards,
and stock bonuses (collectively "Stock Awards") to employees, directors and
consultants. Incentive stock options may be granted to employees at prices not
lower than the market value of the stock at the date of grant. Other Stock
Awards may be granted to employees, officers, directors and consultants at
prices not lower than 85% of the market value of the stock at the date of the
grant. Options granted under the plan are exercisable as determined by the Board
of Directors and typically vest 25% after the first year and ratably over the
following three years. Options granted will expire no later than ten years from
the date of grant.

     In May 1997, the Company adopted the 1997 Non-Officers Equity Incentive
Plan. Under the plan, the Company is authorized to grant up to 1,850,000
incentive stock options, non-qualified stock options, restricted stock purchase
awards, and stock bonuses (collectively "Stock Awards") to employees and
consultants. Incentive stock options may be granted to employees at prices not
lower than the market value of the stock at

                                       51
   53

the date of grant. Other Stock Awards may be granted to employees and
consultants at prices not lower than 85% of the market value of the stock at the
date of the grant. Options granted under the plan are exercisable as determined
by the Board of Directors and typically vest 25% after the first year and
ratably over the following three years. Options granted will expire no later
than ten years from the date of grant.

     During 1999, 1998 and 1997, the Company granted to members of the Board of
Directors and Advisory Board options to purchase an aggregate of 35,000, 63,000
and 42,000 shares, respectively, of common stock at fair market value of the
stock at the date of grant. These options vest 25% after the first year and
ratably over the following three years and will expire no later than ten years
from the date of grant.

     Stock option activity under the 1988 Stock Option Plan, the 1993
Non-Employee Directors' Stock Option Plan, the 1997 Equity Incentive Plan, the
1997 Non-Officers Equity Incentive Plan and options issued to members of the
Board of Directors and Advisory Board for the fiscal years ended December 31,
1997, 1998 and 1999 was as follows:



                                                             SHARES         WEIGHTED
                                                           AVAILABLE        AVERAGE
                                                              FOR        FUTURE OPTIONS    EXERCISE
                                                             GRANT        OUTSTANDING       PRICE
                                                           ----------    --------------    --------
                                                                                  
Balance, December 31, 1996...............................     344,390       3,367,869       $12.45
Authorized...............................................   1,350,000              --           --
Grants...................................................  (3,213,650)      3,213,650       $ 6.01
Exercises................................................          --         (98,386)      $ 6.85
Cancellations............................................   2,509,455      (2,509,455)      $13.11
                                                           ----------      ----------       ------
Balance, December 31, 1997...............................     990,195       3,973,678       $ 6.99
                                                           ----------      ----------       ------
Authorized...............................................   1,150,000              --           --
Grants...................................................  (2,334,301)      2,334,301       $ 9.24
Exercises................................................          --        (187,053)      $ 4.90
Cancellations............................................     872,132        (872,132)      $ 7.84
Expired..................................................    (501,857)             --           --
                                                           ----------      ----------       ------
Balance, December 31, 1998...............................     176,169       5,248,794       $ 7.89
                                                           ----------      ----------       ------
Authorized...............................................   1,400,000              --           --
Grants...................................................  (1,969,270)      1,969,270       $30.01
Exercises................................................          --      (2,537,677)      $ 7.14
Cancellations............................................     689,481        (689,481)      $ 7.75
Expired..................................................    (243,109)             --           --
                                                           ----------      ----------       ------
Balance, December 31, 1999...............................      53,271       3,990,906       $19.21
                                                           ==========      ==========       ======


                                       52
   54

     The following table summarizes information concerning stock options
outstanding and exercisable as of December 31, 1999:



                   OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                 -----------------------   ---------------------------------
                               WEIGHTED    WEIGHTED                 WEIGHTED
                                AVERAGE    AVERAGE                  AVERAGE
   RANGE OF        SHARES      REMAINING   EXERCISE     SHARES      EXERCISE
EXERCISE PRICE   OUTSTANDING     LIFE       PRICE     EXERCISABLE    PRICE
- ---------------  -----------   ---------   --------   -----------   --------
                                                     
$ 3.00 - $ 6.31     662,401      6.82       $ 5.18      363,781      $ 5.06
$ 6.36 - $10.25     583,128      8.64       $ 8.02      111,633      $ 8.20
$10.30 - $13.75     870,467      8.32       $10.48      313,400      $10.49
$14.38 - $22.56     264,860      8.29       $19.71       77,896      $15.58
$22.59 - $26.34     338,000      8.96       $24.78       41,000      $22.88
$26.88 - $40.06     960,050      9.78       $29.41           --      $   --
$42.84 - $64.00     246,000      9.88       $50.04           --      $   --
$69.81 - $93.95      66,000      9.95       $80.48           --      $   --
                  ---------      ----       ------      -------      ------
                  3,990,906      8.64       $19.21      907,710      $ 9.03
                  =========      ====       ======      =======      ======


     STOCK PURCHASE PLAN. In 1991, the Board of Directors adopted the 1991
Employee Stock Purchase Plan (the "Purchase Plan"). An aggregate of 750,000
shares of common stock have been authorized for issuance under the Purchase
Plan. Employees may designate up to 15% of their earnings, as defined, to
purchase shares at 85% of the lesser of the fair market value of the common
stock at the beginning of the offering period or on any purchase date during the
offering period, as defined. In 1999, 1998 and 1997, the Company issued 88,156,
84,650 and 103,056 shares, respectively, under this plan. In January 2000 the
Company issued 125,424 shares under this plan.

     STOCK-BASED COMPENSATION. In January 1996, the Company adopted the
disclosure provision of FASB Statement No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). Statement 123 defines a fair value method of
accounting for stock-based compensation plans. Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period. As permitted under Statement 123, the
Company continues to apply the provisions of Accounting Principals Board Opinion
No. 25 and related interpretations in accounting for its stock-based
compensation plans and, accordingly, does not recognize compensation cost. If
the Company had elected to recognize compensation cost based on the fair value
of the stock options and employee stock purchase rights under the Purchase Plan
at the grant date as prescribed by Statement 123, net income and earnings per
share would have been as follows (in thousands, except per share amounts):



                                                         1999       1998       1997
                                                       --------    -------    -------
                                                                     
Net loss -- As reported..............................  $104,526    $84,164    $59,328
Net loss -- Pro forma................................  $112,800    $89,309    $65,436
Basic and diluted net loss per share -- As
  reported...........................................  $   5.13    $  4.63    $  4.35
Basic and diluted net loss per share -- Pro forma....  $   5.54    $  4.91    $  4.80


     The weighted average fair value of stock options granted during 1999, 1998
and 1997 was $26.42, $3.20 and $2.02 per share, respectively. The fair value of
these options was estimated at the date of grant using a Black-Scholes option
pricing model using the following assumptions:



                                                              1999    1998    1997
                                                              ----    ----    ----
                                                                     
Risk-free interest rate.....................................   5.6%    5.2%    5.5%
Dividend Yield..............................................   0.0%    0.0%    0.0%
Volatility factor of expected market price of the Company's
  stock.....................................................  1.60    0.50    0.50
Weighted average expected option life from Vest date (in
  years)....................................................  1.38    1.03    1.11


                                       53
   55

     The weighted average fair value of employee stock purchase rights granted
during 1999, 1998 and 1997 was $5.58, $3.75 and $1.04 per share, respectively.
The fair value of these purchase rights was estimated at the date of grant using
a Black-Scholes option pricing model using the following assumptions:



                                                              1999    1998    1997
                                                              ----    ----    ----
                                                                     
Risk-free interest rate.....................................  5.6 %   5.2 %      5.2%
Dividend Yield..............................................  0.0 %   0.0 %      0.0%
Volatility factor of expected market price of the company's
  stock.....................................................  1.60    0.50       0.50
Weighted average expected option life from Vest date (in
  years)....................................................  1.38        .70    0.50


     COMMON STOCK EQUIVALENTS. At December 31, 1999, the Company had the
following common stock equivalents outstanding:

                                                           
Redeemable convertible preferred stock......................  60,000,000
Common stock outstanding....................................  24,344,697
Outstanding options to purchase common stock................   3,990,906
Remaining common stock issuable upon conversion of notes
  payable...................................................     296,456
                                                              ----------
          Total.............................................  88,632,059
                                                              ==========



     COMMON STOCK RESERVED FOR FUTURE ISSUANCE. As of December 31, 1999 the
Company had reserved the following shares of common stock for future issuance:

                                                           
Exercise of stock options...................................  4,044,177
Conversion of 8% Convertible Subordinated Notes due 2003....    296,456
Exercise of common stock warrants...........................     81,803
Employee stock purchase plan................................    317,184
                                                              ---------
          Total.............................................  4,739,620
                                                              =========



9. 401(K) PLAN.

     In November 1987, the Company adopted a tax-qualified savings and
retirement plan (the "401(k) Plan"). Pursuant to the terms of the 401(k) Plan,
employees may elect to contribute up to 15% of their gross compensation. The
Company matches employee contributions annually in cash at the rate of 50% for
the first $2,400 contributed. Contributions by the Company to date have not been
material.

10. INCOME TAXES.

     Deferred taxes are provided to reflect the net tax effects of temporary
differences between the financial reporting and income tax bases of assets and
liabilities using the currently enacted tax rate. The tax effect of temporary
differences and carryforwards, which give rise to a significant portion of
deferred tax assets, consisted of the following (in thousands):



                                                            DECEMBER 31,
                                                        ---------------------
                                                          1999         1998
                                                        ---------    --------
                                                               
Reserves and other....................................  $    (812)   $ 11,755
Capitalized research and development..................     34,853       3,659
                                                        ---------    --------
Total.................................................     34,041      15,414
NOL and other credit carryforwards....................     83,574      74,745
Valuation allowance...................................   (117,615)    (90,159)
                                                        ---------    --------
          Total.......................................  $      --    $     --
                                                        =========    ========


     As of December 31, 1998 and 1999, a valuation allowance was provided for
the net deferred tax assets as a result of uncertainties regarding their
realization. During 1999, the valuation allowance increased by approximately
$27.4 million due to increases in temporary differences and additional losses
incurred during the year. Approximately $17.8 million of the valuation allowance
relates to disqualifying dispositions on

                                       54
   56

employee stock options and accordingly will be credited directly to
stockholders' equity and will not be available to reduce the provision for
income taxes in future years.

     As of December 31, 1999, the Company had net operating loss carryforwards
for Federal and California income tax purposes of approximately $209 million and
$82 million, respectively, and research and development tax credit carryforwards
of approximately $7.3 million. To the extent not used, these carryforwards
expire at various times through 2019. The Company's ability to utilize the net
operating loss carryforwards in any given year may be limited upon the
occurrence of certain events, including significant changes in ownership
interests.

11. EARNINGS PER SHARE.

     In 1997, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 128, "Earnings per Share." Basic and diluted net loss per share
data has been computed using the weighted average number of shares of common
stock outstanding. Common shares issuable upon exercise of options, conversion
of the redeemable convertible preferred stock and conversion of convertible
subordinated notes have been excluded from the calculation as their effect would
be anti-dilutive. The reconciliation of the numerators and denominators of the
basic and diluted earnings per share computation are as follows:



                      INCOME SHARES                        (NUMERATOR)    (DENOMINATOR)    AMOUNT
                      -------------                        -----------    -------------    ------
                                                                                  
FOR THE YEAR 1999
BASIC LOSS PER SHARE
Income available to common stockholders..................   $(104,526)           20,375    $(5.13)
DILUTED EARNINGS PER SHARE
Income available to common stockholders..................   $(104,526)           20,375    $(5.13)
FOR THE YEAR 1998
BASIC LOSS PER SHARE
Income available to common stockholders..................   $ (84,164)           18,195    $(4.63)
DILUTED EARNINGS PER SHARE
Income available to common stockholders..................   $ (84,164)           18,195    $(4.63)
FOR THE YEAR 1997
BASIC LOSS PER SHARE
Income available to common stockholders..................   $ (59,328)           13,641    $(4.35)
DILUTED EARNINGS PER SHARE
Income available to common stockholders..................   $ (59,328)           13,641    $(4.35)


12. SEGMENT REPORTING.

     The Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information," during the fourth quarter of 1998. SFAS No.
131 established standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by chief operating decision makers or decision making groups, in
deciding how to allocate resources and in assessing performance.

     The information in the following table is derived directly from the
Company's internal financial reporting used for corporate management purposes.
The Company evaluates its segments' performance based on several factors, of
which the primary financial measures are revenue and gross margin. Corporate
overhead and other costs are not allocated to business segments for management
reporting purposes. The accounting policies followed by the Company's business
segments are the same as those described in Note 2 to the consolidated financial
statements. The Company does not allocate assets by segment for management
reporting purposes.

                                       55
   57

     All of the Company's operations are located in the United States. The
Company's reportable operating segments include Ricochet and Utilinet. Ricochet
designs and manufactures and markets wireless data communications solutions.
Utilinet manufactures and markets customer-owned networks and related products.
A summary of operating results by reportable operating segment is as follows:



                                                                 YEAR ENDED DECEMBER 31,
                                                              -----------------------------
                                                               1999       1998       1997
                                                              -------    -------    -------
                                                                           
Ricochet Revenue............................................  $12,039    $10,775    $ 7,772
Utilinet Revenue............................................    6,486      5,084      5,667
                                                              -------    -------    -------
Total Revenue...............................................  $18,525    $15,859    $13,439
                                                              =======    =======    =======
Cost of Product Ricochet....................................  $ 3,037    $ 2,741    $ 2,162
Cost of Product Utilinet....................................    2,977      2,309      2,396
                                                              -------    -------    -------
Total Cost of Product.......................................  $ 6,014    $ 5,050    $ 4,558
                                                              =======    =======    =======
Cost of Service Ricochet....................................  $21,319    $27,870    $27,562
Cost of Service Utilinet....................................       --        440        304
                                                              -------    -------    -------
Total Cost of Service.......................................  $21,319    $28,310    $27,866
                                                              =======    =======    =======


13. RELATED PARTY TRANSACTIONS.

     WorldCom, Inc. owns 30 million shares of the Company's preferred stock, and
has also entered into an agreement with the Company to resell the Company's
high-speed service when it becomes available. In 1999, the Company paid WorldCom
and its subsidiaries a total of approximately $2.9 million for the purchase of
telecommunications services in the normal course of business.

14. QUARTERLY FINANCIAL DATA (UNAUDITED).



                                                          FISCAL 1999 QUARTER ENDED:
                                              ---------------------------------------------------
                                              MARCH 31    JUNE 30     SEPTEMBER 30    DECEMBER 31
                                              --------    --------    ------------    -----------
                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                          
Net revenues................................  $  4,186    $  4,663      $  4,795       $  4,880
Total costs and expenses....................    18,134      19,805        19,956         25,858
Net loss....................................   (15,018)    (16,557)      (16,653)       (18,065)
Net loss attributable to common
  stockholders..............................  $(15,018)   $(16,557)     $(16,654)      $(56,299)
Net loss attributable to common stockholders
  per share.................................  $  (0.80)   $  (0.86)     $  (0.80)      $  (2.51)




                                                          FISCAL 1998 QUARTER ENDED:
                                              ---------------------------------------------------
                                              MARCH 31    JUNE 30     SEPTEMBER 30    DECEMBER 31
                                              --------    --------    ------------    -----------
                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                          
Net revenues................................  $  3,603    $  4,361      $  4,195       $  3,700
Total costs and expenses....................    14,851      17,300        24,702         41,146
Net loss....................................   (11,707)    (13,221)      (21,006)       (38,230)
Net loss per share..........................  $  (0.69)   $ ( 0.71)     $  (1.13)      $  (2.04)


                                       56
   58

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF METRICOM, INC.:

     We have audited the accompanying consolidated balance sheets of Metricom,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metricom, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.

     As discussed in Note 1 to the consolidated financial statements, in 1999,
the Company changed its capitalization policy for network equipment.

/s/ ARTHUR ANDERSEN LLP

San Jose, California
February 3, 2000

                                       57
   59

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL REPORTING DISCLOSURE.

     None.

                                    PART III

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT IDENTIFICATION OF
           DIRECTORS.

     The information required by this Item concerning our directors is
incorporated by reference from the sections captioned "Proposal 1: Election of
Directors" contained in our definitive Proxy Statement related to our 2000
Annual Meeting of Stockholders, to be filed with the Securities and Exchange
Commission (the "Proxy Statement").

IDENTIFICATION OF EXECUTIVE OFFICERS

     The information required by this Item concerning our executive officers is
set forth in Part 1 of this report.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The information required by this Item is incorporated by reference from the
section captioned "Compliance with Section 16(a) of the Securities and Exchange
Act of 1934" contained in the Proxy Statement.

ITEM 11 -- EXECUTIVE COMPENSATION.

     The information required by this Item is incorporated by reference from the
section captioned "Executive Compensation" contained in the Proxy Statement.

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     The information required by this Item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item is incorporated by reference from the
sections captioned "Certain Transactions" and "Executive Compensation" contained
in the Proxy Statement.

                                    PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) Financial Statements.

     Our consolidated financial statements for each of the three years ended
December 31, 1999 and related notes, together with the report thereon of Arthur
Andersen LLP, independent public accountants.

     (b) Reports on Form 8-K.

     Reports on Form 8-K as amended and filed on November 5, 1999, November 24,
1999 and December 21,1999 included Exhibits 10.15, 10.18 and 10.19 as referenced
in the Exhibit table below.

                                       58
   60

     (c) Exhibits.



  EXHIBIT
  NUMBER                                 EXHIBIT
- -----------                              -------
            
 3.1(12)       Restated Certificate of Incorporation of the Company.
 3.2(7)        Bylaws of the Company.
 4.2(1)        Specimen stock certificate.
 4.3(12)       Senior Debt Indenture among Metricom, Inc., Metricom Finance
               Inc., and Bank One Trust Company, N.A., as trustee.
 4.4(12)       Subordinated Debt Indenture among Metricom, Inc., Metricom
               Finance, Inc., and Bank One Trust Company, N.A.,
 4.5(13)       First Supplemental Indenture for Senior Notes dated February
               7, 2000 between the Company, Metricom Finance, Inc. and Bank
               One Trust Company, N.A.
 4.6(13)       Global Note dated February 7, 2000 in an aggregate principal
               amount of $300,000,000, issued by the Company and Metricom
               Finance, Inc.
10.1a(1)       Form of Indemnity Agreement entered into between the Company
               and its directors and officers, with related schedule.
10.1b(2)(8)    Executive Compensation Agreement between the Company and
               Timothy A. Dreisbach, President and Chief Executive Officer
10.2(2)(5)     1988 Stock Option Plan (the "Option Plan"), as amended
               November 1, 1993.
10.3(1)(2)     Form of Incentive Stock Option Agreement under the Option
               Plan.
10.4(1)(2)     Form of Supplemental Stock Option Agreement under the Option
               Plan.
10.5(1)(2)     Form of Notice of Exercise under the Option Plan, as
               amended.
10.6(1)(2)     Form of Restricted Stock Purchase Agreement and promissory
               note under the Option Plan.
10.7(2)        1991 Employee Stock Purchase Plan, as amended.
10.9(3)        Agreement between the Company and Southern California Edison
               dated October 1, 1992.
10.10(2)(5)    1993 Non-Employee Directors' Stock Option Plan, as amended
               November 1, 1993 (the "Directors' Plan").
10.11(2)(3)    Form of Supplemental Stock Option under the Directors' Plan.
10.12(4)       Purchase Agreement, dated October 3, 1993, between the
               Company and Vulcan Ventures Incorporated.
10.13(6)       Stock Purchase Agreement, dated as of October 10, 1997,
               between the Company and Vulcan Ventures Incorporated, a
               Washington Corporation.
10.14(9)       Loan Agreement, dated October 29, 1998, between the Company
               and Vulcan Ventures Incorporated.
10.15(10)      Preferred Stock Purchase Agreement, dated as of June 20,
               1999, among the Company, MCI WorldCom, Inc., and Vulcan
               Ventures Incorporated.
10.16          Amended and Restated Registration Rights, dated as of
               November 15, 1999, among the Company, MCI Worldcom, Inc.,
               and Vulcan Ventures, Inc.
10.17(2)       1997 Equity Incentive Plan, as amended.
10.18(11)      Ricochet Reseller Agreement, dated as of June 20, 1999,
               between the Company and MCI WorldCom, Inc.
10.19(11)      Amendment to Ricochet Reseller Agreement, dated as of
               November 12, 1999, between the Company and MCI WorldCom,
               Inc.
10.20(13)      Underwriting agreement dated February 1, 2000 among the
               Company, Metricom Finance, Inc. and the underwriters named
               therein.
10.21(13)      Terms Agreement dated February 2, 2000 among the Company and
               the underwriters named therein, relating to the issuance and
               sale of 5,750,000 shares of the Company's Common Stock.
10.22(13)      Terms Agreement dated February 2, 2000 among the Company,
               Metricom Finance, Inc. and the underwriters named therein
               relating to the issuance and sale of 300,000 warrants to
               purchase an aggregate of 1,425,000 shares of the Company's
               Common Stock.


                                       59
   61



  EXHIBIT
  NUMBER                                 EXHIBIT
- -----------                              -------
            
10.23(13)      Warrant Agreement dated February 7, 2000 among the Company,
               Bank One Trust Company, as initial warrant agent and
               BankBoston N.A., as warrant agent.
10.24(13)      Warrant Certificate dated February 7, 2000 between the
               Company and Bank One Trust Company, as initial warrant agent
               and BankBoston, N.A., as warrant agent.
10.26(14)      Terms Agreement dated February 2, 2000 among the Company,
               Metricom Finance, Inc. and the underwriters named therein
               relating to the issuance and sale of $300,000,000 aggregate
               principal amount of 13% Senior Notes due 2010.
12.1(15)       Schedule of Deficiency of Earnings to Fixed Charges.
18.1(15)       Letter from Arthur Andersen LLP, Independent Auditors,
               regarding change in accounting principle.
21.1(15)       Subsidiaries of the Company
23.1(15)       Consent of Arthur Andersen LLP, Independent Auditors.
27.1(15)       Financial Data Schedule


- ---------------
 (1) Incorporated by reference from the indicated exhibit in our Registration
     Statement on Form S-1 (File No. 33-46050), as amended.

 (2) Management contract or compensatory plan or arrangement.

 (3) Incorporated by reference from our Form 10-K for the year ended December
     31, 1992.

 (4) Incorporated by reference from our Form 10-Q for the quarter ended October
     31, 1993.

 (5) Incorporated by reference from our Form 10-K for the year ended December
     31, 1993.

 (6) Incorporated by reference from our Form 8-K dated as of October 13, 1997.

 (7) Incorporated by reference from our Form 10-K for the year ended December
     31, 1997.

 (8) Incorporated by reference from our Form 10-Q for the quarter ended March
     31, 1998.

(9) Incorporated by reference from our Form 10-K for the year ended December 31,
    1998.

(10) Incorporated by reference from our Form 8-K filed July 9, 1999.

(11) Incorporated by reference from our Form 8-K filed December 21, 1999, as
     amended.

(12) Incorporated by reference from our Registration Statement on Form S-3 (file
     No. 333-91359), as amended.

(13) Incorporated by reference from our Form 8-K filed February 10, 2000.

(14) Incorporated by reference from our Form 8-K/A filed February 16, 2000.

(15) Previously filed with our Form 10-K for the year ended December 31, 1999.

                                       60
   62

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Amendment
No. 1 to the Report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 22nd day of December, 2000.

                                          METRICOM, INC.
                                          By /s/ TIMOTHY A. DREISBACH
                                            ------------------------------------
                                            Timothy A. Dreisbach
                                            Chairman and CEO

     Pursuant to the requirements of the Securities and Exchange Act on 1934,
this Amendment No. 1 to the Report has been signed below by the following
persons in the capacities and on the dates indicated.



                      SIGNATURE                                   TITLE                    DATE
                      ---------                                   -----                    ----
                                                                               
/s/ TIMOTHY A. DREISBACH                               Chairman and Chief Executive  December 22, 2000
- -----------------------------------------------------  Officer (Principal Executive
Timothy A. Dreisbach                                   Officer) and Director

/s/ JAMES E. WALL                                      Chief Financial Officer       December 22, 2000
- -----------------------------------------------------  (Principal Financial and
James E. Wall                                          Accounting Officer)

/s/ RALPH DERRICKSON*                                  Director                      December 22, 2000
- -----------------------------------------------------
Ralph Derrickson

/s/ ROBERT P. DILWORTH*                                Director                      December 22, 2000
- -----------------------------------------------------
Robert P. Dilworth

/s/ JUSTIN L. JASCHKE*                                 Director                      December 22, 2000
- -----------------------------------------------------
Justin L. Jaschke

/s/ BRAM JOHNSON                                       Director                      December 22, 2000
- -----------------------------------------------------
Bram Johnson

/s/ DAVID MOORE*                                       Director                      December 22, 2000
- -----------------------------------------------------
David Moore

/s/ WILLIAM D. SAVOY*                                  Director                      December 22, 2000
- -----------------------------------------------------
William D. Savoy

*By: /s/ TIMOTHY A. DREISBACH
- -----------------------------------------------------
     Timothy A. Dreisbach
     President and Chief Executive Officer
     Attorney-in-fact


                                       61
   63

                               POWER OF ATTORNEY

     KNOWN ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Timothy A. Dreisbach and James E. Wall,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

/s/ BRAM JOHNSON
- ---------------------------------------------------------
Bram Johnson, Director,
December 22, 2000

                                       62
   64

                                                                     SCHEDULE II

                                 METRICOM, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTION/END OF
DESCRIPTION OF PERIOD EXPENSES WRITEOFF PERIOD

                                                                           
Year ended December 31, 1997:

Accounts receivable allowances...........................  $  121    $  807    $129    $  799
                                                           ======    ======    ====    ======
Year ended December 31, 1998:
Accounts receivable allowances...........................  $  799    $1,400    $533    $1,666
                                                           ======    ======    ====    ======
Year ended December 31, 1999:
Accounts receivable allowances...........................  $1,666    $1,334    $852    $2,148
                                                           ======    ======    ====    ======



                                       63
   65

                                 EXHIBIT INDEX



  EXHIBIT
  NUMBER                                EXHIBIT
- -----------                             -------
           
 3.1(12)      Restated Certificate of Incorporation of the Company.
 3.2(7)       Bylaws of the Company.
 4.2(1)       Specimen stock certificate.
 4.3(12)      Senior Debt Indenture among Metricom, Inc., Metricom Finance
              Inc., and Bank One Trust Company, N.A., as trustee.
 4.4(12)      Subordinated Debt Indenture among Metricom, Inc., Metricom
              Finance, Inc., and Bank One Trust Company, N.A.,
 4.5(13)      First Supplemental Indenture for Senior Notes dated February
              7, 2000 between the Company, Metricom Finance, Inc. and Bank
              One Trust Company, N.A.
 4.6(13)      Global Note dated February 7, 2000 in an aggregate principal
              amount of $300,000,000, issued by the Company and Metricom
              Finance, Inc.
10.1a(1)      Form of Indemnity Agreement entered into between the Company
              and its directors and officers, with related schedule.
10.1b(2)(8)   Executive Compensation Agreement between the Company and
              Timothy A. Dreisbach, President and Chief Executive Officer
10.2(2)(5)    1988 Stock Option Plan (the "Option Plan"), as amended
              November 1, 1993.
10.3(1)(2)    Form of Incentive Stock Option Agreement under the Option
              Plan.
10.4(1)(2)    Form of Supplemental Stock Option Agreement under the Option
              Plan.
10.5(1)(2)    Form of Notice of Exercise under the Option Plan, as
              amended.
10.6(1)(2)    Form of Restricted Stock Purchase Agreement and promissory
              note under the Option Plan.
10.7(2)       1991 Employee Stock Purchase Plan, as amended.
10.9(3)       Agreement between the Company and Southern California Edison
              dated October 1, 1992.
10.10(2)(5)   1993 Non-Employee Directors' Stock Option Plan, as amended
              November 1, 1993 (the "Directors' Plan").
10.11(2)(3)   Form of Supplemental Stock Option under the Directors' Plan.
10.12(4)      Purchase Agreement, dated October 3, 1993, between the
              Company and Vulcan Ventures Incorporated.
10.13(6)      Stock Purchase Agreement, dated as of October 10, 1997,
              between the Company and Vulcan Ventures Incorporated, a
              Washington Corporation.
10.14(9)      Loan Agreement, dated October 29, 1998, between the Company
              and Vulcan Ventures Incorporated.
10.15(10)     Preferred Stock Purchase Agreement, dated as of June 20,
              1999, among the Company, MCI WorldCom, Inc., and Vulcan
              Ventures Incorporated.
10.16         Amended and Restated Registration Rights, dated as of
              November 15, 1999, among the Company, MCI Worldcom, Inc.,
              and Vulcan Ventures, Inc.
10.17(2)      1997 Equity Incentive Plan, as amended.
10.18(11)     Ricochet Reseller Agreement, dated as of June 20, 1999,
              between the Company and MCI WorldCom, Inc.
10.19(11)     Amendment to Ricochet Reseller Agreement, dated as of
              November 12, 1999, between the Company and MCI WorldCom,
              Inc.
10.20(13)     Underwriting agreement dated February 1, 2000 among the
              Company, Metricom Finance, Inc. and the underwriters named
              therein.
10.21(13)     Terms Agreement dated February 2, 2000 among the Company and
              the underwriters named therein, relating to the issuance and
              sale of 5,750,000 shares of the Company's Common Stock.
10.22(13)     Terms Agreement dated February 2, 2000 among the Company,
              Metricom Finance, Inc. and the underwriters named therein
              relating to the issuance and sale of 300,000 warrants to
              purchase an aggregate of 1,425,000 shares of the Company's
              Common Stock.


                                       64
   66



  EXHIBIT
  NUMBER                                EXHIBIT
- -----------                             -------
           
10.23(13)     Warrant Agreement dated February 7, 2000 among the Company,
              Bank One Trust Company, as initial warrant agent and
              BankBoston N.A., as warrant agent.
10.24(13)     Warrant Certificate dated February 7, 2000 between the
              Company and Bank One Trust Company, as initial warrant agent
              and BankBoston, N.A., as warrant agent.
10.26(14)     Terms Agreement dated February 2, 2000 among the Company,
              Metricom Finance, Inc. and the underwriters named therein
              relating to the issuance and sale of $300,000,000 aggregate
              principal amount of 13% Senior Notes due 2010.
12.1(15)      Schedule of Deficiency of Earnings to Fixed Charges.
18.1(15)      Letter from Arthur Andersen LLP, Independent Auditors,
              regarding change in accounting principle.
21.1(15)      Subsidiaries of the Company
23.1          Consent of Arthur Andersen LLP, Independent Auditors.
27.1(15)      Financial Data Schedule


- ---------------
 (1) Incorporated by reference from the indicated exhibit in our Registration
     Statement on Form S-1 (File No. 33-46050), as amended.

 (2) Management contract or compensatory plan or arrangement.

 (3) Incorporated by reference from our Form 10-K for the year ended December
     31, 1992.

 (4) Incorporated by reference from our Form 10-Q for the quarter ended October
     31, 1993.

 (5) Incorporated by reference from our Form 10-K for the year ended December
     31, 1993.

 (6) Incorporated by reference from our Form 8-K dated as of October 13, 1997.

 (7) Incorporated by reference from our Form 10-K for the year ended December
     31, 1997.

 (8) Incorporated by reference from our Form 10-Q for the quarter ended March
     31, 1998.

 (9) Incorporated by reference from our Form 10-K for the year ended December
     31, 1998.

(10) Incorporated by reference from our Form 8-K filed July 9, 1999.

(11) Incorporated by reference from our Form 8-K filed December 21, 1999, as
     amended.

(12) Incorporated by reference from our Registration Statement on Form S-3 (file
     No. 333-91359), as amended.

(13) Incorporated by reference from our Form 8-K filed February 10, 2000.

(14) Incorporated by reference from our Form 8-K/A filed February 16, 2000.

(15) Previously filed with our Form 10-K for the year ended December 31, 1999.

                                       65

EX-23.1

   1
                                                                    Exhibit 23.1


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

     As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form 10-K/Amended of our reports
dated February 3, 2000, included in the Metricom, Inc.'s Form 10-K for the year
ended December 31, 1999 and to all references to our Firm included in this
registration statement.

                                             /s/ Arthur Andersen LLP

San Jose, California
December 22, 2000