AIRV Air Via (MM)

Airvana, Inc. (NASDAQ: AIRV), a leading provider of mobile broadband network infrastructure products, today reported financial results for the fourth quarter and the full year ended January 3, 2010. Airvana presents both GAAP and non-GAAP financial metrics below because management believes that the combination provides a more complete understanding of the company’s operating performance.

GAAP Financial Highlights

• Revenue: Total revenue for the fourth quarter of 2009 was $47.7 million, compared with $63.3 million for the fourth quarter of 2008. For the full year 2009, total revenue was $64.6 million, compared with $138.2 million for the full year 2008.
• Net Income/Loss: Net income for the fourth quarter of 2009 was $13.1 million, compared with net income of $24.8 million for the fourth quarter of 2008. For the full year 2009, net loss was $25.0 million, compared with net income of $21.3 million for the full year 2008.

In November 2009, the CDMA business of Nortel Networks Inc. (“Nortel”) was acquired by Telefon AB L.M. Ericsson (“Ericsson”). As part of this acquisition, Airvana’s contract with Nortel was assigned to Ericsson and Airvana received $39.6 million in cash from Ericsson, which represented payment for outstanding invoices of $36.4 million for sales of Airvana products and services to Nortel made prior to Nortel’s Chapter 11 bankruptcy filing in January 2009 plus interest of $3.2 million. As of January 3, 2010 Airvana’s cash, cash equivalents and investments increased to $263.2 million, from $228.4 million on December 28, 2008.

Non-GAAP Financial Highlights

• Pro Forma Product and Service Billings (“Billings”): Airvana’s pro forma Billings for the fourth quarter of 2009 were $49.0 million, compared with $39.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma Billings were $152.3 million, compared with $146.9 million for the full year 2008.
• Pro Forma Operating Profit on Billings: Pro forma operating profit on Billings for the fourth quarter of 2009 was $15.3 million, compared with $10.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma operating profit on Billings was $30.3 million, compared with $34.5 million for the full year 2008.

A description of Airvana’s revenue recognition policy is contained in its quarterly report on Form 10-Q and annual report on Form 10-K, each filed with the Securities and Exchange Commission. A description and a reconciliation of the company’s non-GAAP financial measures are included in this press release.

Proposed Acquisition of Airvana for Approximately $530 Million in Cash

On December 18, 2009, Airvana announced that it had entered into a definitive merger agreement with 72 Mobile Holdings, LLC, a newly formed entity owned by affiliates of S.A.C. Private Capital Group, LLC, GSO Capital Partners LP, Sankaty Advisors LLC and ZelnickMedia. As part of the transaction, Randall Battat, president and chief executive officer of Airvana, and Vedat Eyuboglu and Sanjeev Verma, vice presidents and co-founders of the company, together with certain of their affiliates, will exchange a portion of their shares of Airvana common stock for an equity interest in 72 Mobile Holdings, LLC. The transaction is valued at approximately $530 million. Under the terms of the merger agreement, at the closing of the merger, each share of Airvana common stock will be exchanged for $7.65 in cash.

Completion of the transaction is subject to the approval of Airvana’s shareholders and other closing conditions, and is expected to occur in the first half of 2010. In light of this proposed transaction, Airvana will not host a conference call in conjunction with today’s release of its fourth quarter and full year 2009 financial results. In addition, Airvana will not be providing financial guidance for the first quarter or full year 2010 or for any future periods.

Non-GAAP Financial Measures

To supplement Airvana’s condensed consolidated financial statements presented on a GAAP basis, Airvana uses non-GAAP Billings measures of operating results, gross profit on Billings and operating profit on Billings, which include changes in deferred revenue and deferred costs in a period. These non-GAAP financial measures are presented with the intent of providing both management and investors with a more complete understanding of Airvana’s underlying operating performance and trends. Airvana believes that these non-GAAP financial measures enhance the overall understanding of its past financial performance and also its prospects for the future. These non-GAAP measures provide an indication of Airvana’s financial results based upon sales activity in the period and are considered by management for the purpose of making operational decisions. In addition, these non-GAAP measures are the primary indicators that management uses as a basis for Airvana’s planning and forecasting of future periods.

Management uses the following non-GAAP measures (detailed in Exhibits 1, 2 and 3) as a supplement to GAAP revenue and cash flow from operations in evaluating Airvana’s performance:

• Product and Service Billings (“Billings”) reflects the amount invoiced for products and services in a period and equals GAAP revenue plus the change in deferred revenue in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel's bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.
• Costs Related to Billings reflects the cost directly attributable to Billings in a period and equals GAAP cost of revenue plus the change in deferred cost in the period.
• Gross Profit on Billings reflects Billings less costs related to Billings in the period.
• Operating Profit on Billings reflects gross profit on Billings less GAAP operating expenses in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel's bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma operating profit on Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.

Management believes investors may find these measures useful for understanding Airvana’s operations, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP. Exhibits 1, 2 and 3 reconcile all non-GAAP metrics to the corresponding financial statement items as determined in accordance with GAAP for all periods presented.

About Airvana, Inc.

Airvana helps operators transform the mobile experience for users worldwide. The company's high-performance technology and products, from comprehensive femtocell solutions to core mobile network infrastructure, enable operators to deliver compelling and consistent broadband services to mobile subscribers, wherever they are. Airvana's products are deployed in 70 commercial networks on six continents. The company is headquartered in Chelmsford, Mass., USA, with offices worldwide. For more information, please visit www.airvana.com.

Safe Harbor Statement

Any statements in this press release that are not historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “continue,” “outlook” and similar terms, and include, without limitation, statements regarding the expected timing of the merger of Airvana, statements regarding the ability to complete the merger and statements underlying any of the foregoing. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation uncertainties as to the timing of the merger of Airvana, Airvana’s ability to maintain its relationship with Ericsson, the timing and rate of femtocell market acceptance and growth, operator femtocell deployment plans, the highly competitive and rapidly evolving market in which Airvana competes, Airvana’s limited operating history, the fluctuation of its past operating results and its reliance on sales through Ericsson for a significant portion of its revenues and product and service Billings and other factors discussed in Airvana’s filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent Airvana’s views as of the date of this press release. Airvana anticipates that subsequent events and developments may cause its views to change. While Airvana may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Airvana’s views as of any date subsequent to the date of this press release.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

This news release is for informational purposes only. It is not a solicitation of a proxy. Airvana, Inc. has filed with the SEC a preliminary proxy statement and plans to file with the SEC and mail to its stockholders a definitive proxy statement in connection with the transaction. The proxy statement will contain important information about Airvana, Inc., 72 Mobile Holdings, LLC, the proposed merger and related matters. Investors and security holders are urged to read the proxy statement carefully when it is available.

Investors and security holders will be able to obtain free copies of the proxy statement and other documents filed with the SEC by 72 Mobile Holdings, LLC and Airvana, Inc. through the web site maintained by the SEC at www.sec.gov. In addition, investors and security holders will be able to obtain free copies of the proxy statement from Airvana, Inc. by contacting Investor Relations at (978) 250-3000.

Airvana, Inc., its directors and executive officers may be deemed to be participants in the solicitation of proxies from Airvana, Inc.’s stockholders with respect to the transactions contemplated by the merger agreement. Information regarding Airvana, Inc.’s directors and executive officers is contained in Airvana, Inc.’s Annual Report on Form 10-K for the year ended December 28, 2008, its proxy statement dated April 21, 2009 and preliminary proxy statement dated January 14, 2010, which are filed with the SEC.

Airvana, Inc. GAAP Consolidated Statements of Operations Comparative Financial Results (Amounts in thousands except per share data) (Unaudited)               Three Months Ended Year Ended   December 28, January 3, December 28, January 3, 2008 2010 2008 2010 Revenue: Product $ 57,616 $ 36,603 $ 123,295 $ 45,121 Service   5,653     11,122     14,878     19,473   Total revenue 63,269 47,725 138,173 64,594   Cost of revenue: Product 1,407 1,968 3,267 3,195 Service   2,163     2,752     8,195     10,374   Total cost of revenue 3,570 4,720 11,462 13,569   Gross profit 59,699 43,005 126,711 51,025 Gross margin

94%

 

90%

 

92%

 

79%

 

  Operating expenses: Research and development 18,617 19,474 74,826 73,676 Selling and marketing 3,721 3,962 14,933 16,307 General and administrative   2,301     4,461     8,976     12,772   Total operating expenses 24,639 27,897 98,735 102,755   Operating income (loss) 35,060 15,108 27,976 (51,730 ) Interest income, net 1,358 3,601 7,240 6,693   Income (loss) before income tax expense 36,418 18,709 35,216 (45,037 )   Income tax expense (benefit) 11,569 5,610 13,923 (20,045 )         Net income (loss) $ 24,849   $ 13,099   $ 21,293   $ (24,992 )   Net income (loss) per common share: Basic $ 0.39   $ 0.21   $ 0.33   $ (0.40 ) Diluted $ 0.36   $ 0.19   $ 0.30   $ (0.40 )   Weighted average common shares outstanding: Basic   63,655     62,730     64,278     62,499   Diluted   68,744     67,701     70,091     62,499  

Exhibit 1

Airvana, Inc. GAAP to Non-GAAP Product and Service Billings Reconciliation (Amounts in thousands) (Unaudited)                     Three Months Ended December 28, 2008 Three Months Ended January 3, 2010 Deferral Adjusted GAAP Pro Forma Nortel Pro Forma Deferral Adjusted GAAP Pro Forma Nortel Pro Forma GAAP Adjustments   Results Adjustments (1)   Results (1) GAAP Adjustments   Results Adjustments (2)   Results (2)   Revenue $ 63,269 $ (45,274 ) $ 17,995 $ 21,818 $ 39,813 $ 47,725 $ 37,726 $ 85,451 $ (36,442 ) $ 49,009 Cost of revenue   3,570     816     4,386     -   4,386     4,720     1,062   5,782     -     5,782   Gross profit (loss) 59,699 (46,090 ) 13,609 21,818 35,427 43,005 36,664 79,669 (36,442 ) 43,227 Gross margin 94 % 76 % 89 % 90 % 93 % 88 % Operating expenses   24,639     -     24,639     -   24,639     27,897     -   27,897     -     27,897   Operating income (loss) from operations 35,060 (46,090 ) (11,030 ) 21,818 10,788 15,108 36,664 51,772 (36,442 ) 15,330 Operating margin 55 % -61 % 27 % 32 % 61 % 31 % Stock-based compensation   1,302     -     1,302     -   1,302     1,817     -   1,817     -     1,817   Operating income (loss) excluding stock compensation $ 36,362 $ (46,090 ) $ (9,728 ) $ 21,818 $ 12,090 $ 16,925 $ 36,664 $ 53,589 $ (36,442 ) $ 17,147 Operating margin excluding stock compensation 57 % -54 % 30 % 35 % 63 % 35 %   Year Ended December 28, 2008 Year Ended January 3, 2010 Deferral Adjusted GAAP Pro Forma Nortel Pro Forma Deferral Adjusted GAAP Pro Forma Nortel Pro Forma GAAP Adjustments   Results Adjustments (1)   Results (1) GAAP Adjustments   Results Adjustments (1)   Results (1)   Revenue $ 138,173 $ (13,118 ) $ 125,055 $ 21,818 $ 146,873 $ 64,594 $ 109,573 $ 174,167 $ (21,818 ) $ 152,349 Cost of revenue   11,462     2,163     13,625     -   13,625     13,569     5,731   19,300     -     19,300   Gross profit 126,711 (15,281 ) 111,430 21,818 133,248 51,025 103,842 154,867 (21,818 ) 133,049 Gross margin 92 % 89 % 91 % 79 % 89 % 87 % Operating expenses   98,735     -     98,735     -   98,735     102,755     -   102,755     -     102,755   Operating income (loss) from operations 27,976 (15,281 ) 12,695 21,818 34,513 (51,730 ) 103,842 52,112 (21,818 ) 30,294 Operating margin 20 % 10 % 23 % -80 % 30 % 20 % Stock-based compensation   4,844     -     4,844     -   4,844     6,317     -   6,317     -     6,317   Operating income (loss) excluding stock compensation $ 32,820 $ (15,281 ) $ 17,539 $ 21,818 $ 39,357 $ (45,413 ) $ 103,842 $ 58,429 $ (21,818 ) $ 36,611 Operating margin excluding stock compensation 24 % 14 % 27 % -70 % 34 % 24 %   Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. For the three months and year ended December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which was subject to Nortel's bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.  

Note (2): On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which was subject to Nortel's bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008 and March 29, 2009. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.

Airvana, Inc. Consolidated Balance Sheets (Amounts in thousands) (Unaudited)         December 28, January 3, 2008 2010 ASSETS   Current assets Cash and cash equivalents $ 30,425 $ 30,318 Investments 197,941 232,849 Accounts receivable 3,354 19,030 Deferred product cost 1,913 3,379 Prepaid taxes & deferred tax assets and charges, net 2,168 23,079 Prepaid expenses and other current assets   2,758     4,372   Total current assets 238,559 313,027   Property and equipment, net 4,822 5,380   Deferred service cost, long-term 1,300 5,565 Deferred tax assets and charges, net 956 3,686 Goodwill and intangible assets, net 11,096 10,027 Other assets   603     1,032   Total assets $ 257,336   $ 338,717       LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities Accounts payable $ 4,455 $ 3,430 Accrued expenses and other current liabilities 14,365 11,974 Accrued income taxes 1,897 72 Deferred revenue   61,310     167,390   Total current liabilities 82,027 182,866   Deferred revenue, long-term 5,550 9,043 Accrued income taxes 5,703 6,132 Other liabilities   1,174     653   Total long-term liabilities 12,427 15,828   Stockholders' equity: Common stock 63 63 Additional paid-in capital 186,824 188,777 Accumulated other comprehensive income - 180 Accumulated deficit   (24,005 )   (48,997 ) Total stockholders' equity   162,882     140,023   Total liabilities and stockholders' equity $ 257,336   $ 338,717   Airvana, Inc. Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited)                 Three Months Ended Year Ended December 28, January 3, December 28, January 3, 2008 2010 2008 2010 Operating activities Net income (loss) $ 24,849 $ 13,099 $ 21,293 $ (24,992 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 780 839 3,215 3,249 Amortization of intangible assets 268 268 1,069 1,069 Stock-based compensation 1,302 1,817 4,844 6,317 Deferred tax (expense) benefit (160 ) (356 ) (951 ) (14,827 ) Excess tax benefit related to exercise of stock options (288 ) (650 ) (2,266 ) (2,442 ) Amortization of investments (732 ) 935 (4,113 ) 940 Unrealized gain on forward foreign currency exchange contracts - 188 - - Amortization of leasehold incentive (131 ) (130 ) (522 ) (521 ) Changes in operating assets and liabilities: Accounts receivable 4,739 (594 ) 10,817 (15,676 ) Deferred product and service cost (816 ) (1,062 ) (2,163 ) (5,731 ) Prepaid taxes and deferred tax charges 8,877 6,908 115 (6,372 ) Prepaid expenses and other current assets 483 (469 ) 306 (1,384 ) Accounts payable 1,836 271 649 (1,025 ) Accrued expenses and other current liabilities 734 (100 ) 3,358 (2,386 ) Accrued income taxes 2,792 (775 ) (9,964 ) (1,396 ) Deferred revenue   (45,274 )   37,726     (13,118 )   109,573   Net cash (used in) provided by operating activities (741 ) 57,915 12,569 44,396   Investing activities Purchases of property and equipment (194 ) (456 ) (1,765 ) (3,827 ) Purchase of investments (92,995 ) (98,041 ) (341,622 ) (290,902 ) Maturities of investments 78,280 56,944 309,579 255,234 Investments sold - - 16,631 - Other assets   (47 )   38     4     (639 ) Net cash used in investing activities (14,956 ) (41,515 ) (17,173 ) (40,134 )   Financing activities Payments on long-term debt (2 ) - (121 ) - Payments of cash dividend (21 ) - (92 ) (5 ) Purchase and retirement of treasury stock (9,781 ) - (13,328 ) (9,291 ) Excess tax benefit related to exercise of stock options 288 650 2,266 2,442 Proceeds from exercise of stock options   413     449     2,632     2,485   Net cash (used in) provided by financing activities (9,103 ) 1,099 (8,643 ) (4,369 )   Effect of exchange rates on cash and cash equivalents   (95 )   -     125     -     Net (decrease) increase in cash and cash equivalents (24,895 ) 17,499 (13,122 ) (107 ) Cash and cash equivalents at beginning of period   55,320     12,819     43,547     30,425   Cash and cash equivalents at end of period $ 30,425   $ 30,318   $ 30,425   $ 30,318  

Exhibit 2

Airvana, Inc. Select Quarterly Financial Data - GAAP & non-GAAP Metrics (Amounts in thousands) (Unaudited)    

Three Months Ended

                                  Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma Mar 30, Jun 29, Sep 28, Dec 28, Mar 29, Jun 28, Sep 27, Jan 3, Adjustments Dec 28, Adjustments Mar 29, Adjustments Jun 28, Adjustments Sep 27, Adjustments Jan 3, 2008 2008 2008 2008 2009 2009 2009 2010 Dec 28, 2008 (1)   2008 (1)   Mar 29, 2009 (2)   2009 (2)   Jun 28, 2009 (3)   2009 (3)   Sep 27, 2009 (4)   2009 (4)   Jan 3, 2010 (5)  

2010 (5)

GAAP Financial Metrics

Total revenue $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 2,726 $ 47,725 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880 $ - $ 2,726 $ (110 ) $ 47,615 Cost of revenue   1,913     3,327     2,652     3,570     2,547     3,402     2,900     4,720       3,570       2,547       3,402       2,900       4,720   Gross profit 5,725 55,692 5,595 59,699 6,716 1,478 (174 ) 43,005 55 59,754 55 6,771 - 1,478 - (174 ) (110 ) 42,895 Operating expenses   24,910     24,237     24,949     24,639     23,946     24,786     26,126     27,897       24,639       23,946       24,786       26,126       27,897   Operating (loss) profit $ (19,185 ) $ 31,455   $ (19,354 ) $ 35,060   $ (17,230 ) $ (23,308 ) $ (26,300 ) $ 15,108   $ 55 $ 35,115   $ 55   $ (17,175 ) $ -   $ (23,308 ) $ -   $ (26,300 ) $ (110 ) $ 14,998     Net cash (used in) provided by operating activities (2,446 ) 3,685 12,071 (741 ) (24,335 ) 16,167 (5,351 ) 57,915 - (741 ) - (24,335 ) - 16,167 - - - 57,915 Cash, cash equivalents and investments 220,969 227,491 237,814 228,366 198,394 211,001 205,326 263,167 - 228,366 - 198,394 - 211,001 - - - 263,167 Accounts receivable 11,039 7,941 8,093 3,354 13,105 9,493 18,436 19,030 21,818 25,172 36,442 49,547 36,442 45,935 36,442 54,878 - 19,030 Days sales outstanding (a) 27 28 17 17 61 23 54 20 - 57 - 132 - 110 - 160 - 35 Deferred revenue - end of period 110,136 77,396 112,134 66,860 77,124 110,185 138,707 176,433 21,763 88,623 36,332 113,456 36,332 146,517 36,332 175,039 - 176,433 Deferred product cost - end of period 1,651 1,354 2,397 3,213 4,694 6,492 7,882 8,944 - 3,213 - 4,694 - 6,492 - 7,882 - 8,944  

Reconciliation of GAAP and non-GAAP Metrics

Revenue (GAAP) $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 2,726 $ 47,725 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880 $ - $ 2,726 $ (110 ) $ 47,615 Deferred revenue at end of period 110,136 77,396 112,134 66,860 77,124 110,185 138,707 176,433 21,763 88,623 36,332 113,456 36,332 146,517 36,332 175,039 - 176,433 Less: deferred revenue at beginning of period   (79,978 )   (110,136 )   (77,396 )   (112,134 )   (66,860 )   (77,124 )   (110,185 )   (138,707 )   -   (112,134 )   (21,763 )   (88,623 )   (36,332 )   (113,456 )   (36,332 )   (146,517 )   (36,332 )   (175,039 ) Product and service billings, “Billings” (non-GAAP) 37,796 26,279 42,985 17,995 19,527 37,941 31,248 85,451 21,818 39,813 14,624 34,151 - 37,941 - 31,248 (36,442 ) 49,009   Cost of revenue (GAAP) 1,913 3,327 2,652 3,570 2,547 3,402 2,900 4,720 - 3,570 - 2,547 - 3,402 - 2,900 - 4,720 Deferred product cost at end of period 1,651 1,354 2,397 3,213 4,694 6,492 7,882 8,944 - 3,213 - 4,694 - 6,492 - 7,882 - 8,944 Less: deferred product cost at beginning of period   (1,050 )   (1,651 )   (1,354 )   (2,397 )   (3,213 )   (4,694 )   (6,492 )   (7,882 )   -   (2,397 )   -     (3,213 )   -     (4,694 )   -     (6,492 )   -     (7,882 ) Cost related to Billings (non-GAAP) 2,514 3,030 3,695 4,386 4,028 5,200 4,290 5,782 - 4,386 - 4,028 - 5,200 - 4,290 - 5,782   Gross profit on Billings (non-GAAP) (b) 35,282 23,249 39,290 13,609 15,499 32,741 26,958 79,669 21,818 35,427 14,624 30,123 - 32,741 - 26,958 (36,442 ) 43,227 Gross margin on Billings (non-GAAP) (c) 93 % 88 % 91 % 76 % 79 % 86 % 86 % 93 % 89 % 88 % 86 % 86 % 88 %   Total operating expenses (GAAP)   24,910     24,237     24,949     24,639     23,946     24,786     26,126     27,897     -   24,639     -     23,946     -     24,786     -     26,126     -     27,897   Operating profit (loss) on Billings (non-GAAP) (d) $ 10,372 $ (988 ) $ 14,341 $ (11,030 ) $ (8,447 ) $ 7,955 $ 832 $ 51,772 $ 21,818 $ 10,788 $ 14,624 $ 6,177 $ - $ 7,955 $ - $ 832 $ (36,442 ) $ 15,330 % operating profit (loss) on Billings (non-GAAP) 27 % -4 % 33 % -61 % -43 % 21 % 3 % 61 % 27 % 18 % 21 % 3 % 31 % Total interest & other income, net (GAAP)   2,585     1,792     1,505     1,358     1,124     1,542     426     3,601       1,358       1,124       1,542       426       3,601   Profit (loss) before tax on Billings (non-GAAP) (e) $ 12,957 $ 804 $ 15,846 $ (9,672 ) $ (7,323 ) $ 9,497 $ 1,258 $ 55,373 $ 21,818 $ 12,146 $ 14,624 $ 7,301 $ - $ 9,497 $ - $ 1,258 $ (36,442 ) $ 18,931 % profit (loss) before tax on Billings (non-GAAP) 34 % 3 % 37 % -54 % -38 % 25 % 4 % 65 % 31 % 21 % 25 % 4 % 39 %   Stock-based compensation included in operating expense $ 1,085 $ 1,179 $ 1,278 $ 1,302 $ 1,371 $ 1,442 $ 1,687 $ 1,817 $ - $ 1,302 $ - $ 1,371 $ - $ 1,442 $ - $ 1,687 $ - $ 1,817 Acquisition costs included in operating expense - - - - - - - - - - - - - - - - - -   Profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e) $ 14,042 $ 1,983 $ 17,124 $ (8,370 ) $ (5,952 ) $ 10,939 $ 2,945 $ 57,190 $ - $ 13,448 $ 14,624 $ 8,672 $ - $ 10,939 $ - $ 2,945 $ (36,442 ) $ 20,748 % profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e) 37 % 8 % 40 % -47 % -30 % 29 % 9 % 67 % 34 % 25 % 29 % 9 % 42 %   Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.   Note (2): On January 14, 2009, Nortel filed for bankruptcy protection. As of March 29, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $36,332 from deferred revenue, and $36,442 from accounts receivable as of March 29, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.   Note (3): On January 14, 2009, Nortel filed for bankruptcy protection. As of June 28, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of June 28, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.   Note (4): On January 14, 2009, Nortel filed for bankruptcy protection. As of September 27, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of September 27, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.   Note (5): On January 14, 2009, Nortel filed for bankruptcy protection. During the quarter ended January 3, 2010, Airvana collected pre-bankruptcy filing outstanding invoices to Nortel of $36,442 and recorded them on a cash basis.   (a) Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (98 in Q4 2009 and 91 for all other periods presented). (b) Gross profit on Billings equals the excess of Billings over cost related to Billings. (c) Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings. (d) Operating profit on Billings equals Billings less cost related to Billings, less total operating expenses. (e) Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.

Exhibit 3

Airvana, Inc. Select Annual Financial Data - GAAP & non-GAAP Metrics (Amounts in thousands) (Unaudited)     Fiscal Year Ended              

Pro FormaNortel

  Pro  

Pro FormaNortel

  Pro Adjustments Forma Adjustments Forma 2002 2003 2004 2005 2006 2007 2008 2009 2008 (1) 2008 (1) 2009 (1) 2009 (1)  

GAAP Financial Metrics

Total revenue $ 4,567 $ 6,978 $ 3,617 $ 2,347 $ 170,270 $ 305,786 $ 138,173 $ 64,594 $ 55 $ 138,228 $ (55 ) $ 64,539 Cost of revenue   2,764     5,537     4,453     6,533     45,295     41,904     11,462     13,569       11,462       13,569   Gross profit (loss) 1,803 1,441 (836 ) (4,186 ) 124,975 263,882 126,711 51,025 55 126,766 (55 ) 50,970 Operating expenses - - Research & development 17,408 10,089 22,040 42,922 55,073 76,638 74,826 73,676 74,826 73,676 Sales & marketing 4,005 3,582 4,665 5,237 7,729 12,055 14,933 16,307 14,933 16,307 General & administrative 1,484 1,201 2,068 3,253 5,068 7,453 8,976 12,772 8,976 12,772 In-process R&D   -     -     -     -     -     2,340     -     -       -       -   Total operating expenses   22,897     14,872     28,773     51,412     67,870     98,486     98,735     102,755       98,735       102,755   Operating (loss) profit $ (21,094 ) $ (13,431 ) $ (29,609 ) $ (55,598 ) $ 57,105   $ 165,396   $ 27,976   $ (51,730 ) $ 55   $ 28,031   $ (55 ) $ (51,785 )   Net cash (used in) provided by operating activities (18,600 ) (1,687 ) 43,028 67,390 25,138 91,771 12,569 44,396 - 12,569 - 44,396 Cash, cash equivalents and investments 27,000 33,745 72,321 135,470 160,123 221,963 228,366 263,167 - 228,366 - 263,167 Accounts receivable 2,836 1,175 9,244 7,590 46,072 14,171 3,354 19,030 21,818 25,172 - 19,030 Days sales outstanding (a) 17.6 119.3 36.3 9.8 20.3 - 10 - 40 Deferred revenue - end of period 5,837 15,519 118,051 273,124 243,418 79,978 66,860 176,433 21,763 88,623 55 176,488 Deferred product cost - end of period 2,183 3,949 28,196 66,966 34,214 1,050 3,213 8,944 - 3,213 - 8,944  

Reconciliation of GAAP and non-GAAP Metrics

Revenue (GAAP) $ 4,567 $ 6,978 $ 3,617 $ 2,347 $ 170,270 $ 305,786 $ 138,173 $ 64,594 $ 55 $ 138,228 $ (55 ) $ 64,539 Less: deferred revenue from acquisition - - - - - (171 ) - - - - - - Deferred revenue at end of period 5,837 15,519 118,051 273,124 243,418 79,978 66,860 176,433 21,763 88,623 - 176,433 Less: deferred revenue at beginning of period   -     (5,837 )   (15,519 )   (118,051 )   (273,124 )   (243,418 )   (79,978 )   (66,860 )   -     (79,978 )   (21,763 )   (88,623 ) Product and service billings, “Billings” (non-GAAP) 10,404 16,660 106,149 157,420 140,564 142,175 125,055 174,167 21,818 146,873 (21,818 ) 152,349   Cost of revenue (GAAP) 2,764 5,537 4,453 6,533 45,295 41,904 11,462 13,569 - 11,462 - 13,569 Deferred product cost at end of period 2,183 3,949 28,196 66,966 34,214 1,050 3,213 8,944 - 3,213 - 8,944 Less: deferred product cost at beginning of period   -     (2,183 )   (3,949 )   (28,196 )   (66,966 )   (34,214 )   (1,050 )   (3,213 )   -     (1,050 )   -     (3,213 ) Cost related to Billings (non-GAAP) 4,947 7,303 28,700 45,303 12,543 8,740 13,625 19,300 - 13,625 - 19,300   Gross profit on Billings (non-GAAP) (b) 5,457 9,357 77,449 112,117 128,021 133,435 111,430 154,867 21,818 133,248 (21,818 ) 133,049 Gross margin on Billings (non-GAAP) (c) 52 % 56 % 73 % 71 % 91 % 94 % 89 % 89 % 91 % 87 %   Operating expenses (GAAP): Research & development 17,408 10,089 22,040 42,922 55,073 76,638 74,826 73,676 - 74,826 - 73,676 % research & development expense on Billings 167 % 61 % 21 % 27 % 39 % 54 % 60 % 42 % 51 % 48 % Sales & marketing 4,005 3,582 4,665 5,237 7,729 12,055 14,933 16,307 - 14,933 - 16,307 % sales & marketing expense on Billings 38 % 22 % 4 % 3 % 5 % 8 % 12 % 9 % 10 % 11 % General & administrative 1,484 1,201 2,068 3,253 5,068 7,453 8,976 12,772 - 8,976 - 12,772 % general & administrative expense on Billings 14 % 7 % 2 % 2 % 4 % 5 % 7 % 7 % 6 % 8 % In-process R&D - - - - - 2,340 - - - - - - % in-process R&D expense on Billings   0 %   0 %   0 %   0 %   0 %   2 %   0 %   0 %     0 %     0 % Total operating expenses (GAAP)   22,897     14,872     28,773     51,412     67,870     98,486     98,735     102,755     -     98,735     -     102,755   % total operating expenses (GAAP) 220 % 89 % 27 % 33 % 48 % 69 % 79 % 59 % 67 % 67 % Operating profit (loss) on Billings (non-GAAP) (d) $ (17,440 ) $ (5,515 ) $ 48,676 $ 60,705 $ 60,151 $ 34,949 $ 12,695 $ 52,112 $ 21,818 $ 34,513 $ (21,818 ) $ 30,294 % operating profit (loss) on Billings (non-GAAP) -168 % -33 % 46 % 39 % 43 % 25 % 10 % 30 % 23 % 20 %   Total interest & other income, net (GAAP) 101 (93 ) 485 3,459 6,602 9,845 7,240 6,693 - 7,240 - 6,693 Cumulative effect of change in accounting principle (GAAP)   -     -     -     -     (330 )   -     -     -       -       -   Profit (loss) before tax on Billings (non-GAAP) (e) $ (17,339 ) $ (5,608 ) $ 49,161 $ 64,164 $ 66,423 $ 44,794 $ 19,935 $ 58,805 $ 21,818 $ 41,753 $ (21,818 ) $ 36,987 % profit (loss) before tax on Billings (non-GAAP) -167 % -34 % 46 % 41 % 47 % 32 % 16 % 34 % 28 % 24 %   Stock-based compensation included in operating expense $ - $ - $ - $ - $ 800 $ 2,996 $ 4,844 $ 6,317 $ - $ 4,844 $ - $ 6,317 Acquisition costs included in operating expense $ - $ - $ - $ - $ - $ 2,340 $ - $ - $ - $ - $ - $ -   Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.   (a) Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (371 in 2009 and 364 for all other periods presented). (b) Gross profit on Billings equals the excess of Billings over cost related to Billings. (c) Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings. (d) Operating profit (loss) on Billings equals Billings less cost related to Billings, less total operating expenses. (e) Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.